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New Ways to Present a Financial Statement

by Sue Harding, European Chief Accountant, Standard & Poor’s Rating Services

Following the recent proposals published by the International and U.S. Financial Accounting Standards Boards for the presentation of financial statements, Sue Harding, European Chief Accountant for Standard & Poor’s Ratings Services, discusses how helpful the proposed changes would be for credit analysis.

Having debated this issue for a number of years, the International Accounting Standards Board (IASB) and the U.S. Financial Accounting Standards Board (FASB) have now published a joint discussion paper entitled ‘Preliminary Views on Financial Statement Presentation’. The discussion paper (DP) advocates a radical change to the decades-old presentation of basic financial statements – the balance sheet and the income and cash flow statements - without changing any of the underlying accounting requirements. However, in the opinion of Standard & Poor’s Ratings Services, if the proposals described in the DP are introduced, the implications for the analysis of financial statement information would be no less significant. The question S&P would raise, therefore, is whether simple enhancements could be made to the current format of company financial statements that might better resolve concerns than a complete replacement of the format.