Changes to Segment Expense Disclosure Rules Finalized

FASB voted to finalize its proposed changes to segment reporting, wrapping up about six years of discussions aimed at providing investors with better information about a company’s business unit expenses from the viewpoint of management. The full board voted to clarify and finalize most of proposed Accounting Standards Update (ASU) 2022-ED100, “Segment Reporting (Topic 280)—Improvements to Reportable Segment Disclosures,” with added illustrations for some issues. A transition disclosure will be removed. At the core of the guidance is a significant expense principle that will require public companies to disclose significant expense information that 1) is regularly provided to the chief operating decision-maker (CODM); and 2) is included in the measure of segment profit or loss. The title of the CODM will need to be provided, the board affirmed. The revisions—the most substantial set on segment reporting in 25 years—are aimed at providing investors with better information about a company’s profit and loss, future cash flows, and business unit operations on an interim and annual basis. A majority of the board felt the guidance will be an improvement from what investors get now. “We all bring our own perspectives to these things but at the end of the day I guess my ultimate litmus test is ‘are we better off without the standard or with it’ and that’s the choice,” FASB Chair Richard Jones said. “When I look at it overall, I do believe we’re better off with this standard and I do think it moves the needle.”


IOSCO Endorses ISSB’s New Climate and Sustainability Disclosure Standards

The International Organization of Securities Commissions (IOSCO) endorsed the International Sustainability Standards Board’s (ISSB) two new climate and sustainability disclosure standards and called for the rules to be considered worldwide, the IFRS Foundation said on July 25. The IOSCO Board is made up of 35 securities regulators, including the U.S. Commodity Futures Trading Commission (CFTC) and the U.S. SEC. The organization’s membership regulates more than 95% of the world’s securities markets in some 130 jurisdictions, and it continues to expand. IOSCO “is now calling on its 130 member jurisdictions—capital markets authorities that regulate more than 95% of the world’s securities markets—to consider how they can incorporate the ISSB Standards into their respective regulatory frameworks to deliver consistency and comparability of sustainability-related disclosures worldwide,” the foundation said. The IFRS Foundation is a trustee body with oversight responsibility of the ISSB, which was established two years ago to develop environmental, social, and governance (ESG) related disclosure rules. Trustee Chair Erkki Liikanen called IOSCO’s endorsement “a landmark and a historical achievement” which validates the ISSB’s work to develop disclosure rules fit for capital market use at the global level as was done decades ago with the IASB, the rulemaker that develops IFRS. “IOSCO’s endorsement sends a powerful signal to jurisdictions worldwide, providing them with the confidence they need to implement the ISSB Standards in their regulatory frameworks,” he said in a speech. The endorsement comes at a time “when a number of jurisdictions are taking steps to introduce mandatory requirements for use of” the ISSB’s first two standards, IFRS S1, General Requirements for Disclosure of Sustainability-Related Financial Information, and IFRS S2, Climate-Related Disclosures.


Errors in Reporting on Subsequent Events May Trigger Accounting Rule Revisions

GASB will decide next month whether to revise the accounting for subsequent events, having wrapped up a year of research which found that vague disclosure rules may be causing reporting errors, according to July 17 discussions. A subsequent event—for example sale of a bond or a lawsuit—must be reported if settled after a reporting period but before the financial statements are issued. Research conducted by GASB staff over the past year found that subsequent events are rampant among state and local governments, especially related to bonds, but the current standard is vague about when to disclose a subsequent event and what that disclosure should be. The board will therefore determine on Aug. 28 whether to add a project to its technical agenda to re-examine GASB Statement (GASBS) 56, Codification of Accounting and Financial Reporting Guidance Contained in the AICPA Statements on Auditing Standards, which was issued in March 2009. In general, GASB members signaled an openness to revisiting the guidance. “The research shows that these subsequent events are prevalent in our environment and it does certainly seem that users find them to have a meaningful impact on their analysis,” GASB Chair Joel Black said.