SwissHoldings - FASB
Transcript of SwissHoldings - FASB
14 April 2009
SwissHoldingsVerband der Industrie- und Dienstleistungskonzeme in der SchweizFederation des groupes industriels et de services en SuisseFederation of Industrial and Service Groups in Switzerland
International Accounting Standards Board30 Cannon StreetLondon EC4M 6XHUnited Kingdom
1 6 3 O - 1 0 0
LETTER OF COMMENT NO. ^Comment Letter on Discussion Paper (DP) - Financial Statement Presentation
Dear Madam/Sir,
SwissHoldings, the Swiss Federation of Industrial and Services Groups in Switzerland, represents49 Swiss groups, including most of the country's major industrial and commercial firms. We verymuch welcome the opportunity to comment on the above-mentioned Discussion Paper (DP). Ourresponse below has been prepared in conjunction with our member companies.
Please find in the attachment the answers to the various questions raised in the DP.
We would, however, like to make the following general comments which we would like you to alsotake into account in your deliberations:
1. Financial statements need to be a means for preparers to communicate appropriatelywith their investors and other users
We are very pleased that the Boards are looking into ways of improving the presentation offinancial statements as we are convinced that these could be improved to the benefit of allconcerned in the capital markets. We are, however, concerned that the DP proposals in theirpresent form will not improve the ability of preparers to communicate with their investors andother users. The current proposals could have the effect of impeding rather than improving theability to communicate the annual results. The financial statements could become overloadedwith details and yet will still not provide our investors with a clear overview of the annualperformance of the entity in a format that our investors and other users consider important.
For the next stage of the project we would like to suggest that the Boards work more closelyand directly with active users of the financial statements, such as the Corporate ReportingUsers Forum (CRUF), and look at the information which they would find practically useful. Theincrease in the amount of non-lFRS information being presented, e.g. in managementcommentaries, and the reduced interest of many analysts in the financial statementsthemselves indicate that non-IFRS information is considered extremely useful by active users.We therefore suggest that the Boards should concentrate on potential improvements withoutmajor upheavals in transactional systems etc. The proposal based on the cohesivenessprinciple, to create an "operating" category in the financial statements, already provides anexcellent starting-point for bringing useful non-IFRS concepts like EBIT, EBITDA and FreeCash Flow into the IFRS fold. This would also have the advantage for users of a morestandardised approach to such key indicators and thus hopefully enhance their confidence inthis information.
Similarly, we would urge the Boards to continue to explore some of the more practical ideas inthe reconciliation statement proposal, such as separating out more clearly for users elementssuch as remeasurements and unusual items as well as identifying more explicitly the underlying
Postfach 402, 3000 Bern 7 NSgeligasse 13, 3011 Bern
Tel. 1^1 (0)31 355 60 68 Fax +41 (0)31 352 32 [email protected] www.swissholdings.cn
SwissHoldings
movements in components of net working capital. From our regular contacts with active userswe believe that such information would considerably increase the practical usefulness offinancial statements.
2. Financial statements should not be a pure compliance exercise. At least elements of thefinancial statements should be aligned with the way that management runs its business
It is important that externally reported financial data is at some level aligned with the way thatmanagement internally measures performance and sets targets. Without this alignment thepreparation of financial statements could become an academic compliance exercise. If thiswere to occur, parallel internal financial reporting will commence and there is a real danger thatthe quality of the "official" financial data will suffer. We therefore strongly support the integrationof the management view of reporting financial data within the "official" financial statements.
3. There is a concern that certain of the proposals will lead to substantial additional costswith minimal benefits
Certain of the proposals will result in substantial one-off and recurring costs to produce thefinancial statements without clear benefit. The obvious area where this is the case is theproposal to introduce the direct cash flow method. If this is to be applied in its purest form thenmajor changes in the internal reporting and data collection systems would be necessary. Weare not convinced that this would produce substantial benefits for our investors and other usersof our financial statements.
