Robert Herz and FASB are preparing a radical new format for financial statements.
Last summer, McCormick & Co. controller Ken Kelly sliced and diced his financial statements in ways he had never before imagined. For starters, he split the income statement for the $2.7 billion international spice-and-food company into the three categories of the cash-flow statement: operating, financing, and investing. He extracted discontinued operations and income taxes and placed them in separate categories, instead of peppering them throughout the other results. He created a new form to distinguish which changes in income were due to fair value and which to cash. One traditional ingredient, meanwhile, was conspicuous by its absence: net income.
Kelly wasn't just indulging a whim. Ahead of a public release of a draft of the Financial Accounting Standards Board's new format for financial statements in the second quarter of 2008, the McCormick controller was trying out the financial statements of the future, a radical departure from current conventions. FASB's so-called financial statement presentation project is ostensibly concerned only with the form, or the "face," of financial statements, but it's quickly becoming clear that it will change and expand their content as well. "This is a complete redefinition of the financial statements as we know them," says John Hepp, a former FASB project manager and now senior manager at Grant Thornton.
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