News
IASB to Set Stricter Rules on Use of Infrequent Items
18-Jan-2017
NEW YORK - The International Accounting Standards Board will provide stricter guidance on the use of so called infrequent items on company income statements, the organization's Chairman Hans Hoogervorst said.
Companies could be required to disclose the nature of their infrequent items for the past five years, Mr. Hoogervorst said in an interview.
"Should firms be able to present restructuring as an infrequent item? That calls for stricter guidance," he said.
In the next two to three years, the IASB will also specify how it wants companies to state subtotals, such as operating profit and earnings before interest and taxes, or ebit, and other special line items, Mr. Hoogervorst said. The board will also include recommendations on where to place interest expenses, he said.
"We want more comparability above the bottom line," Mr. Hoogervorst said. These steps should lead to a stricter formatting of income statements and also provide greater transparency over the use of financial measures outside generally accepted accounting principles (GAAP),” he said.
"This will hopefully make it easier for regulators to get more clarity over the use of non-GAAP measures," Mr. Hoogervorst said.
Earlier this year, the US Securities and Exchange Commission issued new guidelines on the use of non-GAAP figures in an effort to rein in the practice. The guidelines targeted the prominence of non-GAAP figures in earnings releases and specifically prohibited certain adjustments to revenue.
Last week agency officials said it would allow the use of adjusted figures under special circumstances.
The IASB is also working on a practice statement that clarifies the application of materiality.
The organization will propose clarifications to the definition of materiality in a draft, a spokeswoman of the IASB said. This is aimed at making "companies feel more comfortable to leave out unnecessary clutter," Mr. Hoogervorst said.
The final version of the practice statement is expected to be published in the second quarter of 2017.
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http://blogs.wsj.com/cfo/2016/12/16/iasb-to-set-stricter-rules-on-use-of-infrequent-items/