Huge Changes in Store for Financial Statements - - CFO.com

Huge Changes in Store for Financial Statements - - CFO.com


Huge Changes in Store for Financial Statements
Thought the economy wreaked havoc on your financial statements? Wait until FASB gets through with them.
Tim Reason and Marie Leone - CFO.com US
January 30, 2009


A balance sheet that doesn't balance?
Financing and operating classifications that depend on your company type?

A (gulp) cash-basis income statement?

Excerpts:

... preparers of financial statements might be surprised to find that the above descriptions do accurately describe the look and feel that financial statements might have just two years from now.

"This particular project will change the face of financial statements in a very, very significant way," said Financial Accounting Standards Board member Thomas Linsmeier at a January 22 conference sponsored by the New York State Society of CPAs.

Among the notable features: all three statements — balance sheet, income statement, and cash-flow statement — will be divided into two major sections: business and financing.

"Users of financial statements analyze how a company creates value separately from how it funds that value creation," said FASB senior project manager Kim Petrone in a Webcast on Tuesday. "So we want to separate the creating activities from the financing activities."

The "business" section — which is subdivided into operating and investing categories — will focus on what a company does to produce goods and provide services. The operating category will include its primary or "core" revenue and expense-generating activities, and the investing category will include activities that generate a return but are not "core."

The "financing" section will include those activities that fund a company's business activities. For nonfinancial institutions, that would primarily include cash, bank loans, bonds, and other items that arise from general capital-raising activities.


Read full article: http://www.cfo.com/article.cfm/13048671/c_2984368
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This posting was made my Jim Jacobs, President & CEO of Jacobs Executive Advisors. Jim also serves as Leader of Jacobs Advisors' Insurance Practice.