Commentary on the application of certain aspects of IAS 1 Presentation of Financial Statements by selected Irish equity issuers

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1 Commentary on the application of certain aspects of IAS 1 Presentation of Financial Statements by selected Irish equity issuers October 2013

2 OUR MISSION To support and enhance public confidence in the accountancy profession and in financial reporting through the exercise of effective, independent oversight and the promotion of adherence to high standards

3 Contents Section Title Page 1 Introduction Purpose of this Commentary Previous IAASA activity relating to IAS Key messages and summary of findings 4.1 Key messages Key aspects of IAS 1 relevant to this Commentary Summary of findings Detailed findings 5.1 Analysis of expenses recognised in profit or loss using a classification based on either their nature or their function within the entity Operating profit Exceptional items Accounting policies Other comments IAASA Publications referred to in this Commentary are available on our website at

4 DISCLAIMER Whilst every effort has been made to ensure the accuracy of the information contained in this Commentary, the Irish Auditing & Accounting Supervisory Authority accepts no responsibility or liability howsoever arising from any errors, inaccuracies, or omissions occurring. The Irish Auditing & Accounting Supervisory Authority reserves the right to take action, or refrain from taking action, which may or may not be in accordance with this Commentary.

5 Section 1 - Introduction The objective of financial statements prepared under IFRS 1 is to provide financial information about the reporting entity that is useful to existing and potential investors, lenders and other creditors in making decisions about providing resources to the entity. However, preparers of financial statements exercise judgement in the preparation of financial statements with the result that reported headline figures may not be comparable from one entity to another. Users of such financial statements need to study the financial statements carefully to fully understand the entity s results and preparers need to provide sufficient disclosures to aid users understanding. For example, operating profit is not a term defined by the accounting standards and items included in that figure can vary between entities. Similarly, many entities include exceptional items in their Income Statement either as line items or separate columns with such items normally not included in operating profit. The use of exceptional items appears to be particularly prevalent amongst UK and Irish entities. Entities in jurisdictions such as France, Belgium and Denmark use variations of these and highlight non recurring or special items. These items are not defined in the accounting standards and what one entity judges to be exceptional may not be judged as exceptional by other entities. In preparing financial statements under IFRS, IAS 2 1 Presentation of Financial Statements ( IAS 1 ) sets out overall requirements for the presentation of financial statements, guidelines for their structure and minimum requirements for their content. It prescribes the basis for presentation of general purpose financial statements to ensure comparability both with the entity's financial statements of previous periods and with the financial statements of other entities. IAS 1 is not prescriptive in nature. Rather, IAS 1 acknowledges that judgement is required in determining the best manner in which information is presented. In applying IAS 1, entities are required to exercise judgement in presenting information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information. Entities should provide additional disclosures to enable users to understand the impact of particular transactions, other events and conditions on the entity's financial position and financial performance 3. This Commentary is limited to consideration of aspects of IAS 1 s requirements in respect of the Income Statement. The other components of a full set of financial statements (statement of financial position, statement of changes in equity, statement of cash flows, notes, and comparative information) are outside the scope of this Commentary. 1 International Financial Reporting Standards 2 International Accounting Standard 3 IAS 1.17 refers 5

6 Section 2 - Purpose of this Commentary IAASA has previously engaged with issuers on IAS 1 related matters some of which is set out in Section 3 of this Commentary. As a consequence of this past activity, IAASA has undertaken a thematic review of the 2012 annual financial reports of ten equity issuers 4 to determine those issuers approach to the following four matters: analysis of expenses using a classification based on either their nature or their function; disclosure of operating profit or a similar line item; use of exceptional items ; and disclosure of accounting policies addressing exceptional items and operating profit. The ten annual financial reports of equity issuers sampled for review were selected judgementally. The sample objective was to cover a cross section of industry sectors and to review issuers ranging from the larger issuers in terms of market capitalisation to smaller sized entities. The ten annual financial statements selected for inclusion in this review are set out in the table below. Issuer Annual financial statements in respect of the year ended 1. Aer Lingus Group plc 31 December Aminex plc 31 December CRH plc 31 December DCC plc 31 March Glanbia plc 29 December Greencore Group plc 28 September Independent News & Media plc 31 December Kerry Group plc 31 December Paddy Power plc 31 December Ryanair Holdings plc 31 March 2012 The review comprised a desk top review of the published annual financial statements and thus additional information was not sought from issuers. The IASB 5 s Conceptual Framework states that To a large extent, financial reports are based on estimates, judgements and models rather than exact depictions and The usefulness of financial information is enhanced if it is comparable [bold emphasis added], verifiable, timely and understandable. The IASB has identified users of financial statements as existing and potential investors, lenders and other creditors of the entity. This Commentary has been prepared to highlight for users of Irish equity issuers annual financial statements the areas where divergent, but not necessarily non-compliant, approaches have been adopted in practice. The Commentary also aims to stimulate debate amongst preparers, auditors, and other stakeholders as to whether and, if so, how existing approaches could be modified to provide enhanced comparability with similar information about other entities and with similar information about the same entity for another reporting period. While this Commentary is primarily directed at the users of annual and half-yearly financial statements of issuers falling within IAASA s financial statement review remit, users, preparers, auditors, and other stakeholders of the financial statements of entities not within IAASA s financial statement review remit may also find the Commentary of interest. 4 At the time this review was undertaken there were 24 equity issuers falling under IAASA s financial statement review remit 5 International Accounting Standards Board 6

