expenses grouped by NATURE vs FUNCTION

[relentless]

Could someone please give me a clear explanation of this? neither the cfai nor the schweser make this crystal clear….

 

[pepp]

yeah they do.
You group expenses a) by function b) by nature
Ex of Functional group Accounts receiveable and bad debts
Ex. of nature group NI and .. i forgot.

 

[thunderanalyst]

This is not crystal clear. Can you elaborate plz ?

 

[pepp]

I think functional group
PPE and depreciation. (they are not same acounts, btu are reported Net) hence grouping by function because it makes no sense to show depreciation as a libaility.
Group by nature, I can’t think of an example in this one.

 

[jpfwildcat]

I’m with you guys, that doesn’t really paint a picture for me either. I did some research, and apparently this is from IASB no. 1.88 and it is currently being debated on whether to change the way this is presented, particularly dealing with comprehensive income. Could see this changed in the future, anyway here is a breakdown for everyone.
a. Function refers to the primary activities in which an entity is engaged, such as selling a product or providing a service, cost of sales, research and development, marketing, and administrative activities.
b. Nature refers to the inputs (costs) required to accomplish those functional activities, such as costs related to people (labor and benefits), materials, energy, equipment (depreciation), and occupancy (rent).
Hope that explains it a little better. Back to the grind.

 

[jpfwildcat]

For ethical reasons I better cite my last post, it was from a FASB board meeting in 2007 that discussed the issue of nature vs. function of expense reporting.
http://www.fasb.org/board_meeting_minutes/01-30-07_fsp.pdf
Not a bad read.