08/09/2015 - Summary report of EFRAG - EFFAS/ABAF - IASB Joint Investor Outreach Event on profit or loss (P&L) and other comprehensive income (OCI)

In May 2015, the IASB published an Exposure Draft ED/2015/3 Conceptual Framework for Financial Reporting (the 'ED') which provides a description of the statement of profit or loss and suggests what OCI could be in undefined circumstances. The ED also seeks feedback on whether there is support for the proposed description of the statement of profit or loss and for proposals on the use of OCI.

To seek the views of users on the role of P&L and what should be the purpose of OCI and its separation from P&L, the European Financial Reporting Advisory Group (EFRAG), the European Federation of Financial Analysts Societies (EFFAS) and the Association Belge des Analystes Financiers (ABAF), in cooperation with the International Accounting Standards Board (IASB), organised a joint outreach event that took place on 1 July 2015 in Brussels.

The speakers and the panel comprised Hans Buysse, Member of EFFAS Management Committee and EFRAG Board Member; Steve Cooper, IASB Board Member; Mark Clatworthy, Professor, University of Bristol; Joachim Gassen, Professor, Humboldt University, Berlin; Frank Klein (panellist), Managing Director, Deutsche Asset & Wealth Management; Stefaan Genoe (panellist), Head of Equity Research, Petercam NV; Glen Suarez (panellist), CIO and Deputy CEO, Knight Vinke Asset Management; Françoise Flores, EFRAG TEG Chairman; and Patricia McBride, EFRAG Technical Director.

The summary report of the event describes the main comments that EFRAG - EFFAS/ABAF - IASB received in the event. The main observations made can be summarised as follows:

• The members of the panel, formed by users of financial statements, noted that financial information obtained from P&L is key and often the starting point of their analysis. They also noted that the sector in which the company operated could influence users' analysis and that for highly leveraged entities the balance sheet was important.

• The panel highlighted the importance of non-GAAP metrics based on P&L, such as EBITDA, EBIT and others.

• It is important for users to look at OCI to have a complete picture of a company's performance. The panellists noted that if significant amounts of income and expenses were included in OCI and those amounts varied significantly, users failing to take these amounts into consideration, risked being misled. It was also noted that the lack of clarity as to what OCI represented was not helping users to get the full picture.

• The members of the panel pointed out that OCI had a confirmative role for investors and stressed the importance of understanding how much the amounts included in OCI were moving over time.

• Users need a number that reflects the underlying performance of a business so that they are be able to apply their valuation model.

• The concept of 'business model' was considered important and P&L should be closely linked to the entity's business model and management's view over the performance of the business.