SwissHoldings - FASB

Page 1

14 April 2009

SwissHoldingsVerband der Industrie- und Dienstleistungskonzeme in der SchweizFederation des groupes industriels et de services en SuisseFederation of Industrial and Service Groups in Switzerland

International Accounting Standards Board30 Cannon StreetLondon EC4M 6XHUnited Kingdom

1 6 3 O - 1 0 0

LETTER OF COMMENT NO. ^Comment Letter on Discussion Paper (DP) - Financial Statement Presentation

Dear Madam/Sir,

SwissHoldings, the Swiss Federation of Industrial and Services Groups in Switzerland, represents49 Swiss groups, including most of the country's major industrial and commercial firms. We verymuch welcome the opportunity to comment on the above-mentioned Discussion Paper (DP). Ourresponse below has been prepared in conjunction with our member companies.

Please find in the attachment the answers to the various questions raised in the DP.

We would, however, like to make the following general comments which we would like you to alsotake into account in your deliberations:

1. Financial statements need to be a means for preparers to communicate appropriatelywith their investors and other users

We are very pleased that the Boards are looking into ways of improving the presentation offinancial statements as we are convinced that these could be improved to the benefit of allconcerned in the capital markets. We are, however, concerned that the DP proposals in theirpresent form will not improve the ability of preparers to communicate with their investors andother users. The current proposals could have the effect of impeding rather than improving theability to communicate the annual results. The financial statements could become overloadedwith details and yet will still not provide our investors with a clear overview of the annualperformance of the entity in a format that our investors and other users consider important.

For the next stage of the project we would like to suggest that the Boards work more closelyand directly with active users of the financial statements, such as the Corporate ReportingUsers Forum (CRUF), and look at the information which they would find practically useful. Theincrease in the amount of non-lFRS information being presented, e.g. in managementcommentaries, and the reduced interest of many analysts in the financial statementsthemselves indicate that non-IFRS information is considered extremely useful by active users.We therefore suggest that the Boards should concentrate on potential improvements withoutmajor upheavals in transactional systems etc. The proposal based on the cohesivenessprinciple, to create an "operating" category in the financial statements, already provides anexcellent starting-point for bringing useful non-IFRS concepts like EBIT, EBITDA and FreeCash Flow into the IFRS fold. This would also have the advantage for users of a morestandardised approach to such key indicators and thus hopefully enhance their confidence inthis information.

Similarly, we would urge the Boards to continue to explore some of the more practical ideas inthe reconciliation statement proposal, such as separating out more clearly for users elementssuch as remeasurements and unusual items as well as identifying more explicitly the underlying

Postfach 402, 3000 Bern 7 NSgeligasse 13, 3011 Bern

Tel. 1^1 (0)31 355 60 68 Fax +41 (0)31 352 32 [email protected] www.swissholdings.cn

Page 2

SwissHoldings

movements in components of net working capital. From our regular contacts with active userswe believe that such information would considerably increase the practical usefulness offinancial statements.

2. Financial statements should not be a pure compliance exercise. At least elements of thefinancial statements should be aligned with the way that management runs its business

It is important that externally reported financial data is at some level aligned with the way thatmanagement internally measures performance and sets targets. Without this alignment thepreparation of financial statements could become an academic compliance exercise. If thiswere to occur, parallel internal financial reporting will commence and there is a real danger thatthe quality of the "official" financial data will suffer. We therefore strongly support the integrationof the management view of reporting financial data within the "official" financial statements.

3. There is a concern that certain of the proposals will lead to substantial additional costswith minimal benefits

Certain of the proposals will result in substantial one-off and recurring costs to produce thefinancial statements without clear benefit. The obvious area where this is the case is theproposal to introduce the direct cash flow method. If this is to be applied in its purest form thenmajor changes in the internal reporting and data collection systems would be necessary. Weare not convinced that this would produce substantial benefits for our investors and other usersof our financial statements.

Should you wish to further discuss the points raised in this letter, we would be happy to do so.

We thank you for the opportunity to contribute to the due process and for taking into considerationour comment.

