The Financial Accounting Standards Board (FASB) has published a proposed Accounting Standards Update (ASU) intended to provide investors with more decision-useful information about a public business entity’s expenses. Stakeholders are encouraged to review and provide comment on the proposal by 30 October 2023.
Commenting on this, FASB chair, Rich Jones, said: “Feedback from investors on our 2021 Agenda Consultation provided us with a fresh approach to providing more detailed information about a company’s expenses, which investors have said is critically important to understanding a company’s performance, assessing its prospects for future cash flows, and comparing its performance over time and with that of other companies.
“As a result, less than 18 months after revising the scope of the project, we’ve issued this proposed standard that would require companies to provide more information about specific expenses in the notes to financial statements.”
The proposed ASU would require public companies to provide detailed disclosure of specified categories underlying certain expense captions in interim and annual periods. It would provide investors with more detailed information about the types of expenses, including employee compensation, depreciation, amortisation, and costs incurred related to inventory and manufacturing activities in income statement expense captions such as cost of sales; selling, general and administrative; and research and development.
The amendments in the proposed ASU do not change or remove existing expense disclosure requirements and do not change requirements for presentation of expenses on the face of the income statement. They would require public companies to include certain existing disclosures in the same tabular format disclosure as the other disaggregation requirements set forth in the proposed ASU.