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FASB Revisiting Financial Performance Reporting Project

Resembling previous efforts, the Financial Accounting Standards Board (“FASB”) is considering adding a project on financial performance reporting to its current agenda. At its June 25th meeting, the staff began research on which issues the forthcoming project should address and discussed problems faced during prior attempts to improve the presentation of financial statements. Eventually, staff members were instructed to study how the income statement could be enhanced, but recognized that most income statement changes would have to be mirrored on the balance sheet.

Also at the meeting, FASB members could not agree on the degree to which a balance sheet presentation reassessment should be set aside while focusing on the income statement, given their relationship. Additionally, members were worried that the more attention the balance sheet received, the more likely improvements to the income statement would be delayed.

As project discussions continued, FASB struggled on how its potential efforts should differentiate a business’s continuing operations, and infrequent or one-time occurrences. Specifically, the discussion focused on a debate over the appropriate language, and whether a distinction should be noted between core and noncore earnings, or recurring and nonrecurring events. Despite previous attempts by the standard-setter’s staff to create a practical distinction between core and noncore earnings, the lack of an acceptable solution ultimately caused FASB to abandon its efforts.

With a review of the project expected to last over several months, the staff could present its findings to FASB by year’s end. If added to FASB’s agenda, staff members believe a narrow version of the project can be completed in two years.

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