7 Section 3 - Previous IAASA activity relating to IAS 1 IAS 1.82 prescribes a minimum content for the face of the Income Statement. IAS 1.85 provides that additional line items, headings and subtotals shall be presented on the face of the Income Statement when such presentation is relevant to an understanding of the entity s performance. The inclusion of a line item called operating profit and exceptional items, many of which are not included in the operating profit line, seems more prevalent in Ireland and the UK than in other European jurisdictions. While IAS 1 neither requires nor precludes disclosure of a line item operating profit on the face of the Income Statement, IAS 1.BC 56 clearly states that where an entity discloses the results of operating activities or similar line items, it should be representative of activities that would normally be considered to be operating. It further states that it would be misleading and would impair comparability if items of an operating nature were excluded from the results of operating activities, even if that had been industry practice. IAASA has previously engaged with issuers on IAS 1-related matters, as a consequence of which: (a) an issuer was required to amend the basis on which it determined operating profit as IAASA deemed that it was not in compliance with the requirements of IAS 1; (b) certain issuers have been required to include an explicit accounting policy dealing with the definition of operating profit ; (c) (d) certain issuers have been required to include an explicit accounting policy dealing the identification and classification of items as exceptional in nature; and issuers rationales for separately disclosing or not disclosing exceptional items has been challenged by IAASA. Each year IAASA publishes Observations on Selected Financial Reporting Issues which seeks to assist issuers management and those charged with issuers governance in the preparation of high quality financial reports by offering observations on selected financial reporting issues to coincide with the preparation of issuers annual financial statements. Readers attention is drawn to the following matters included in such Observations documents. (a) Presentation of exceptional items in the Income Statement In applying the requirements of IAS 1, issuers should carefully consider: - how the presentation and disclosure of exceptional items is best achieved; - the disclosure of an accounting policy in respect of exceptional items setting out the basis on which exceptional items are identified and presented; - the treatment in subsequent reporting periods of items which were presented as exceptional in earlier periods but which, based on materiality of the item in the current period, is considered no longer material; and - both income and costs to determine whether they constitute exceptional items and apply their exceptional item accounting policy consistently. [Item 9 on pages 12 and 13 of IAASA s 2012 Observations document]; 7

8 (b) Exceptional items and non-recurring items IAASA has challenged issuers as to the presentation of such items in their financial reports, including issuers rationale for separately disclosing or not disclosing such items. [Item 13 on page 18 of IAASA s 2011 Observations document]; (c) Operating profit In instances where issuers present items outside of the results of operating activities, IAASA s clear expectation is that such issuers will provide detailed narrative explaining their analysis of what constitutes operating activity and the basis upon which amounts have been presented outside the results of operating activities. [Item 2.8 on page 13 of IAASA s 2009 Observations document]; and (d) Operating profit Given the prominence attributed to the line item operating profit in financial reports and the degree of judgement required in relation to the classification of items within and outside of operating profit, issuers should give consideration as to whether it is necessary to include an accounting policy disclosure explaining judgements and rationales. [Item 9 on page 7 of IAASA s 2008 Observations document]. 8

