Note: The information presented below is based solely on the information set forth in section 15 of the database. In that regard, this information may supplement or, in some situations, conflict with users' needs expressed in other analyses of the database. section 15 of the database is comprised principally of the views expressed by users based on the material discussed at the March 11, 1993 meeting of the Creditor Discussion Group (14 participants) and the March 17, 1993 meeting of the Investor Discussion Group (6 participants). Furthermore, prior to discussing this topic with participants, the Subcommittee acknowledged that improvement of disaggregated disclosures was a top priority of users. Therefore, users were not requested to express their needs about disaggregated disclosures.
Leading view
The top three priorities, other than disaggregated disclosures, mentioned by investors were (in order of priority):
1. Developing a concept of core earnings
2a.* Disclosure of measurement uncertainties
2b.* Consolidation practices and unconsolidated entities (considered one topic by some users)**
2c.* Display of financial information
2d.* Disclosure of operating opportunities and risks**
2e.* Business combination practices
2f.* Financial instruments and off-balance-sheet financing
* Comments made by investors on these topics are discussed on pages 5-6 and 13-15 of the database. Specific comments include:
* Need more explanations on the assumptions used to measure uncertainties [p. 6]
* More disclosure is needed for finance subsidiaries of non-financial entities
[p. 13]
* A concept of core earnings is needed to allow users to better predict future cash flows for the entity [p. 15]
_______________
*-- each category was selected by 2 participants.
**-- although not one of their top three priorities, two or more creditors also expressed a need for improvement in this area.
* Users need more information on asset and liability adjustments made by companies in accounting for a business combination [p. 6, 14].
The top three priorities, other than disaggregated disclosures, mentioned by creditors were (in order of priority):
1. Developing a concept of core earnings
2. Financial instruments and off-balance sheet financing
3. Display of financial information.
* Core earnings is as important as disagreggated disclosures because it is a key element in the analysis process [p. 7]
* Core earnings allows users to estimate the future earnings of the company [p. 8]
* To better understand expected earnings [p. 11], users will classify additional income statement items as unusual, nonrecurring, or infrequent [p. 9]
* Users need additional information about off-balance-sheet instruments (swaps, derivatives, futures, etc.) to better understand the operating risks of a company [p. 8- 9]
* Users believe that practice is ahead of accounting for off-balance-sheet transactions [p. 9] and that senior management only broadly understands the related issues [p. 10-11]
* Users need consistency in the display of financial information to facilitate the analysis process [p. 11- 12].
Other areas of external reporting that users (both investors and creditors) believe need timely consideration for improvement include (need was expressed by 2 or more participants):
1. Disclosure of nonbusiness information
2. Interim reporting
3. Auditor involvement
4. Alternative accounting procedures
5. Use of value information.
* Comments made by users on these topics are discussed on pages 6, 9-12, 14-15 of the database. One of the comments made is that fair value information would be helpful if provided as supplemental disclosures [p. 10].