One of the change is sub operating profit as part of the development of its proposals, the IASB sampled 100 sets of company financial statements. Of these, 63 showed some form of operating profit subtotal, and the operating sections will only include income and expenses from the company’s operating activities.
While the entity which generates investment income or finance income or costs from its main business of activities will still be calculated in its operating profit.
Moreover, in investing and financing sections in cashflow. The investing sections will include income from investments generated different form core business activities of the company will differentiate the other types of income.
The financing sections will include different types of finance costs and incomes. As IASB believes there is much difference types finance cost such as unwinding of discount and interest calculated on simple debt. This will result in profit and loss longer but this disaggregation will produce more good information.
Statement of Cashflows
Now IASB is proposing change in cashflow, indirect reconciliation should be started from operating profit rather that net profit and then removing income and finance cost. There is also proposal to remove classification of interest and dividends paid in cashflow. Currently these are recorded in operating activities of cashflow. Whereas interest and dividend received should be in investing or operating activities. Under IASB proposal Interest and dividend paid for non-financial entities must be in financing activities. Where interest and dividend received for non-financial entities must be in investing activities.
According to IASB proposal unusual income and expenses should be disclosed in single note to the accounts. Additionally, IASB proposed management performance measures as subtotals of income and expenses that are used as public communications, complements totals and subtotals according to IFRS and tell to users of financial statements about management view of entity performance. This will be disclosed in single note to the financial statements. The aim is improving comparability, to produce clearer disclosure and understandable picture for users.