9 Section 4 - Key messages and summary of findings 4.1 KEY MESSAGES IAS 1 is not prescriptive in nature and acknowledges that judgement is required in determining the best manner in which information is presented. This review has identified that issuers have adopted alternative permitted presentation methodologies and have exercised judgement in presenting information. While there is no indication that these methodologies and judgments are not in compliance with IFRS, they do reduce the extent to which one issuer s financial statements are comparable with another issuer s. Consequently, users of issuers financial statements are advised to critically evaluate reported headline items and the Income Statement presentation adopted by issuers. Users should consider the related explanatory note disclosures including the definitions used and the accounting policy adopted in respect of items including exceptional items and operating result. Preparers of issuers financial statements should carefully consider the presentation and disclosure of the Income Statement on a regular basis to ensure the decision making needs of users are met. The effectiveness of IAS 1 as a financial reporting standard meeting the needs of users of financial statements is a matter which the standard setter, the IASB, is reviewing as part of its short and medium term projects. As part of its medium-term projects, the IASB intends to explore whether IAS 1, IAS 7 Statement of Cash Flows and IAS 8 Accounting Policies, Changes in Estimates and Errors should be replaced with a single Standard on presentation and disclosure, in effect creating a disclosure framework for IFRS. This IASB research project will incorporate a review of the work previously done on the Financial Statement Presentation project. Given our past experience in examining this issue and the results of this survey, IAASA intends to provide feedback to the IASB on this matter. 4.2 KEY ASPECTS OF IAS 1 RELEVANT TO THIS COMMENTARY In presenting the Income Statement, entities: 1. shall provide an analysis of expenses using a classification based on either their nature or their function within the entity (IAS1.99); 2. are not prevented from using a line item called operating profit in that an issuer is allowed to present additional line items, headings and subtotals in the Income Statement by virtue of IAS 1.85; 3. are not prevented from including exceptional items in the Income Statement by virtue of IAS 1.85 and IAS 1.97 which states that when items of income or expense are material, an entity shall disclose their nature and amount separately; 4. select a form of presentation for exceptional items (e.g. disclosure in the accompanying explanatory notes, disclosure as a separate line item on the face of the Income Statement or presentation as a separate column on the face of the Income Statement); and 5. shall disclose the accounting policies used that are relevant to an understanding of the entity s financial statements (IAS 1.117). 9

10 4.3 SUMMARY OF FINDINGS The following Table summarises the results of this thematic review in the context of the matters outlined above. Details findings are set out in Section 5 below. Finding Section 1. Five issuers adopted the nature of expense method of classification and the remaining 5.1 five issuers adopted the function of expense or cost of sales method of classification. 2. All ten selected equity issuers annual financial statements issuers presented a measure 5.2 of operating profit or a similar line item. In all instances, the measure of the results of operating activities, or a similar line item, has been disclosed before finance income, finance expenses and the share of results of associates and joint ventures. By virtue of the use of a columnar presentation for exceptional items, those six issuers electing a columnar presentation disclosed a measure of the results of operating activities, or a similar line item, before and after exceptional items. This review identified instances of inconsistent treatment of certain items of expense (e.g. foreign exchange gains/losses and amortisation of intangible assets) by issuers in presenting a measure of the results of operating activities, or a similar line item. 3. This review identified 30 different items presented as exceptional items by the ten 5.3 selected equity issuers in either their 2012 or 2011 annual financial statements. The review determined that the cumulative amount presented as exceptional items before tax by the ten selected equity issuers over the five years amounted to 1.7bn comprising 2.1bn in exceptional costs and 0.4bn in exceptional income. The costs presented as exceptional exceeded the income presented as exceptional by a factor of 5:1. Three of the selected equity issuers have presented restructuring and rationalisation costs as exceptional in each of the past five years. 4. The review identified a range of practices in presenting exceptional items : disclosure in the accompanying explanatory notes without the items being highlighted on the face of the Income Statement (two issuers); - disclosure as a separate line item on the face of the Income Statement (seven issuers); - presentation as a separate column on the face of the Income Statement (six issuers); and - a combination of these practices. 5. Seven of the ten selected equity issuers disclosed an accounting policy relating 5.4 to exceptional items. 10

