The Financial Accounting Standards Board (FASB) has released a proposed Accounting Standards Update (ASU), designed to improve the clarity of expense information for public business entities.

FASB noted that this update aims to equip investors with more comprehensive insights into a company’s expenses.

The proposed ASU stipulates that public companies must disclose detailed information regarding specific categories of expenses during both interim and annual reporting periods.

This includes a breakdown of expenses related to employee compensation, depreciation, amortisation, and costs tied to inventory and manufacturing activities.

Such disclosures would be included in income statement expense categories, such as cost of sales, selling, general and administrative expenses, and research and development.

The proposed changes do not modify or eliminate current expense disclosure requirements, nor do they affect how expenses are presented on the income statement.

Instead, they would require public companies to present certain existing disclosures in a tabular format, consistent with the other disaggregation requirements specified in the proposed ASU.

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.”