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Eldon House, 2 Eldon St.London, EC2M 7UA

England

www.fitchratings.com

17 July 2006

IAS 1 Amendments

International Accounting Standards Board

30 Cannon Street

London EC4M 6XH

Exposure Draft: Amendments to IAS 1 Presentation of Financial Statements: A Revised

Presentation

Dear Sir/Madam,

We appreciate the opportunity to comment on the International Accounting Standards

Boards (IASB or Board) Proposed Amendments to IAS 1 Presentation of Financial

Statements: A Revised Presentation (hereafter referred to as the Exposure Draft). We

support the Exposure Draft as part of the Boards general objective to enhance theusefulness of information presented in the financial statements but consider this as a

relatively small step forward. Fitch will be following the discussion in segment B of the

FASB/IASB joint project, which we hope will result in appropriate granularity within thestatements and will focus on reconciling the component parts between the various

financial statements. Our particular focus will be on seeing improvement in the cash flow

statement.

Overview

Fitch Ratings (Fitch) is a leading global rating agency committed to providing the world's

credit markets with independent, timely and prospective credit opinions. Fitchs corporateratings make use of both qualitative and quantitative analyses to assess the business and

financial risks of fixed-income issuers. Therefore, Fitch directly relies on the financialstatements and that reliance places us in an informed position to comment on information

we believe is useful and crucial in the credit evaluation process, which is a critical

component of efficient capital markets. We think it is important for accounting standards

to consider the heavy reliance on cash flow related disclosures by credit analysts andfixed-income investors in determining a companys ability to service its debt as it falls

due and continue as a going concern.

While we understand that no amendment has been proposed to IAS 7 at this stage, and

we agree that it would be impracticable to do so, with regard to BC27 of the Exposure

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Draft we wish to emphasise that starting a cash flow statement at net income and

reconciling for non-cash items is not helpful for cash flow-based analysis. In this sense, it

would make little difference to us if the indirect cash flow statement were to start at totalrecognised income and expense rather than net income, but we would encourage the

IASB to urge preparers at least to provide more meaningful and granular reconciliation to

cash flow if they find it too difficult to provide information under the direct method.

Each of your questions is addressed below:

Questions 1 and 3

The labelling of the component parts of the statements is not a major issue for us. Weconsider the Boards proposal not to make changes in nomenclature mandatory a sensible

one, and will be interested to see how companies make use of this flexibility over the

next few years.

Question 2

Yes. We agree. It is important that our analysts are able to understand how the numbersthat appear in different statements relate to each other. Providing the closing balance

sheet for the prior period should assist in this.

Question 4

We agree that owner changes in equity should be presented separately from all other

changes in equity. Understanding internally generated cash flows separately from those

external to the business is an important part of a rating agencys analysis of a companys

ability to generate sufficient cash flow to repay its debt. We encourage the Board to

ensure that the segregation of owners from non-owners interests is maintained in thestatement of cash flows as well.

Question 5

We agree that the flexibility of permitting entities to present components of recognised

income and expense either in a single or in two statements is appropriate at the currenttime. We acknowledge that some users would be confused if the net income line they

are used to were to disappear from one period to the next. However, we do not consider it

appropriate and view it as often misleading for users to focus on a single magic number

in financial statements. Fitch encourages its analysts to adjust this number forinconsistency between periods or between companies by putting thought into the various

items shown in the financial statements and the notes, and to look at the informationprovided about developments in a company that is shown in movements in equity that are

not shown as part of net income. For this process it makes no difference whether incomeand expense are presented in one statement or two, except that presentation in two

statements gives the impression that the bottom line number in the first statement has

some meaning for users. We are struggling to identify what this may be given the currentcomposition of net income.

Question 6

We agree with the proposal to present reclassification adjustments separately. We wish to

point out that clear display of these items in the cash flow statement at the same time

would assist our understanding of how the financial statements relate to one another.

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Question 7

We agree that it is important for users to be able to see the tax related to components ofother recognised income and expense. These items are often adjusted for in our analysis,

and it is preferable to do this with the appropriate rather than the estimated related tax.

BC25 describes our position well in this context.

Question 8

As a credit rating agency, looking at a companys ability to repay debt, Fitch does not

look at the Earnings per Share, so we leave this question for equity investors to answer.

We will be happy to answer any questions on our comments and look forward to

discussing these comments with the Board at the appropriate time.

Yours faithfully,

Bridget GandyManaging Director

Credit Policy

Fitch Ratings

London