Boost in Accounting Disclosure Requirements Likely

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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.

Developed By Using Disclosure Framework

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.

Four Standards

The board picked four accounting standards on which it would apply the framework:

  •  In July FASB issued the proposal Income Taxes (Topic ASC 740), Disclosure Framework--Changes to Disclosure Requests for Income Taxes;
  •  In January it issued, Compensation--Retirement Benefits--Defined Benefit Plans-General/Subtopic ASC 715-20: Changes to the Disclosure Requirements for Defined Benefit Plans; and,
  •   In December 2015, it issued Fair Value measure (Topic ASC 820): Disclosure Framework —Changes to the Disclosure Requirements for Fair Value Measurement.

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

To contact the editor responsible for this story: S. Ali Sartipzadeh at

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