FASB Improves the Effectiveness of Disclosures in Notes to Financial
Statements
Norwalk, CT, August 28, 2018—The Financial
Accounting Standards Board (FASB) today
issued two changes to the FASB’s
conceptual framework and two Accounting Standards Updates (ASUs)
that improve the effectiveness of disclosures in notes to financial
statements.
“The two changes to our Conceptual Framework will help
the Board identify and evaluate disclosure requirements in accounting standards
and clarify the concept of materiality,” said FASB Chairman Russell
G. Golden. “Meanwhile, the new standards improve fair value and defined
benefit disclosure requirements by removing disclosures that are not cost
beneficial, clarifying disclosures’ specific requirements, and adding relevant
disclosure requirements.”
A new chapter in the Conceptual
Framework on disclosures.
The chapter
explains what information the Board should consider including in notes to
financial statements by describing the purpose of notes, the nature of
appropriate content, and general limitations. It also addresses the Board’s
considerations specific to interim reporting disclosure requirements.
An update to an existing chapter of the Conceptual Framework
for its definition of materiality.
The amendment
aligns the FASB’s definition of materiality with other definitions in the
financial reporting system. The materiality concepts will now be consistent with
the definition of materiality used by the U.S. Securities and Exchange
Commission, the auditing standards of the Public Company Accounting Oversight
Board and the American Institute of Certified Public Accountants, and the United
States judicial system.
An ASU on Fair Value Measurement
disclosure requirements.
The standard
improves the disclosure requirements on fair value measurements in Topic 820,
Fair Value Measurement. The amendments are effective for all organizations for
fiscal years, and interim periods within those fiscal years, beginning after
December 15, 2019. Early adoption is permitted.
An ASU on
Defined Benefit Plan disclosure requirements.
The standard
improves disclosure requirements for employers that sponsor defined benefit
pension or other postretirement plans. The amendments are effective for fiscal
years ending after December 15, 2020, for public companies, and for fiscal years
ending after December 15, 2021, for all other organizations. Early adoption is
permitted.
More information about the Conceptual Framework changes
and the ASUs can be found at http://www.fasb.org/.
About
the Financial Accounting Standards Board
Established in 1973,
the FASB is the independent, private-sector, not-for-profit organization based
in Norwalk, Connecticut, that establishes financial accounting and reporting
standards for public and private companies and not-for-profit organizations that
follow Generally Accepted Accounting Principles (GAAP). The FASB is recognized
by the Securities and Exchange Commission as the designated accounting standard
setter for public companies. FASB standards are recognized as authoritative by
many other organizations, including state Boards of Accountancy and the American
Institute of CPAs (AICPA). The FASB develops and issues financial accounting
standards through a transparent and inclusive process intended to promote
financial reporting that provides useful information to investors and others who
use financial reports. The Financial Accounting Foundation (FAF) supports and
oversees the FASB. For more information, visit http://www.fasb.org/.