Should you wish to further discuss the points raised in this letter, we would be happy to do so.
We thank you for the opportunity to contribute to the due process and for taking into considerationour comment.
Yours sincerely,
SwissHoldings
Dr. Raymund BreuCurrent Chair of SwissHoldings(CFO Novartis Group)
Dr. Peter BaumgartnerChairman Executive Committee
cc SH Board
09-04-14-CL-DP on Financial Statement Presentation
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SH c
onsi
ders
that
the
bene
fits
of t
he m
anag
emen
t app
roac
h to
prov
ide
the
mos
t rel
evan
t vie
w o
f eac
h en
tity
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sine
ss o
utw
eigh
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lack
of s
tand
ardi
zatio
n as
thi
s w
ould
sho
w th
e in
form
atio
n us
ed b
man
agem
ent t
o ru
n th
e bu
sine
ss a
nd w
ill t
here
fore
be
the
mos
t
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vant
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ting
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t fo
r ex
tern
al c
omm
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n.
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SH c
onsi
ders
the
man
agem
ent a
ppro
ach
shou
ld o
nly
be o
verr
idde
very
rar
e ci
rcum
stan
ces
and
in th
ese
case
s de
taile
d re
ason
s ne
ed t
o•4-"
prov
ided
by
the
Boa
rd a
s to
why
the
man
agem
ent a
ppro
ach
need
sbe
ove
rrid
den.
In t
his
resp
ect S
H w
ould
lik
e to
em
phas
ize
the
pote
ntia
l co
nflic
tar
isin
g fr
om th
e pr
opos
ed r
estr
ictio
ns r
elat
ed to
pos
t-em
ploy
men
t S
bene
fits
of (
a) a
coh
esiv
enes
s ap
proa
ch t
hat r
equi
res
that
the
inco
ist
atem
ent c
ateg
oriz
atio
n is
bas
ed o
n ca
tego
riza
tion
in th
e ba
lanc
e
ox
shee
t and
(b)
the
fin
anci
ng s
ectio
n co
ntai
ning
onl
y fi
nanc
ial
asse
tlia
bilit
ies
(dis
cuss
ed in
par
agra
phs
2.45
-2.4
7):
enO
SH w
ould
exp
ect
in p
arti
cula
r wit
h re
gard
to th
e pr
esen
tatio
n of
p
cdE
empl
oym
ent b
enef
its
the
man
agem
ent a
ppro
ach
to p
reva
il w
hich
resu
lt in
a n
et fi
gu
re be
ing
reco
rded
in th
e ba
lanc
e sh
eet
but
exce
ptio
nally
a s
plit
cate
gori
zatio
n in
the
inco
me
stat
emen
t (e
.g.
supp
orte
d by
the
resp
ectiv
e di
sclo
sure
s).
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iso
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t P
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ld f
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e ca
lcul
atio
n of
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eke
y op
erat
iona
l bu
sine
ss f
igur
es w
hile
oth
er k
ey f
igur
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elat
ed to
the
exis
ting
str
uctu
re (
in p
arti
cula
r on
liq
uidi
ty)
wou
ld h
ave
to b
epr
ovid
ed i
n th
e no
tes.
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SH
's v
iew
is
that
the
re w
ould
be
a be
nefi
t, pa
rtic
ular
ly b
y br
ingi
ngto
geth
er a
sset
s an
d lia
bilit
ies
in th
e fi
nanc
ing
sect
ion.
As
expl
aine
d in
the
answ
er to
Q2
abov
e, S
H w
ould
pro
pose
to
impr
ove
cohe
sive
ness
by r
equi
ring
the
cas
h flo
w st
atem
ent t
o re
conc
ile
to t
he m
ovem
ent
inth
e fi
nanc
ing
cate
gory
of t
he b
alan
ce s
heet
(w
hich
in
effe
ct w
ould
be
cons
ider
ed "
net d
ebt"
) ra
ther
than
with
the
mov
emen
t in
cash
.
hn CJ <D ""
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The
pro
pose
d st
ruct
ure
wou
ld,
how
ever
, le
ad t
o a
loss
of i
nfor
mat
ion
on th
e so
lven
cy o
f com
pani
es.