11 Section 5 - Detailed findings The following are the findings arising from this review: 5.1 ANALYSIS OF EPENSES RECOGNISED IN PROFIT OR LOSS USING A CLASSIFICATION BASED ON EITHER THEIR NATURE OR THEIR FUNCTION WITHIN THE ENTITY Requirements of IAS 1 99 An entity shall present an analysis of expenses recognised in profit or loss using a classification based on either their nature or their function within the entity, whichever provides information that is reliable and more relevant. 100 Entities are encouraged to present the analysis in paragraph 99 in the statement(s) presenting profit or loss and other comprehensive income Expenses are subclassified to highlight components of financial performance that may differ in terms of frequency, potential for gain or loss and predictability. This analysis is provided in one of two forms. 102 The first form of analysis is the 'nature of expense' method. An entity aggregates expenses within profit or loss according to their nature (for example, depreciation, purchases of materials, transport costs, employee benefits and advertising costs), and does not reallocate them among functions within the entity. This method may be simple to apply because no allocations of expenses to functional classifications are necessary. An example of a classification using the nature of expense method is as follows: Revenue Other income Changes in inventories of finished goods and work in progress Raw materials and consumables used Employee benefits expense Depreciation and amortisation expense Other expenses Total expenses () Profit before tax 103 The second form of analysis is the 'function of expense' or 'cost of sales' method and classifies expenses according to their function as part of cost of sales or, for example, the costs of distribution or administrative activities. At a minimum, an entity discloses its cost of sales under this method separately from other expenses. This method can provide more relevant information to users than the classification of expenses by nature, but allocating costs to functions may require arbitrary allocations and involve considerable judgement. An example of a classification using the function of expense method is as follows: Revenue Cost of sales () Gross profit Other income Distribution costs () Administrative expenses () Other expenses () Profit before tax 104 An entity classifying expenses by function shall disclose additional information on the nature of expenses, including depreciation and amortisation expense and employee benefits expense. 105 The choice between the function of expense method and the nature of expense method depends on historical and industry factors and the nature of the entity. Both methods provide an indication of those costs that might vary, directly or indirectly, with the level of sales or production of the entity. Because each method of presentation has merit for different types of entities, this Standard requires management to select the presentation that is reliable and more relevant. However, because information on the nature of expenses is useful in predicting future cash flows, additional disclosure is required when the function of expense classification is used. In paragraph 104, 'employee benefits' has the same meaning as in IAS 19. Of the ten annual financial statements selected for inclusion in this review, five issuers adopted the nature of expense method of classification and the remaining five issuers adopted the function of expense or cost of sales method of classification. 6 IAS1.100 was amended by Presentation of Items of Other Comprehensive Income (Amendments to IAS 1) (issued June 2011) and effective 1 July The previous requirements were Entities are encouraged to present the analysis in paragraph 99 in the statement of comprehensive income or in the separate income statement (if presented). 11

12 5.2 OPERATING PROFIT Operating profit is not a term defined by accounting standards and items included in that figure can vary between entities. IAS 1 does not require disclosure of operating profit. However, entities may elect to disclose the results of operating activities, or a similar line item. The results of the review of the ten selected equity issuers annual financial statements regarding the disclosure of the results of operating activities noted that all ten issuers presented such a measure. In all ten instances, the measure of the results of operating activities, or a similar line item, has been disclosed before finance income, finance expenses and the share of results of associates and joint ventures. By virtue of the use of a columnar presentation for exceptional items, all six issuers electing a columnar presentation disclosed a measure of the results of operating activities, or a similar line item, before and after exceptional items (i.e. those six issuers presented a measure of the results of operating activities, or a similar line item, before charging/crediting such exceptional items and after charging/crediting such exceptional items ). However, the review detected a number of instances of inconsistent treatment of other items by issuers in presenting a measure of the results of operating activities, or a similar line item. Such inconsistent treatments reduce the comparability of issuers annual financial statements. Six examples are set out below. Foreign exchange gains/losses One issuer charged/credited foreign exchange gains/losses in arriving at a measure of the results of operating activities, or a similar line item. However, another issuer, operating in the same sector, presented a measure of the results of operating activities, or a similar line item, before charging/crediting such foreign exchange gains/losses. Certain other issuers presented foreign exchange gains/losses as part of finance income/expenses and, therefore, excluded such gains/losses from the measure of the results of operating activities, or a similar line item. Gain/loss on disposal of property, plant and equipment One issuer disclosed the results of operating activities before and after gain/loss on disposal of property, plant and equipment. Gain/loss on the disposal of subsidiaries, joint ventures, associate and other investments, and other non-current assets One issuer disclosed the results of operating activities before the gain/loss on the disposal of subsidiaries, joint ventures, associate and other investments, and other non-current assets. Another issuer disclosed the results of operating activities after the gain/loss on the disposal of subsidiaries, joint ventures, associate and other investments, and other non-current assets. Amortisation of intangible assets Two issuers disclosed the results of operating activities before and after amortisation of intangible assets. Two other issuers disclosed the results of operating activities after amortisation of intangible assets. Acquisition integration and restructuring costs One issuer disclosed the results of operating activities before acquisition integration and restructuring costs. Impairment loss on AfS financial asset One issuer disclosed the results of operating activities after an impairment loss on AfS financial asset. 12

