Response to Preliminary Views on Financial Statement Presentation By Anson, Daisy, Grace, Jessie, Jolin

Question 2 Would the separation of business activities from financing activities provide information that is more decision useful than the provided in the financial statement formats used today? Why and why not?

Question 3 3. Should equity be presented as a section separate from the financing section or should it be included as a category in the financing section?

Statement of Financial Position

Our Decision and supporting Do not harm the equation “equity = total asset + total liabilities” Equity covers more than financing activities (e.g. Retained Earnings) Equity is unique to be classified one of the component of financing ( combined by non-owner and owner transactions)

Financial Statement Presentation Question 4 (1): In the proposed presentation model, an entity would present its discontinued operations in a separate section. Does this presentation provide decision-useful information?

Discontinued operations Carrying amount will be recovered principally through a sale, rather than through continuing use. Available for immediate sale The sale is highly probable ——Different Profitability and Liquidity

Separate Presentation The firms can keep a track of the value of the discontinued operations. The outside users can make judgments about the changes in profitability of these operations. Discontinued operations also represent changes in firms’ operating strategies ——Decision-useful information

Financial Statement Presentation Question 4 (2): Instead of presenting this information in a separate section, should an entity present information about its discontinued operations in the relevant categories (operating, investing, financing assets, and financing liabilities)? Why or why not?

Financial Statement Presentation No, an entity should not be required to report discontinued operations separately in different categories. Instead, it should be reported as a whole in a separate part from other activities as proposed.

Current reporting format- discontinued operations Income Statement No disclosure requirement in Balance Sheet or Statement of Cash Flow

Proposed reporting format- Discontinued operations

Statement of Comprehensive Income Operating Investing Financing Income tax Other Comprehensive income

Statement of Financial Position Operating Investing Financing Income tax Equity

Statement of Cash Flow Operating Investing Financing Income tax Equity

Question: What kind of income, assets or liabilities, or cash flow should be reported in discontinued operations? Answer: According to FAS 144, (a) the operations and cash flows of the component have been (or will be) eliminated from the ongoing operations of the entity as a result of the disposal transaction and (b) the entity will not have any significant continuing involvement in the operations of the component after the disposal transaction.

Reasons for Rejection First, most discontinued operations are related to operating activities, but seldom related to investing and financing activities. Second, the economic value of providing such detailed discontinued operation is low for both outside statement analysts and internal business operators. Third, the cost of preparing those disclosures may be relatively high.

Question 14 Should an entity present comprehensive income and its components in a single statement of comprehensive income as proposed (see paragraphs 3.24–3.33)? Why or why not? If not, how should they be presented?

Skipping the other comprehensive income from the statement of comprehensive income may result in incompletion of disclosing components of comprehensive income. Therefore mislead the report users by implying that the comprehensive income does not include the component of other comprehensive income.

Moreover, the other comprehensive income may include the unrealized gain and loss on the available for sale securities and other financial derivatives. These financial instruments indicate the coherent risk to part of the operation. Hence it is closely associated with the profitability of an entity. In this regard, it is reasonable to include and separate the other comprehensive income in the statement of comprehensive income.

Finally, a single statement format can improve the user’s ability to consistently attend to the information. It also helps the statement preparer to consistently organize the comprehensive information and reduces the cross statements matching errors.