Con
side
rati
on s
houl
d be
giv
en t
o al
soin
clud
e th
e ol
d st
ruct
ure
of th
e ba
lanc
e sh
eet
(lon
g te
rm v
s. s
hort
ter
man
d to
tal
asse
ts a
nd l
iabi
litie
s) i
n th
e no
tes
to t
he a
ccou
nts
or in
tota
lon
the
fac
e of
the
stat
emen
t of
fin
anci
al p
osit
ion.
SH b
elie
ves
that
cla
ssif
icat
ion
of a
sset
s an
d li
abil
itie
s as
the
y ar
em
anag
ed a
nd u
sed
at t
he r
espe
ctiv
e re
port
able
seg
men
t le
vel
wou
ldfu
rthe
r im
prov
e in
form
ativ
e va
lue
of th
e fi
nanc
ial
stat
emen
ts a
nd i
s in
alig
nmen
t w
ith
the
proj
ect's
ove
rall
obj
ecti
ve t
o pr
ovid
e th
e m
ost
rele
vant
in
form
atio
n to
th
e us
ers
and
incr
ease
tr
ansp
aren
cy
and
enab
le m
anag
emen
t to
com
men
t be
st o
n th
e se
gmen
t ac
tivi
ties
. If
the
segm
ent
clas
sifi
cati
on i
s di
ffer
ent
to t
he e
ntit
y le
vel
clas
sifi
cati
on a
nap
prop
riat
e re
conc
ilia
tion
sh
ould
be
co
nsid
ered
so
as
no
t to
unde
rmin
e th
e en
tity
le
vel
cohe
sive
ness
. H
owev
er
SH
do
es
not
cons
ider
tha
t it
is
nece
ssar
y to
mak
e se
gmen
t de
tail
s to
ass
ets
and
liabi
litie
s a
man
dato
ry r
equi
rem
ent,
as i
f th
is i
s no
t us
ed t
o m
anag
eth
e bu
sine
ss,
it w
ould
inv
olve
add
ition
al c
osts
with
litt
le b
enef
it to
the
man
agem
ent.
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h th
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y w
ith
cent
rall
y m
anag
ed
fina
ncia
fina
ncia
l li
abil
itie
s to
the
oth
er r
epor
ted
segm
ents
, wou
lto
kee
p th
ese
acti
viti
es i
n a
sepa
rate
rep
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ble
segm
ent.
s X.£ cflrtS CD£'?
In d
evel
opin
g IF
RS
8, t
he B
oard
dec
ided
tha
t se
gmen
t in
shou
ld b
e pr
esen
ted
in a
ccor
danc
e w
ith
the
man
agem
ent
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aine
d, a
ndad
diti
onal
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men
t dis
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d (b
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e on
ly r
equi
red
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he e
xten
iin
form
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n is
alr
eady
pro
vide
d to
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segm
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rtin
g th
an t
he t
otal
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up fi
gure
s, so
SH
wsu
ppor
t ad
diti
onal
gui
danc
e co
ncer
ning
app
lyin
g th
e pr
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nd
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ent
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rmat
ion
rela
ted
to w
orki
ng c
apit
al a
nd o
pera
ting
cas
h fl
ow (
assu
info
rmat
ion
is a
vail
able
inte
rnal
ly.)
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sing
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ent
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oach
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ele
men
ts r
ecor
dei
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ty's
finan
cial
stat
emen
ts a
re n
ot a
lloca
ted
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he s
egn
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c f
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s su
ch a
s sh
are-
base
d co
mpe
nsat
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expe
nse,
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pair
men
ts,
rese
arch
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ses
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prov
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mpa
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er c
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nies
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inim
um,
ther
e sh
ould
be
a re
conc
ilia
tion
of a
mou
nts
rese
gmen
ts t
o th
e en
tity
's t
otal
am
ount
s fo
r su
ch it
ems.