13 5.3 ECEPTIONAL ITEMS Many entities include exceptional items in their Income Statement either as line items or separate columns. While the use of exceptional items is not envisaged by IAS 1, the Standard requires additional line items, headings and subtotals to be used when such presentation is relevant to an understanding of the entity's financial performance. The Standard leaves the decision about what to present and the presentation method to management judgement rather than prescribing a format. Provisions of IAS 1 85 An entity shall present additional line items, headings and subtotals in the statement(s) presenting profit or loss and other comprehensive income, when such presentation is relevant to an understanding of the entity's financial performance. 97 When items of income or expense are material, an entity shall disclose their nature and amount separately. 98 Circumstances that would give rise to the separate disclosure of items of income and expense include: (a) write-downs of inventories to net realisable value or of property, plant and equipment to recoverable amount, as well as reversals of such write-downs; (b) restructurings of the activities of an entity and reversals of any provisions for the costs of restructuring; (c) disposals of items of property, plant and equipment; (d) disposals of investments; (e) discontinued operations; (f) litigation settlements; and (g) other reversals of provisions. In applying these requirements, the selected equity issuers adopt diverse practices: (a) disclosure of the nature and amount income or expense amount only in the notes to the financial statements (e.g. in the operating profit note); (b) disclosure of the nature and amount income or expense amount as a separate line item on the face of the Income Statement with or without an accompanying explanatory note; (c) disclosure of the nature and amount income or expense amounts in a separate column in the Income Statement with an accompanying explanatory note; and (d) a combination of two or more of (a) to (c) above. 13

14 Nature of exceptional items This review identified 30 different items presented as exceptional items by the ten selected equity issuers in either their 2012 or 2011 annual financial statements. Those items presented as exceptional by more than one issuer and the frequency of their occurrence are set out in the following table. Nature Frequency of occurrence Restructuring and rationalisation costs 6 Impairment of property, plant and equipment 4 Amortisation of intangible assets 7 4 Impairment of goodwill and intangible assets 3 Gain/loss on disposal of property, plant and equipment 3 Gain/loss on disposal of subsidiaries, joint ventures, associate and other investments, and other non-current assets 3 Acquisition-related costs 2 Amendments to and/or restructuring of defined benefit pension schemes 2 Impairment of associate company investment 2 Gain on disposal of business 2 Integration costs 2 In addition, many items presented as exceptional are issuer specific. The following list shows examples of items presented as exceptional by the ten selected equity issuers in either their 2012 or 2011 annual financial statements: 1. Adjustments to deferred and contingent acquisition consideration 2. Airspace closure costs associate with Eyjafjallajokull volcanic eruption 3. Costs associated with re-financing arrangements 4. Costs relating to former activities 5. Gain on revision of customer loyalty scheme terms and conditions 6. Gain on surrender of lease agreement 7. Insurance claim settlement 8. Legal claim settlement 9. Mark-to-market of swaps and related debt 10. Payment to discharge profit share obligation 11. Provision against onerous contracts 12. Re-classification of cash flow hedging reserve 13. Reduction of impairment provision 14. Sales tax refund receivable 15. Statutory redundancy Government refund 16. Revenue adjustment 17. Takeover defence costs 18. Tax authority settlement 7 Amortisation of intangible assets relates to amortisation of brands/know-how, customer relationships, computer and software costs, contract-related intangibles 14

