International Accounting Standards Board
30 Cannon Street
London
EC4M 6XH
30 September 2010
Dear Sirs,
Presentation of Items of Other Comprehensive Income: proposed amendments to IAS 1
This is the British Bankers’ Association’s response to the above exposure draft; we welcome the
opportunity to comment.
As is noted in the Alternative View, a number of decisions reached in the course of important
projects - such as reform of the accounting for Financial Instruments and Employee Benefits - have
increased the number of items not reported in profit or loss. These decisions have been taken on a
project-by-project basis with seemingly little conceptual grounding on which items should be
presented in P&L and which in OCI subject to future recycling. In particular, ‘fair value through OCI
which cannot subsequently be recycled to profit or loss’ is a completely new category of item which
needs to be defined.
We share the view of Mr Engstrom that this lack of conceptual analysis is unsatisfactory and
therefore believe that a proper debate is needed on the fundamental issues related to performance
reporting. This is a point we, together with many others, made in our response to the October 2008
discussion paper. We are therefore disappointed to see this exposure draft adopting a piecemeal
approach without conceptual debate and proposing to implement the changes on a fast track basis.
This is not an approach we can support. We urge the Board to conduct a proper evaluation of this
issue and to bring forward considered proposals in due course. We firmly believe that strong
conceptual underpinnings will give clarity to those items that will and will not be recycled,
strengthening financial reporting and enhancing users’ understanding of financial statements.
As a conceptual debate of the type we propose will take time, and in light of decisions reached in the
Financial Instruments and Employee Benefits projects, we agree that it is important to help users to
differentiate those items in OCI which may be subject to future recycling to the P&L from those which
will not. We therefore support the proposal to present separately these items and suggest that it be
taken forward as a stand alone project. The intention should for the amendment to be introduced on
a timetable which will allow it to become effective at the same time as IFRS 9.
We set out our thoughts on the questions in the exposure draft below.
Question 1: The Board proposes to change the title of the statement of comprehensive
income to ‘Statement of profit or loss and other comprehensive income’ when referred to in
IFRSs and its other publications. Do you agree? Why or why not? What alternative do you
propose?
We believe that it is essential that this type of issue be discussed in the context of the financial
statement presentation project. We note that the July 2010 Staff Draft refers to this project as the
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reasoning behind the decision to change the title. To us, it would seem more appropriate for that
project to influence this one.
Question 2: The proposals would require entities to present a statement of profit or loss and
other comprehensive income with two sections – profit or loss and items of other
comprehensive income. The Board believes this will provide more consistency in
presentation and make financial statements more comparable. Do you agree? Why or why
not? What alternative do you propose?
We do not believe it is appropriate to reach a conclusion on this issue without first conducting a
project on the conceptual issues underlying performance reporting and therefore do not support the
proposal. We also question the Board’s belief that the proposal will lead to a greater degree of
consistency and make financial statements more comparable. The IAS 1 option to present a single
performance statement does not appear to be widely utilised, at least in Europe, and so its deletion
would have a minimal impact on comparability.
Question 3: The exposure draft proposes to require entities to present items of other
comprehensive income (OCI) that will be reclassified to profit or loss (recycled) in
subsequent periods upon derecognition separately from items of OCI that will not be
reclassified to profit or loss. Do you support this approach? Why or why not? What
alternative do you propose, and why?
We can see some merit in this proposal in that it will enhance the visibility of items that will be
recycled and will therefore improve clarity for users. As noted by BC25, the projects on both
Financial Instruments and Employee Benefits will give greater prominence to items presented in OCI
and users; understanding of an entity’s financial position will be enhanced if there is a distinction
between items which will be subject to subsequent recycling and those which will not. Given that the
finalisation of the Financial Instruments project is a matter of some urgency, and the fact that we do
not believe it is appropriate to pursue the major changes to financial statement presentation
proposed in the exposure draft without a proper conceptual debate, we suggest that this proposal be
taken forward as a second project with a view to its effective date being aligned with that of IFRS 9.
Question 4: The exposure draft also proposes to require that income tax on items presented
in OCI should be allocated between items that might be subsequently to profit or loss, if the
items in OCI are presented before tax. Do you support this proposal? Why or why not? What
alternative do you propose and why?
We support the decision on the basis that it will be consistent with current practice.
Question 5: In the Board’s assessment:
a) The main benefits of the proposals are:
I. Presenting all non-owner changes in equity in the same statement.
II. Improving comparability by eliminating options currently in IAS 1.
III. Maintaining a clear distinction between profit or loss and items of other
comprehensive income.
IV. Improving clarity of items presented in OCI by requiring them to be classified
into items that might be reclassified subsequently to profit or loss and items that
will not be reclassified subsequently to profit or loss
b) The costs of the proposals should be minimal because in applying the existing
version of IAS 1, entities must have all the information required to apply the proposed
amendments.
c)
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Do you agree with the Board’s assessment?
We see greater clarity over those items which might subsequently be recycled to the P&L as the
major benefit. As noted above, we are not convinced that the proposal to eliminate the presentation
option in IAS 1 will have any major bearing on comparability.
Question 6: Do you have any other comments on the proposals?
We have no further comments.
Yours sincerely,
Paul Chisnall
Executive Director
Direct Line: 020 7216 8865
E-mail: paul.chisnall@bba.org.uk
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