The G100 supports the intention of the proposed objectives. However, we do not believe that users will be well served by the proposals for extensive additional detail and related mechanistic approach to their implementation to the extent that fixed formats are effectively required. For example:

• the treatment of dividends payable as a financing item rather than as an item of equity as a distribution to equity holders.
• the application of the disaggregation objective and the extent to which considerable additional detail is provided on the face of the financial statements rather than by way of note. The G100 believes that summary items should be shown on the face of the financial statements with the detail being shown by way of note.
• the emphasis on financial flexibility in the absence of appropriate background discussion of the concept.

The G100 supports the separation of activities in this way if it is based on how the assets and liabilities are used by the entity. The approach is consistent with a ‘through the eyes of management’ approach which is seen to provide relevant information to users.
 

The G100 supports proposals having a separate section relating to equity. We believe that users are interested in the separation of owner and non-owner financing and distributions.
 

The G100 believes that the proposed presentation gives undue prominence to discontinued operations. Rather, the G100 considers that a one-line presentation of discontinued operations is sufficient for the profit and loss statement with the additional and more detailed information being included as a note. The G100 believes that such an approach will meet the needs of users.
 

The G100 supports a flexible management approach under which the classification of items on the balance sheet would reflect how those assets and liabilities are used in the business by management. Once management decides on how an item is used in the business it is our presumption that its classification is determined.

We believe that the management approach will emphasise the differences between entities and as such provide users with a better foundation on which to make comparisons between entities and assessments of their relative performance. The G100 does not believe that comparability is enhanced by mandating uniformity. Accordingly, we believe that the management approach will provide more relevant information to users.
 

The G100 believes that requiring this approach will necessitate significant education activity for both preparers and users given the entrenched practice of balance sheet presentation. Although essentially a change in the format of the balance sheet, we do not consider that providing the information most commonly used in determining ratios in a convenient format is a sufficient justification for change. Rather, the proposed change should be justified on the basis that it will facilitate user understanding of the entity’s financial position, performance and flexibility.

We believe that in the absence of a significant and extended education program a wide range of users and preparers, including management, will form a view that the financial statements have lost their relevance by being too detailed and complex and will make greater use of alternative means of conveying key messages to users.
 

The G100 supports the proposed approach to classification at the operating segment level because it more closely reflects the management approach.
 

The G100 believes that the current level of disclosures made to the chief operating decision maker in respect of segment assets is sufficient. We do not believe that the disclosures required by IFRS 8 ‘Operating Segments’ should be extended unless a review of practice demonstrates that IFRS 8 disclosures are inadequate.
 

The G100 considers that the proposed categories are adequately defined and provide entities with sufficient flexibility to reflect different circumstances. However, the investing category is based on a different perception to that commonly understood by the use of the term and, if retained, will require education effort for both preparers and users. However, there is a considerable risk that entities that are quite similar will have different interpretations which will reduce consistency and comparability.
 

The G100 does not believe that the proposals are consistent with the management approach to the use of the assets and liabilities in the business.

a. What types of entities would you expect not to present a classified statement of financial position? Why?

b. Should there be more guidance for distinguishing which entities should present a statement of financial position in order of liquidity? If so, what additional guidance is needed?

The G100 believes that consistent with the management approach whether the basis of classification is short-term/long-term or liquidity is a matter for management judgement.

While it would normally expect financial institutions to use a liquidity basis other types of entities should not be precluded from doing so. However, we do not consider that there is a compelling case for shifting from the present requirements in IAS 1 ‘Presentation of Financial Statements’.
 

No. The G100 strongly disagrees with this proposal. The essence of cash management is managing the relationship between cash and its ‘investment’ as part of the management exercise in cash equivalents. We do not believe that these items which are managed on an unified basis should be shown in separate categories in the financial statements.
 

Yes. However, the G100 believes that judgment and flexibility would be required to avoid the balance sheet becoming overloaded with detail particularly as there are a significant number of alternative measurement bases permitted under IFRSs.
 

The G100 supports the concept of the presentation of a single statement of comprehensive income instead of two separate statements. However, the current approach in IAS 1 provides users with all the same information required and we are not aware of interpretation difficulties arising from how entities currently comply with IAS 1.
 

Yes.
 