15 Presentation of exceptional items Eight of the ten equity issuers annual financial statements selected for this review present exceptional items. This review revealed that Irish equity issuers adopt differing approaches to the presentation of exceptional items as set out in the following paragraphs. (a) Disclosure of the nature and amount of income or expense amounts as a separate line item on the face of the Income Statement with or without an accompanying explanatory note Three issuers presented exceptional items as a single line item on the face of the Income Statement and did not use a columnar format for the Income Statement. Of these three issuers: - one aggregated a number of exceptional items into that single line item on the face of the Income Statement and provided additional information on the nature and amount of the exceptional items in the accompanying explanatory notes; and - two presented the gain/loss on disposal of property, plant and equipment and the gain/loss on the disposal of subsidiaries, joint ventures, associates and other investments, and other non-current assets as separate line items on the face of the Income Statement. In one of these cases, the composition of the item was detailed in the accompanying explanatory notes. (b) Disclosure of the nature and amount of income or expense amounts in a separate column in the Income Statement with an accompanying explanatory note Two issuers adopted a columnar format in the Income Statement showing exceptional items in a separate column. In these two cases, no additional lines items were used in the Income Statement and the exceptional items were detailed in the accompanying explanatory notes. (c) A combination of approaches The remaining four issuers adopted a combination of approaches to the presentation of exceptional items. In addition to presenting amortisation of intangible assets as a separate line item on the face of the income statement, these four issuers also adopted a columnar format in the Income Statement showing the remaining exceptional items in a separate column. In each case, the remaining exceptional items were detailed in the accompanying explanatory notes. It was not apparent as to those issuers rationale for distinguishing the presentation adopted for the totality of exceptional items as between those presented as a separate line item and those presented in the exceptional items column. In the case of one issuer, it presented a columnar format for the current year amounts and only a single column for the prior year comparative amounts even in instances where those prior year comparative amounts had been presented in columnar format in the prior period. (d) Disclosure of the nature and amount of income or expense only in the notes to the financial statements One issuer, while presenting an exceptional item in the notes to the financial statements, elected not to classify the items as exceptional on the face of the Income Statement. However, the issuer presented supplementary information in the front end narrative accompanying its IFRS-based annual financial statements. This supplementary information presented the issuer s Income Statement in columnar format disclosing an exceptional item in a separate column. The issuer stated in that narrative that any amounts deemed exceptional for narrative discussion purposes had been classified for the purposes of the IFRS-based Income Statement in the same way as nonexceptional amounts of the same nature. 15

16 Scale of exceptional items An examination of the ten selected equity issuers annual financial statements for each of the past five years revealed that, for those issuers presenting exceptional items on the face of the Income Statement (either in a separate column or as a separate line item): (a) (b) (c) the cumulative amount presented as exceptional items before tax by the ten issuers over the five years amounted to 1.7bn comprising 2.1bn in exceptional costs and 0.4bn in exceptional income; the costs presented as exceptional exceeded the income presented as exceptional by a factor of 5:1; and overall, net exceptional items before tax amounted to 16% of the issuers profit before tax before exceptional items. 5.4 ACCOUNTING POLICIES Requirements of IAS An entity shall disclose in the summary of significant accounting policies: (a) the measurement basis (or bases) used in preparing the financial statements, and (b) the other accounting policies used that are relevant to an understanding of the financial statements. IAASA has in the past engaged with a number of issuers on the apparent absence of an accounting policy addressing exceptional items. Of the ten issuers annual financial statements included in the review, seven disclosed and three did not disclose an accounting policy relating to exceptional items. Features of the accounting policy disclosed by those seven issuers were: - reference was made to the exercise of judgement by management in assessing the particular items which should be disclosed in the Income Statement as exceptional items in six of seven instances. The seventh issuer did not explicitly refer to the exercise of judgement in its accounting policy; - five of the seven issuers included examples of the types of items that may be disclosed as exceptional items. The other two issuers did not provide examples in the accounting policy; and - only one issuer explicitly referred to the tax element of exceptional items in its accounting policy. Of the remaining three issuers not disclosing an accounting policy relating to exceptional items, two have presented the gain/loss on disposal of property, plant and equipment and the gain/loss on the disposal of subsidiaries, joint ventures, associate and other investments, and other non-current assets as separate line items on the face of the Income Statement. The third issuer, while disclosing exceptional items in the relevant note to the financial statements has chosen not to classify such items as exceptional items on the face of the Income Statement. 16

17 5.5 OTHER COMMENTS This thematic review identified a report in which the issuer presented, in the narrative forming part of the Annual Report, (which narrative falls outside IAASA s financial reporting review remit), a summary income statement data in columnar format showing the issuer s results before exceptional items, exceptional items and the IFRS results. However, in its financial statements prepared under IFRS a columnar format was not adopted. The issuer, in that narrative, explained that it presents certain items, which are unusual by virtue of their size and incidence, separately in the context of the issuer s operations, as the directors believe this presentation represents the underlying business more accurately and reflects the manner in which investors typically analyse the issuer s results. The issuer also stated that any amounts so presented in the narrative have been classified for the purposes of the income statement in the same way as nonexceptional amounts of the same nature. 17

18 Willow House, Millennium Park, Naas, Co. Kildare, Ireland Tel: +353 (0) Fax: +353 (0)

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