Jul 12th 2012
The Financial Accounting Standards Board (FASB) has issued the Invitation to Comment, Disclosure Framework, to ask for stakeholder input on ways to improve effectiveness of disclosures in notes to financial statements of public, private, and not-for-profit organizations. Stakeholders are asked to provide comments by November 16, 2012.
The Invitation to Comment is the FASB's first step in soliciting broad input on ways to improve disclosure effectiveness. The Invitation to Comment addresses the following topics:
- A decision process that could aid the board in establishing disclosure requirements that address relevant information and only relevant information.
- Flexible disclosure requirements that could be adapted by each reporting organization to focus on information that is relevant in its specific circumstances.
- A judgment framework that could help each reporting organization determine which disclosures are relevant in its specific circumstances.
- Organization and formatting techniques that could make the information users need easier to find and understand.
The document also discusses disclosure requirements for interim period financial statements.
The paper does not propose any specific changes but rather, suggests a number of possibilities that the board believes could lead to more effective disclosures by reporting organizations. The FASB believes that establishing a framework for disclosure is an important first step before any specific changes to existing disclosure requirements are considered.
When the framework has reached a sufficient level of development, the board plans to apply that framework to existing standards. Applying the framework to existing standards could eventually result in modifying existing requirements or establishing new ones; any such changes would be exposed for public comment.
"Many stakeholders have expressed concerns about the relevance and sheer volume of information in notes to financial statements, and that some information is either missing or difficult to find," said FASB Chairman Leslie F. Seidman. "Therefore, the FASB is looking to improve its own procedures for establishing disclosure requirements and to provide a way for reporting organizations to exercise judgment about which disclosures are relevant to them. The ultimate goal is to enhance users' abilities to analyze the information in the notes to financial statements while minimizing the burden on reporting organizations."
The European Financial Reporting Advisory Group (EFRAG), which provides advice to the European Commission on issues relating to the application of International Financial Reporting Standards (IFRS) in the European Union, is working on a similar disclosure framework project. The EFRAG is working jointly with the French Accounting Standards Authority (Autorité Des Normes Comptables) and the Financial Reporting Council of the United Kingdom.
Before the conclusion of the comment period, the FASB will conduct additional outreach with preparers, users, and auditors of financial statements to solicit their input on the proposal, including a webcast in the coming months. Further information including a podcast and a "FASB in Focus" ‒ high-level summaries of the Invitation to Comment ‒ will be available on the FASB website.
Source: July 12, 2012, FASB Press Release
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