morning call ... 05 14 2007

In the coming months, accounting rule makers are planning to unveil a daft plan to rework financial statements. One possible result: the bottom-lione figure will be gone. the elimination of what today is known as net income or net profit, the bottom-line figure showing what is left after expenses have been met and taxes paid. Another possible radical change in the works: assets and liabilities may no longer be separate categories on the balance sheet, or fall to the left and right side in the classic format taught in introductory accounting classes. the project is aimed at providing investors with a common and global set of accounting standards. The project is being managed jointly by the FASB in the U.S. and the London-based International Accounting Standards Board, and involves accounting bodies in Japan, other parts of Asia and individual European nations. challenge "The cost of this change could be monumental," - textbooks, applies proactively The entire process of adopting the revised approach could take a few years to play out, so much could yet change. new proposed FI statements 1.high granularity 2.seperate segmetns for op, fin, invest - interest expense There is also a "total comprehensive income" category that is wider ranging than net profit as it is known today, and so wouldn't be directly comparable. That is because this total would likely include gains and losses now kept in other parts of the financial statements. These include some currency fluctuations and changes in the value of financial instruments used to hedge against other items. As for the balance sheet, the new version would group assets and liabilities together according to similar categories of operating, investing and financing activities, although it does provide a section for shareholders equity. Currently, a balance sheet is broken down between assets and liabilities, rather than by operating categories.