Mark Casson 2006 A Principles-based Framework for Financial Reporting A framework of financial reporting principles De-constructs, re-thinks and simplifies current financial reporting standards

Mark Casson 2006 Acknowledgements Principles Not Rules – A Question of Judgement Report by ICAS, published April 2006

Mark Casson 2006 Principles-based Framework Principles of Revenue Recognition Principles of Cost Recognition Principles of Capital Principles of True & Fair View (Overarching) Statements of Principles Assets Liabilities Capital & Reserves Balance Sheet Income Expenditure P&L / I&E

Mark Casson 2006 Some comments on the Framework Principles of True & Fair View –The “Overarching” Statement of Principles –Sets out the fundamental and overarching principles of financial reporting These would take precedence where conflicts arise with other principles –To include disclosure of generators of economic activity, risks & rewards

Mark Casson 2006 Some comments on the Framework Principles of True & Fair View –To include recognition and/or disclosure principles for items such as intangible assets, financed and off- balance sheet assets; for example: IP, Goodwill, etc Financed assets (owned) Leased assets (not owned) Financial instruments (Hedges, etc) –To include recognition and/or disclosure principles for activities such as: Mergers & acquisitions Research & Development

Mark Casson 2006 Some comments on the Framework Principles should focus more on revenue & cost recognition, rather than on assets & liabilities –Assets & Liabilities should be governed by Principles of Revenue and Cost Recognition or Principles of Capital –The primary drivers for financial statements should be: True and Fair View –Disclosure of generators of economic activity, risks and rewards (not necessarily their recognition in the Balance Sheet) Revenues and Costs and Capital

Mark Casson 2006 How specific items would be governed by principles Intangible assets & off-balance sheet items –Principles of True & Fair View Include recognition vs disclosure principles of intangible assets and off-balance sheet items Principles of disclosure for generators of economic activities, risks and rewards

Mark Casson 2006 How specific items would be governed by principles Research & development (R&D) –Principles of True and Fair View –Principles of Cost Recognition

Mark Casson 2006 How specific items would be governed by principles Depreciation –Principles of Cost Recognition

Mark Casson 2006 How specific items would be governed by principles Mergers & Acquisitions –Principles of True and Fair View Including Principles of recognition of intangible assets –Principles of Capital –Principles of Revenue Recognition –Principles of Cost Recognition

Mark Casson 2006 How specific items would be governed by principles Financial instruments –Principles of True & Fair View Eg Principles of Intangible Asset Recognition –Principles of Revenue Recognition –Principles of Cost Recognition

Mark Casson 2006 Principles-based Framework Principles of Revenue Recognition Principles of Cost Recognition Principles of Capital Principles of True & Fair View (Overarching) Statements of Principles Assets Liabilities Capital & Reserves Balance Sheet Income Expenditure P&L / I&E