Surprisingly, some finance executives endorse it, too. “It’s the kind of schedule you do to make sure you haven’t made a mistake anyway, and to me, there’s no difference if we publish it,” says Rickard. More than 50 percent of survey respondents said they thought the reconciliation schedule would help explain revenue changes to investors; only 28 percent said it would not.
Again, though, the appropriate level of detail remains an open question. The basic categories that FASB is contemplating right now are: cash flows not affecting income, accruals and systematic allocations, recurring valuation changes, and remeasurements other than recurring valuation changes. Beyond that, the number of columns and precision of reconciliation vary greatly among the drafts. In some scenarios, the reconciliation schedule would replace the cash-flow statement (since it would contain it).
A potentially explosive change that is still only a twinkle in standard-setters’ eyes is expanded segment disclosure. Last September, FASB said it was asking the IASB to sign off on the view that companies should have to classify segment as well as corporate data into operating, financing, and investing buckets. How much detail will be provided within those buckets remains to be seen. The alternatives FASB proposes range from including only significant line items to including enough segment data to total the general financials.
FASB members, particularly Young, are eager to push this part of the project forward. “I’m beginning to believe that’s where some of the greatest payoffs are,” he says. And it’s hard to find an investor or an analyst who would turn down such plum information. Jonas, for one, is clamoring for it. “For a complex business, the unit of analysis is often the segment,” he explains. “When we’re analyzing GE, for example, we do look at GE consolidated, but only after we analyze each segment. But yet we don’t get nearly the info in segments that we get at the consolidated level.”
Finance executives so far are fairly relaxed about this proposal, largely due to Financial Accounting Standard 131, which says they don’t have to report externally anything that is not used internally. McCormick, for example, doesn’t keep some of the items that would likely be requested, such as balance sheets for each segment, but Kelly doesn’t expect that will be a problem if those parts of FAS 131 stay in place. “And if we have it within the company, I’m fine with reporting it,” he says.
Pie in the Sky?
Given that FASB has so many big-picture projects on its plate these days, it is tempting to dismiss the financial-statement project as just another pie-in-the-sky idea that will get bogged down in procedure. But with a joint FASB/IASB draft due out for comment in mid-2008, “hard decisions” could be made by 2009, says Young, with implementation to follow by 2010 at the earliest, if not several years after that. FASB members say that finishing this project isn’t contingent on finishing any others on its ambitious agenda, including its efforts to hammer out a conceptual framework for accounting and to redefine notions of revenue and fair value.