G4+1 ISSUES SECOND DISCUSSION PAPER

Representatives of the national standards setting bodies from Australia, Canada, New Zealand, the United Kingdom, and the United States (the so-called G4+1 Group of Accounting Standard Setters) issued in September a second position paper for comment by those interested in the convergence of international accounting standards. The first paper, issued in December 1998, contained recommendations relating to the methods of accounting for business combinations.

This second paper, Reporting Financial Performance, addresses the format and presentation of the results of operations in financial statements. FASB issued the paper as a Special Report, with a preface and request for comment without setting a deadline for receiving comments. The standards setting bodies in the other countries are also issuing the paper for comment. The International Accounting Standards Committee has publicized a response deadline of December 31, 1999, and said that it will review the comments for possible modification of its standards. The FASB preface also indicates that it will consider the responses, but notes that some of the changes being suggested have already been introduced into U.S. GAAP in Statement No.130 on reporting comprehensive income.

The following are the main G4+1 positions:

* Financial performance should be presented once, rather than in two or more statements;

* The single statement of financial performance (i.e., the income statement) should be divided into three components: 1) the results of operating (trading) activities; 2) the results of financing and other treasury activities; and 3) other gains and losses;

* Recycling (reporting the same item in two different periods in two different types of performance measures) should not generally be permitted;

* The category of extraordinary items should be abolished, and abnormal or exceptional items should not be reported as a separate category of revenue or expense;

* The results of continuing and discontinued operations should be segregated; and

* Changes in accounting policy should be reported by retrospectively applying the new policy with restatement of prior periods.

The paper reflects the views of the working group of members that produced it and was not officially deliberated by the bodies themselves. It is available from FASB (Publication No. 201-B; http://fasbpubs@fasb.org ) for $12 or from the IASC (http://publications@iasc.org.uk) for $17. *

The CPA Journal is broadly recognized as an outstanding, technical-refereed publication aimed at public practitioners, management, educators, and other accounting professionals. It is edited by CPAs for CPAs. Our goal is to provide CPAs and other accounting professionals with the information and news to enable them to be successful accountants, managers, and executives in today's practice environments.