September 30, 2010
International Accounting Standards Board
30 Cannon Street
London EC4M 6XH
United Kingdom
Comment letter submitted via IASB website
Re: Presentation of Items of Other Comprehensive Income
Proposed Amendments to IAS 1
We are pleased to provide comments on the International Accounting Standards Board’s
(“IASB”) proposed Exposure Draft “Presentation of Items of Other Comprehensive
Income”:
We do not support the proposal to present all non-owner changes in equity in a single
statement and to remove the option to present the items of profit and loss and the items of
other comprehensive income in two separate statements.
We understand that this proposal was created in consideration for the potential of more
items to be reflected in other comprehensive income from other proposals. However, as
mentioned in the alternative view, prior to focusing on presentation of financial reporting, a
real debate on the concept of performance remains necessary. From our point of view,
determining which items should be presented in profit or loss, which items should be
presented in other comprehensive income and when items should be reclassified into profit
or loss requires a robust conceptual analysis.
We consider that the proposal of requiring one single statement of comprehensive income
would be confusing for users of the financial statements. Aggregating all non-owner
changes (net income and other comprehensive income) tends to make believe that the total
is meaningful. We believe it is not meaningful because it includes items such as, cash flow
hedge valuation reserves, which have been specifically excluded from the income
statement, as they do not contribute to the measure of the entity’s performance.
As we consider it crucial to maintain a statement of performance, which ends with net
income and earning per share, we propose to present other non-owner changes components
either in a specific section of the statement of change in equity or in a separate statement
without adding them to net income.
You will find other answers to the questions asked by the Exposure Draft in the appendix.
Should you have any questions regarding our comments, please do not hesitate to contact
us.
Sincerely,
Gerard Gil
Deputy CFO
BNP PARIBAS: 3 Rue Louis Le Grand, 75002 Paris, France - www.bnpparibas.com
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APPENDIX
ED Presentation of Items of Other Comprehensive Income - Proposed Amendments to
IAS 1
Questions 1 and 2 – Statement of Profit and Loss and Other Comprehensive Income
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.
Question 1- Do you agree? Why or why not? What alternative do you propose?
We disagree with the proposal to present items of net income and other
comprehensive income within a single statement. We believe that the Comprehensive
Income is a confusing aggregate and we would rather present the changes in assets
and liabilities recognized directly in equity as such in an identified section of the
statement of change in equity or in a separate statement without adding them to net
income. Should nevertheless a single statement be required, we consider it important
that the revised standard upholds the option for using other titles and we suggest the
following one: "Statement of net income and changes in assets and liabilities
recognized directly in equity"
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.
Question 2 - Do you agree? Why or why not? What alternative do you propose?
We do not support the IASB’s proposal to remove the current presentation option of
IAS 1.
As mentioned in our answer dated 14 April 2009 to the Discussion Paper “Preliminary
Views on Financial Statement Presentation:
“Aggregating non-owner changes and net income in a single separate statement is quite
confusing, since it tends to make believe that the total is meaningful, while other nonowner change components (for example, cash-flow hedges valuation reserve or foreign
exchange translation adjustments) have been specifically excluded from the income
statement as they do not contribute to the measure of the entity's performance. The
specific reasons why the components of comprehensive income have been separated from
the income statement have been discussed and concluded in the prior discussion papers
for the other standards and these conclusions were that the best accounting for these
certain transactions is to separate them. This DP proposes to practically ignore those
prior discussions and put them all into one statement, against the fact that it has already
been concluded that this would be incorrect to do. For example, by showing the changes
in value of the cash flow hedging instrument in the same statement as the income
statement, would completely defeat the purpose of the initial hedge, as the hedged item
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relates only to future cash flows and not the current period's performance. Therefore the
option to separate, comprehensive income and the income statement should remain.
Furthermore, the other comprehensive income (OCI) category should be maintained and
its components should continue to be used and not combined with other components of
income, as they provide a proper way to reflect the activity that the business is
conducting.”
We therefore indicated our strong opposition to present items of profit and loss and
other non-owner changes into one single statement, and to draw any total of net
income and OCI components.
Regarding the current status of the proposal, the IASB’s arguments of improving
consistency of presentation and comparability of the financial statements fails to
convince us. We keep on considering that aggregating items of conceptually different
nature and predictive value, in one single statement will be confusing for users of
financial statements.
Question 3 to 4 — Presentation of Items of Other Comprehensive Income
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.
Question 3 - Do you support this approach? Why or why not? What alternative do you
propose, and why?
We do not consider that this proposal really improves the presentation of items in
Other Comprehensive Income for users.
We consider that profit and loss is a central performance measure. As a consequence,
we consider that every other non-owner change not directly accounted for in profit
and loss should be subsequently reclassified to profit and loss to reflect this
performance. We do not support a category of non-owner changes, which would never
be reclassified to profit and loss.
The exposure draft also proposes to require that income tax on items presented in OCI
should be allocated between items that might be subsequently reclassified to profit or loss
and those that will not be reclassified subsequently to profit or loss, if the items in OCI are
presented before tax.
Question 4 - Do you support this proposal? Why or why not? What alternative do you
propose and why?
We do not consider that this proposal is a significant change from the previous IAS 1
because the standard already requires the disclosure of “the amount of income tax
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relating to each component of other comprehensive income, including reclassification
adjustments, either in the statement of comprehensive income or in the notes”. The cost
of allocating income tax between items that will be subsequently reclassified and those
that will not be reclassified is minimal.
However, as mentioned in our answer to question 3, we do not support a category of
OCI that would never be reclassified to profit and loss.
Question 5 – Benefits and Costs
In the Board’s assessment:
(a) the main benefits of the proposals are: BC32–BC36
(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.
Question 5 - Do you agree with the Board’s assessment? Why or why not?
We don’t feel convinced by the benefits (a) (i to iv) considered by the Board. As
mentioned in our answer to question 2, such a proposal will lead to a misleading
presentation by aggregating items of different informational value and drawing a
meaningless total.
We know that the number of items of other comprehensive income will increase with
the IASB’s current projects so that we agree with the importance of maintaining
information concerning OCI in principal statements rather than in the notes.
However, we think essential for users of financial statements that a statement of
performance which ends with a net income and earning per share should be
maintained. As a consequence, we propose that components of other comprehensive
income should either be presented in a separate section of the statement of change in
equity or in a separate statement of other comprehensive income, without adding
them to net income.
Question 6 – Other Comments
Question 6 - Do you have any other comments on the proposals?
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