Financial Analysts’ Preferences Regarding Income Statement Presentation

Abstract

The FASB continues to debate useful format and disaggregation choices of financial performance information as part of its disaggregation of income statement expenses project. Using a survey of 235 investment professionals, this study provides insight into their preferences regarding income statement presentation and standardization. Overall, we find that investment professionals are generally satisfied with the level of disclosure firms currently provide in the income statement. However, the investment professionals surveyed generally think that companies should be required to use the same labels for common lines on the income statement and that operating and non-operating activities should be formally defined. They also generally think that GAAP should allow managers flexibility to present non-GAAP measures or subtotals on the income statement. Our study provides insights for the FASB on the views of investment professionals and for academics and financial statement users regarding the information preferences of key information intermediaries in financial markets.

Keywords: financial reporting; accounting standard setting; presentation format; GAAP.

JEL Classification: M41, M44, M45, G29