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(232)-REPORTING FINANCIAL PERFORMANCE

Sunday, January 9, 2011

Reporting Financial Performance


The main abuse of SSAP related to the treatment of extraordinary items, particularly redundancy, reorganization and restructuring costs. Any such costs classified as extraordinary were excluded from the earnings per share number under SSAP/.

The treatment of extraordinary items was thus often “EPS-driven”.


Main charges

The main charges introduced by financial reporting standards include:

  • Presentation in the profit and loss account
Items such as turnover, cost of sales, gross profit, operating expenses and operating profit are to be analyzed between, continue operations, discontinuing operations and exceptional items.

  • Presentation and measurement of profit on disposal of fixed assets
This is particularly important for companies who incorporate fixed asset revaluations into the accounts.

  • Treatment of extraordinary items
  • Additional statements and notes
Statement of total recognized gains and losses, note of historical cost profits and losses, reconciliation of movement in shareholders’ funds.

  • A change in the definition of earnings per share.
Earnings per share will in future be based on earnings after taking account of extraordinary items if they exist in the future.

  • Implementation

The accounting standard burrow encourages companies to adopt financial reporting standard at the earliest opportunity.


Split between continuing and discontinuing operations


Financial reporting standards set out detailed criteria to be followed in deciding whether particular business disposals and terminations are to be regarded as “discontinued”. The standard also specifics the extent to which provisions can be set up in the balance sheet relating to the year prior to discontinuance.


This area of the standard is particularly complex and will apply mostly to large quoted groups which are regularly involved in acquisitions, disposals and business closures. As this part of financial reporting standards are concerned particularly with consolidated accounts.

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