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Friday, November 20, 2009

The Impact of IFRS for EPM Reporting – Part 2

Previously, I gave a brief overview of IFRS and it’s potential impact to many organizations. In that summary I provided a list of major differences between IFRS and US GAAP, the first item in that list was Financial Statement Presentation. I want to provide some more detail about each item in the list as well as provide some references for anyone wanting to learn more about the changes driving financial reporting.

So, let’s talk about Financial Statement Presentation. Below are the similarities and differences between IFRS and US GAAP.


  • Balance sheet, income statement, statement of cash flows, footnotes
  • Accrual basis
  • Similar materiality and consistency concepts


Classification of expenses

  • US GAAP – based on function (e.g., cost of sales, administrative)
  • IFRS – based on function or nature (e.g.., salaries, depreciation)

Layout of balance sheet and income statement

  • US GAAP – Public companies must follow Regulation S-X
  • IFRS – IAS 1 prescribes a list of minimum items – less prescriptive than S-X

Extraordinary items

  • US GAAP – restricted to items that are both unusual and infrequent
  • IFRS - prohibited

Some additional information about Financial Statement Presentation

In addition to the IFRS changes, the FASB and IASB have started considering other alternative reporting guidelines that may be incorporated into the IFRS standard in the future.

Some of the alternatives that are being discussed are significantly different than current reporting under both IFRS and US GAAP. This potential change in reporting presentation was brought to my attention by an actual client and they are already discussing the impact and requirements to fulfill the new guidelines.

The partial information below is from a publication by KPMG’s Department of Professional Practice – Audit, October 2008, Defining Issues, No. 08-42:

The FASB and IASB favor significant changes in the structure and content of the basic financial statements, and have set out their preliminary views on those changes. If the preliminary views go forward during the remaining due-process steps, the statement of financial position would no longer be organized primarily by assets, liabilities, and equity, and the income statement would no longer be organized primarily by revenues and expenses. Instead, the information in the statements of financial position, comprehensive income, and cash flows would be organized under “business,” “financing,” “income taxes,” “discontinued operations,” and “equity,” the latter not included in the statement of comprehensive income. Information would be disaggregated more than is the case today, and a new schedule would reconcile the information in the statement of cash flows to the information in the statement of comprehensive income.

The presentation model would have each entity present information in “sections” grouped by these major activities: business, financing, income taxes, discontinued operations, and equity. The model gives the business and financing sections subordinate reporting “categories.” Business-activities information would be separately presented for the operating- and investing-activities categories, and financing-activities information would be separately presented for financing assets and financing liabilities.

The classification scheme for financial statements is illustrated in Table 1

If you would like to read more about this subject the full KMPG article is located at the link below:

None of these decisions are final yet, but these are some of the things that we need to keep in mind for the future of EPM and BI.