FASB Unveils Draft Disclosure Framework

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On July 8, 2009, the Financial Accounting Standards Board (FASB) added a disclosure framework project to its technical agenda with the goal of establishing an overarching framework that is intended to make financial statement disclosures more effective, more coordinated, and less redundant.

Now almost five years later, the FASB has finally released its draft version of the disclosure framework.

The exposure draft, Conceptual Framework for Financial Reporting: Chapter 8: Notes to Financial Statements (concepts statement), issued by the FASB on March 4, addresses the standard-setting organization’s process for identifying relevant information and the limits on information that should be included in notes to financial statements.

If approved, the disclosure framework would become part of the FASB conceptual framework, which provides the board a foundation for making standard-setting decisions. Individuals and organizations have until July 14 to provide the FASB with their input on the exposure draft.

“The proposed concepts statement is intended to aid the FASB in identifying what types of information the board should consider when deciding on required disclosures,” FASB Chairman Russell Golden said in a written statement. “We encourage our stakeholders to review and provide comment on the proposal, and let us know if they think it would help the board achieve our objective of improving the relevance of the information in those notes to investors and other financial statement users.”

Last December during the American Institute of CPAs (AICPA) Conference on Current SEC and PCAOB Developments in Washington, DC, Golden said the disclosure framework project has two components.

“The first involves the board’s decision-making process and is intended to help the board decide on disclosure requirements in the standard-setting process. The second component involves the reporting organization’s decision process and is intended to help them make decisions about which disclosures are relevant for their particular circumstances,” he noted.

“Both components emphasize the relevance, not the volume, of notes to financial statements,” Golden continued. “One of the goals of this project is to allow individual organizations to exercise more discretion and flexibility in applying existing and future relevant disclosure requirements.”

As part of the proposed process, once the board has identified what should be broadly considered based on the concepts, the FASB would:

  • Identify information to be disclosed in the notes that is likely to be helpful to those making decisions about providing resources and that would be relevant to a significant number of the organizations to which it applies.
  • Eliminate disclosures of certain types of future-oriented information that may have negative effects on the cash-flow prospects of the reporting organization and its investors and creditors.
  • Consider the costs and potential consequences of providing a disclosure in the notes.

The proposed concepts statement also contains a discussion of what the FASB should consider when determining which disclosures should be required at interim periods for those companies that produce such statements.

FASB staff is in the process of compiling field study results as part of the second component of the disclosure framework project, which addresses the reporting entity’s decision process. The FASB will consider stakeholder feedback on the 2012 Invitation to Comment and the results from the field study when developing the entity’s decision process.

Those interested in providing comments on the proposed disclosure framework can used the electronic feedback form on the FASB website or e-mail a written letter to [email protected], including File Reference No. 2014-200. Written comments can also be sent by mail to Technical Director, File Reference No. 2014-200, FASB, 401 Merritt 7, PO Box 5116, Norwalk, CT 06856-5116.

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FASB Seeks Input on Disclosure Framework


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