While the disclosures may be decision-useful the G100 believes that these disclosures should be considered in the context of the overall load of disclosures. Disclosures should not be determined on the bases that because the information may be decision-useful it should be provided to users. The G100 believes that a set of disclosure principles against which proposed disclosures are assessed should be established. It is our belief that an entity should be required to disclose items by nature or by function but not both unless information is provided to management on those bases. Entities have, and will continue to provide additional information to the market in response to the needs of capital providers: not on the basis of mandatory requirements in accounting standards.
 

The G100 supports the retention of the current approach to allocation.
 

a. Would this provide decision-useful information to users in their capacity as capital providers? Please explain why or why not and discuss any alternative methods of presenting this information.

Yes.

b. What costs should the boards consider related to presenting the components of net foreign currency transaction gains or losses for presentation in different sections and categories?

The G100 considers that there are likely to be significant costs and practical difficulties in separating foreign currency translation amounts on translation of subsidiary’s financial statements relating to foreign subsidiaries in different sections and categories. The categorisation of foreign currency transaction amounts would not be expected to present the same difficulties.
 

While the use of a certain form of the direct method is established practice in Australia the requirements are not as specific or onerous as those included in the proposals. For example, the proposals to show cash flows for individual operating expenses would defeat the present capacity of the information systems of the vast majority of entities which have not been designed to readily extract this information. If the proposals are proceeded with, companies will incur significant costs to acquire, adapt and implement software to enable compliance with the requirements.

a. Would a direct method of presenting operating cash flows provide information that is decision-useful?

Probably. However, a reconciliation required as an additional Australian requirement already provides users with information to reconcile operating profit and cash flow from operations. [AASB 107, Aus 20.1].

b. Is a direct method more consistent with the proposed cohesiveness and disaggregation objectives (see paras 3.75-3.80) than an indirect method? Why or why not?

Yes, but in order to achieve consistency would impose significant costs on entities. As such the approach is not justified on cost-benefit grounds particularly where users can extract similar but not identical information from using the indirect method.

c. Would the information currently provided using an indirect method to present operating cash flows be provided in the proposed reconciliation schedule (see paragraphs 4.19 and 4.45)? Why or why not?

The G100 has concerns about the practicality of these proposals in the present circumstances.
 

See response to Question 19.
 

Yes, so far as practicable. However, the G100 believes that the overall impact of a basket transaction is relevant information for users. For example, a one-line presentation of discontinued operations on the face of the profit and loss supported by note disclosure would be sufficient to meet the needs of users. Similarly for business combinations.

The G100 does not believe it is necessary to duplicate the disclosures required by IFRS 7 ‘Financial Instruments: Disclosures; which deals with maturity analyses. Disclosures relating to maturity analysis should be addressed in a review of IFRS 7.
 

The G100 does not support this proposal and is concerned about the increasing tendency of standard setters to require reconciliations of items in the financial statements. We do not consider that the case for further reconciliations has been established particularly when considered in the context of the cohesiveness principle upon which the proposals are based.

(a) Would the proposed reconciliation schedule increase users’ understanding of the amount, timing and uncertainty of an entity’s future cash flows? Why or why not? Please include a discussion of the costs and benefits of providing the reconciliation schedule.

No. If proposals achieve their objective a reconciliation will be redundant.

(b) Should the changes in assets and liabilities be disaggregated into the components described in para 4.19? Please explain your rationale for any component you would either add or omit.

No.

(c) Is the guidance provided in paras 4.31, 4.41 and 4.44-4.46 clear and sufficient to prepare the reconciliation schedule? If not, please explain how the guidance should be modified.

Yes.
 

Yes. The analysis of changes in fair values, including remeasurements, are more appropriately dealt with as part of a project on fair values.
 

The case for and the objective of requiring such reconciliations has not been established. For example, are such reconciliations designed to meet an existing user need or are they anticipatory. This work should be undertaken before proceeding to develop proposals.
 

a. Would this information be decision-useful to users in their capacity as capital providers? Why or why not?

b. APB Opinion No 30 Reporting the Results of Operations-Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions, contains definitions of unusual and infrequent (repeated in para 4.51). Are those definitions too restrictive? If so, what type of restrictions, if any, should be placed on information presented in this column?

c. Should an entity have the option of presenting the information in narrative format only?

While the information about these items may be relevant to users a reconciliation statement (including a memo column) is one of a number of ways in which the information could be provided. However, explanation in an MD & A style document (including narrative and numbers) is more likely to facilitate understanding by users.