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elie
ves
that
the
prop
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sent
atio
n an
d ca
teas
sets
and
lia
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ties
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at a
re i
n M
anag
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t's v
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cent
ral
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for
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ch t
he e
ntit
y is
in
busi
ness
, s"c
ore"
ope
rati
ng a
sset
s an
d li
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itie
s w
ould
be
deci
r^iO(N
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ving
the
use
rs a
bet
ter,
i.e
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ore
diff
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tiat
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icun
derl
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bus
ines
s m
odel
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As
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tivi
ty i
n th
is c
ateg
ory
beca
use
all
asse
ts a
nd 1
acd
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part
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he c
ore
acti
viti
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i.e.
oper
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r pa
rt
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The
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o m
ake
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dis
tinc
tion
bas
ed o
n co
rebu
sine
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ctiv
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s is
rea
sona
ble
and
also
fro
m a
pra
pers
pect
ive
easy
to
deci
de o
n.
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How
ever
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con
side
rs t
hat
in t
his
rega
rd t
he t
erm
[ ex
pect
s th
ee t
radi
tion
al"
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cate
gory
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ina
ppro
pria
te a
nd e
ven
mis
lead
ing,
sin
ite
rm i
nves
ting
to
be f
urth
er u
sed
wit
hin
a na
rrow
erde
fini
tion
(e.g
. ca
pita
l ex
pend
itur
es i
n PP
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refo
re,
in o
ur v
iew
the
re i
s no
nee
d fo
r fu
rthe
r d
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ateg
ory
o
spec
ific
atio
ns,
but t
here
is
need
to
chan
ge t
he n
ame
(e.g
. no
n-co
re a
ctiv
itie
s in
stea
d of
inve
stin
g).
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dditi
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limiti
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so
met
hod
oper
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onit
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cuse
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ch i
s al
so o
f int
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t fo
r th
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prop
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n ca
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hod
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mos
t co
mpa
nies
'no
t pro
vide
thi
s re
leva
nt i
nfor
mat
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s w
ould
lea
d to
the
si •EJ
i tha
t thi
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ck o
f inf
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addr
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or e
xtpr
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rpos
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urth
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iscl
osur
es w
ould
be
need
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vie
w t
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anag
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proa
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pre
vail
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ucti
on a
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rese
ntat
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pera
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vide
mor
e de
cisi
on-
usef
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mat
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than
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irec
t met
hod,
as
in S
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tity
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Sho
uld
an e
ntit
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at p
rese
nts
asse
ts a
nd l
iabi
liti
es in
orde
r of
liqu
idit
y in
its
sta
tem
ent o
f fi
nanc
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posi
tion
disc
lose
inf
orm
atio
n ab
out
the
mat
uri
ties
of i
ts s
ho
rt-
term
co
ntr
actu
al a
sset
s an
d li
abil
itie
s in
the
not
es t
ofi
nanc
ial
stat
emen
ts a
s pr
opos
ed i
n pa
ragr
aph
4.7?
Sho
uld
all
enti
ties
pre
sent
thi
s in
form
atio
n? W
hy o
r w
hyno
t?
23.
Par
agra
ph 4
.19
prop
oses
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t an
ent
ity
shou
ld
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esen
t a s
ched
ule
in t
he n
otes
to
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ncia
l st
atem
ents
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onci
les
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flo
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o co
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sive
inc
ome
and
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ggre
gate
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ome
into
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nent
s: (
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ash
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ived
or
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oth
er t
han
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ansa
ctio
ns w
ith
owne
rs,
(b)
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oth
er t
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easu
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ents
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mea
sure
men
ts t
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re r
ecur
ring
fair
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ange
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val
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djus
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(d)
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ents
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t ar
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t re
curr
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