The Accounting Standards Board has published a Discussion Paper, Reporting Financial Performance: Proposals for Change. The proposals in the Discussion Paper build upon the strengths of, and are a progression from FRS 3, Reporting Financial Performance. It proposes that a single performance statement should replace the profit and loss account and the Statement of Total Recognised Gains and Losses, effectively combining them in one statement. The paper also takes the view that gains and losses should be reported only once and in the period when they arise, and should not be reported again in another component of the financial statements at a later date, a practice which is sometimes called ‘recycling’.
Required:
(a) (i) Explain the reasons for presenting financial performance in one statement rather than two or more statements;
(ii) Discuss the views for and against the recycling of gains and losses in the financial statements.
(b) Describe how the following items are dealt with under current Financial Reporting Standards, and how their treatment would change if the Discussion Paper were adopted:
(i) Gains and losses on the disposal of fixed assets;
(ii) Revaluation gains and losses on fixed assets;
(ii) Foreign currency translation adjustments arising on the net investment in foreign operations.