APPENDIX I

SUMMARY OF RECOMMENDATIONS

IMPROVING THE TYPES OF INFORMATION IN BUSINESS REPORTING CHAPTER 5

• The model should be based on certain concepts to guide reporting under the comprehensive model See appendix II.
• The model should include practical constraints on disclosures to reduce costs when costs could be significant See appendix II.
• To assess the feasibility of its ideas, the Committee designed and illustrated a comprehensive model based on the abovenoted concepts, its understanding of users' needs for information, and information about costs of reporting See appendix II.

• See chapter 5 for examples of the types of research to consider.

FINANCIAL STATEMENTS AND RELATED DISCLOSURES CHAPTER 6

• Basis of segmentation See appendix II, item I(A)7(a).
• Information to report about segments See appendix II, item I(A)7(b).
• Restatement of historical segment information when segments change See appendix II, item I(A)7©.
• Format of disclosures See appendix II, item I(A)7(d).
• Information related to unconsolidated entities See appendix II, item I(A)7(e).

• Broader guidance that addresses fundamental issues is needed. The guidance would provide a framework for addressing the accounting for future innovations in financial instruments, thereby leading rather than lagging behind the pace of change.
• The Committee's study of users' needs affirmed the critical importance of improving disclosures and accounting for innovative financial instruments. The FASB is addressing the appropriate issues and it is right to give that work the highest priority.

• The FASB should emphasize disclosures in its projects on unconsolidated entities, special purpose entities, and securitizations.
• The FASB should not reconsider the accounting for leases at this time; however, it should add a limitedscope project to its agenda to improve disclosures by lessees of operating leases.

• Display of core and noncore activities and events See appendix II, item I(A)4(a): Income Statement Statement of Cash Flows Balance Sheet
• Measurement of noncore assets and liabilities See appendix II, item I(A)3(a).

• Identify in financial statement notes the specific types of assets and liabilities subject to significant measurement uncertainties.
• For assets and liabilities subject to significant measurement uncertainties, disclose how the reported amounts were derived and explain the estimates, assumptions, and judgments about future events considered in their measurement.
• The key to meaningful disclosure is to be selective about the measurement uncertainties disclosed.

• Fourthquarter reporting should be no different from the reporting on other quarters except for the disclosure of significant yearend adjustments.
• Notes related to yearend balance sheet amounts can generally be omitted if the fourthquarter financial statements are included in annual reporting.

Other recommendations

• Display of information in financial statements

• Interim reporting Interim reporting should include quarterly cash flow statements. Interim information should include uncondensed financial statements; however, condensed note disclosures remain appropriate at interim periods. Companies should disclose the methods of computing reported amounts used in interim periods that differ from the methods used at yearend.
• Comparability and consistency of information Companies should restate or reclassify information in more circumstances than allowed in current practice for dispositions, accounting changes, changes on the definitions of business segments, and possibly other items as well if the restated or reclassified information can be assembled reasonably and is necessary for a better and more complete understanding of the business. Standard setters should consider simplifying the procedure for adopting new pronouncements by making them effective for all companies in a single year and prescribing only one method of adoption.
• Key statistics and ratios Companies should provide a summary of key financial and nonfinancial data on a consolidated basis as well as for each business segment. A company and the users of its business reporting should agree on the periods to be reported for the summary information, which generally need not exceed five years.
• Lower priority issues

AUDITOR ASSOCIATION WITH BUSINESS REPORTING ; CHAPTER 7

• The level of auditor assurance selected for the financial statement element, if any, should determine the maximum level of assurance that could be provided on other elements reported.

• One standard setter, the Auditing Standards Board, should assume responsibility for new auditing standards.
• Reporting on objective information in the comprehensive model. ; To the extent possible, current auditing standards should be retained. ; Existing standards are adequate for auditing and reporting on information in some elements of the model but not others. See chapter 7 for a list of those elements for which existing standards are considered adequate.
• Reporting on subjective information in the comprehensive model. ; Existing audit guidance is not sufficient, and new standards will be required. See chapter 7 for a list of those elements for which existing standards are not considered adequate. ; A different (lower) level of assurance from the level provided for information that is verifiable objectively should be expressed using an approach that encompasses the style of current attestation standards as follows: Reasonable basis for presentation. Conformity with presentation standards.
• Standardized reporting. ; Standardized reporting should be supported. ; The historical longform report is not an acceptable alternative to the standardized expression of an auditor's final conclusion on the fairness of financial statements.
• The Special Committee on Assurance Services and the Auditing Standards Board should pursue the subject of alternative levels of assurance within the Committee's reporting framework.

• Those projects are reporting on internal controls, credibility of business reporting and pressures on auditor independence, and responsibility for detecting fraud.

FACILITATING CHANGE IN BUSINESS REPORTING ; CHAPTER 8

• Those responsible for standardsetting processes, such as the Financial Accounting Foundation, the FASB's parent organization, and standard setters themselves should more effectively recruit users for service on standardsetting boards, advisory councils, and task forces.
• Those responsible for standardsetting processes should seek formal commitments to increase user participation from institutions representing users, such as the Association of Investment Management and Research and the Robert Morris Associates, or major institutional investors and other organizations.
• Those responsible for standardsetting processes should consider novel vehicles to get qualified users to focus exclusively on users' needs for the benefit of the standardsetting process (for example, focus groups and task forces made up of recently retired users).
• Standard setters should more aggressively search for, sponsor, and undertake research about how users make decisions and about the relative usefulness of various types of information in their decision making processes.
• Standard setters should become more active in helping steer research programs into areas that are relevant to the standardsetting process.

• Any approach that would sacrifice users' needs for information to the goal of creating international standards should be rejected.
• A policy of mutual recognition should be rejected, except when the differences among disclosure presentations are immaterial.

• Legislators and regulators should create more effective safe harbors and should adopt other measures that discourage unwarranted litigation.
• Standard setters should reduce the threat of unwarranted litigation by developing provisions for forwardlooking disclosures that enable companies to demonstrate compliance.

• Standard setters should have some systematic approach to awareness of the likely importance of economic and technological changes for business reporting so that agenda priorities are well chosen, resources are effectively deployed, and standards are appropriate to the environment in which they are to be applied.
• To ensure the perceptiveness and quality of their vision, standard setters should consider assistance from experts in various disciplines ; finance, accounting, economics, law, business strategy, behavioral science, and technology, for example.

• The fully public disclosure requirements should not be abandoned; however, regulators should explore whether there are any alternatives.
• Regulators should consider whether the cost of reporting sensitive information to competitors could become an undesirable barrier to

• The Coordinating Committee should be responsible for the activities listed in chapter 8.