The Accounting Policy & Practice Report ® provides financial accounting policy makers, advisors, and practitioners with the latest news, expert insights, and guidance on emerging, evolving,...
By Denise Lugo
Sept. 27 — Companies would generally see an increase in financial reporting under Financial Accounting Standards Board proposals addressing disclosure requirements in four areas.
The four areas are fair value measurement, employee benefit plans, income taxes and inventory, FASB Vice Chairman James Kroeker said.
The proposals, issued separately and at different dates, stem from FASB’s disclosure framework initiative. The disclosure framework seeks to improve the effectiveness of disclosures in the notes to financial statements.
The board decided to test the principles in the disclosure framework to accounting standards for fair value measurement and pensions because its constituents questioned whether or not disclosures for those rules were too excessive. Alternately, standards on income tax and inventories were picked because of questions from the board’s constituents about whether or not the disclosures were sufficient.
“Income taxes particularly as it relates to foreign source earnings is an area where investors rightly say we could use some more information to understand the situation,” Kroeker said. Similarly, under current inventory rules there are very little disclosure requirements today, he said.
FASB started the disclosure framework initiative after feedback from its stakeholders who said disclosure overload in financial reporting should be expeditiously addressed. Disclosure overload has generated substantial debate for years.
“I would say almost across the board there’s an increase even in the areas where people think that there is potentially significant disclosure, or you hear the term disclosure overload used,” Kroeker said Sept. 26 at a financial reporting conference. His comments were in response to a question posed about whether—generally speaking—companies would see more, less or the same amount of disclosure requirements as a result of FASB’s proposals.
The question was posed by a conference session moderator, Leslie Seidman, executive director of the center for excellence in financial reporting at Pace University’s Lubin School of Business during discussions about various disclosure proposals. Seidman is a former FASB chairman.
Broadly, the disclosure framework is a nonauthoritative internal guide FASB uses. It defines the purpose of footnote disclosures.
Footnote disclosures are required to illuminate changes in line items on financial statements. They also provide information about a company and about certain items that might affect financial line items.
Financial statement users have raised concerns about footnote disclosures because a single number in footnote disclosures encompasses a great deal of information, but even so, much of it is insufficient for investors to make useful decisions about future cash flows.
The board picked four accounting standards on which it would apply the framework:
On, Sept. 19 the board voted to issue a proposal about inventory disclosure in upcoming weeks.
To contact the reporter on this story: Denise Lugo in New York at email@example.com
To contact the editor responsible for this story: S. Ali Sartipzadeh at firstname.lastname@example.org
Copyright © 2016 Tax Management Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)