Yours sincerely,

SwissHoldings

Dr. Raymund BreuCurrent Chair of SwissHoldings(CFO Novartis Group)

Dr. Peter BaumgartnerChairman Executive Committee

cc SH Board

09-04-14-CL-DP on Financial Statement Presentation

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fits

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he m

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t app

roac

h to

prov

ide

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mos

t rel

evan

t vie

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ould

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w th

e in

form

atio

n us

ed b

man

agem

ent t

o ru

n th

e bu

sine

ss a

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ill t

here

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mos

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the

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ppro

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ld o

nly

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very

rar

e ci

rcum

stan

ces

and

in th

ese

case

s de

taile

d re

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s ne

ed t

o•4-"

prov

ided

by

the

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rd a

s to

why

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man

agem

ent a

ppro

ach

need

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ove

rrid

den.

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his

resp

ect S

H w

ould

lik

e to

em

phas

ize

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pote

ntia

l co

nflic

tar

isin

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om th

e pr

opos

ed r

estr

ictio

ns r

elat

ed to

pos

t-em

ploy

men

t S

bene

fits

of (

a) a

coh

esiv

enes

s ap

proa

ch t

hat r

equi

res

that

the

inco

ist

atem

ent c

ateg

oriz

atio

n is

bas

ed o

n ca

tego

riza

tion

in th

e ba

lanc

e

ox

shee

t and

(b)

the

fin

anci

ng s

ectio

n co

ntai

ning

onl

y fi

nanc

ial

asse

tlia

bilit

ies

(dis

cuss

ed in

par

agra

phs

2.45

-2.4

7):

enO

SH w

ould

exp

ect

in p

arti

cula

r wit

h re

gard

to th

e pr

esen

tatio

n of

p

cdE

empl

oym

ent b

enef

its

the

man

agem

ent a

ppro

ach

to p

reva

il w

hich

resu

lt in

a n

et fi

gu

re be

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in th

e ba

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eet

but

exce

ptio

nally

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plit

cate

gori

zatio

n in

the

inco

me

stat

emen

t (e

.g.

supp

orte

d by

the

resp

ectiv

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sclo

sure

s).

Page 8

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atio

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som

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erat

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exis

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in p

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geth

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aine

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pose

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sive

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equi

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cas

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w st

atem

ent t

o re

conc

ile

to t

he m

ovem

ent

inth

e fi

nanc

ing

cate

gory

of t

he b

alan

ce s

heet

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hich

in

effe

ct w

ould

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cons

ider

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with

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mat

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on th

e so

lven

cy o

f com

pani

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side

rati

on s

houl

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giv

en t

o al

soin

clud

e th

e ol

d st

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ure

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e ba

lanc

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eet

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rm v

s. s

hort

ter

man

d to

tal

asse

ts a

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iabi

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n th

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ccou

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the

fac

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stat

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osit

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elie

ves

that

cla

ssif

icat

ion

of a

sset

s an

d li

abil

itie

s as

the

y ar

em

anag

ed a

nd u

sed

at t

he r

espe

ctiv

e re

port

able

seg

men

t le

vel

wou

ldfu

rthe

r im

prov

e in

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ativ

e va

lue

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e fi

nanc

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emen

ts a

nd i

s in

alig

nmen

t w

ith

the

proj

ect's

ove

rall

obj

ecti

ve t

o pr

ovid

e th

e m

ost

rele

vant

in

form

atio

n to

th

e us

ers

and

incr

ease

tr

ansp

aren

cy

and

enab

le m

anag

emen

t to

com

men

t be

st o

n th

e se

gmen

t ac

tivi

ties

. If

the

segm

ent

clas

sifi

cati

on i

s di

ffer

ent

to t

he e

ntit

y le

vel

clas

sifi

cati

on a

nap

prop

riat

e re

conc

ilia

tion

sh

ould

be

co

nsid

ered

so

as

no

t to

unde

rmin

e th

e en

tity

le

vel

cohe

sive

ness

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er

SH

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es

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ider

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t it

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ssar

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e se

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t de

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s to

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rem

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as i

f th

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t us

ed t

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ould

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olve

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but t

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ge t

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s in

stea

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inve

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