More Expense Lines Could be Required on the Income Statement
FASB plans to require all companies to break out into component parts more expense lines than previously expected on the income statement. Specifically, the board decided to refine the scope of its project on the disaggregation of income statement expenses to focus beyond “cost of tangible goods sold; cost of services and other cost of revenues; and selling, general, and administrative (SG&A)” to include any relevant expense line (excluding taxes). The structure of the income statement is not going to change, and the project will likely advance quickly, according to the board’s discussions. “Looked at the 20-year history of financial performance reporting and the question I always had was ‘gee why didn’t it get done,’” Chair Richard Jones said. “And I think part of the reason was we didn’t have a focused scope or we didn’t stick with our focused scope and so particularly this is a project I would like to do fairly quickly.”
Staff Seeking Comments on Policy Election Element Relationships for GAAP Taxonomy
FASB staff said they are seeking public input about proposed policy election element relationships that will be provided in the GAAP Financial Reporting Taxonomy (GRT). Comments are due by Nov. 4. The staff published release notes to explain the proposed Policy Election Element Relationships, which aim to improve the usefulness of the GRT for users and preparers of data information. The update would assist: 1) in identifying the policy elements for users to tag their filings; 2) in identifying the policy elements for users’ consumption of the data; and 3) in writing business rules that leverage this information to assist with the proper element selection and identification of policies elected, according to the release notes. Moreover, it includes explicit relationships between structured policy election elements and their related monetary or numeric elements in the GRT. Currently, policy information is infrequently tagged with structured elements. “This is important information for users of the data and obtaining that information is not as seamless as it could be,” the notes explain. “Providing this relationship should help preparers locate related policy election elements for tagging of facts.”
Chair Williams Urges Engagement with Audit Committees
The PCAOB has hired a liaison, Todd Cranford, who will build relationships with financial statement preparers and audit committees of public companies, Chair Erica Williams said at a recent conference. Williams urged audit committee members to reach out to Cranford. “There is no substitute for the role engaged and informed audit committees play when it comes to maintaining and improving audit quality. You are the gatekeepers on the ground, vetting and hiring auditors, and overseeing their work,” Williams explained. “It’s important that you engage in a robust dialogue with your auditors every step of the way, from auditor selection to completion of each audit. And the PCAOB is here to help you be an effective voice on behalf of investors as you are having those conversations.” Under the direction of previous board leaders, the inspection staff has also been having conversations with audit committee chairs, which engagement many found to be useful. Furthermore, the PCAOB has also been issuing Spotlight publications tailored for audit committees. A recent one, Williams said, focuses questions that audit committees can ask their auditors. Moreover, she said the PCAOB’s individual audit firm’s inspection reports can be a good resource for audit committees as they evaluate their external auditors’ performance. “If you see a particular firm has had deficiencies in the past, ask them what they are doing to avoid repeating those deficiencies in your audits,” Williams said.