Proposed Income Statement Expense Disclosures Moves Forward
FASB has affirmed much of a proposal that would add new rules for disclosing income statement expenses, but also agreed to work to clarify various issues companies raised. The main theme of the proposal was affirmed by the board: that companies disclose in the notes certain types of expenses that are currently obscured on the income statement—that is, figures that investors say will enable them to better understand a company’s performance and prospects for future cash flows. Public companies will need to disclose, for example, employee compensation, depreciation, and intangible asset amortization that are recorded under certain expense captions on the face of the income statement, the board affirmed. Overall, the board’s discussions so far signal that the rules are likely to pass with clarifications. “I think when you look back over the 20 years we’ve touched on similar projects maybe with other names, what I saw the significant improvement we needed to make which was an understanding of when you look at an income statement can you see the detail in the footnotes,” FASB Chair Richard Jones observed during the meeting. “And we haven’t made that progress and I do think this is reasonable and a practical way of making that progress; it doesn’t mean it’s without cost. I think we considered a lot of other far-reaching standard-setting and went out actually with something we thought was realistic. So we didn’t throw out something that we knew we could scale back; we went out with something we thought was reasonable and practical to get input—it doesn’t mean there is not a cost. I’m certainly sensitive to the cost issue.”
No Big Push Right Now from Investors for IASB-ISSB ‘Integrated Reporting’ Project.
On January 25, the International Accounting Standards Board (IASB) and the International Sustainability Standards Board (ISSB) heard a staff analysis that said there was no big push from the global investment marketplace for a special joint project on integrated reporting right now. Many companies want to first focus on adopting new climate and sustainability disclosure rules, the results of which may take a while for investors to analyze, according to the discussions. Specifically, integrated reporting is important—and the boards need to keep that as an underlying process—but companies need time to apply and digest S1, General Requirements for Disclosure of Sustainability-related Financial Information, and S2, Climate-related Disclosures, the boards heard. “The thing that struck me probably the most was the investor feedback. I was really struck by the comment that ‘half of the respondents, including two-third of users said that this should be a lower priority or made no comment about it,’” ISSB Vice Chair Sue Lloyd said. “If I connect the dots and read between the lines, I’m not too surprised by that, because we know that the main thing that users asked us for more broadly in the agenda consultation was to really make sure we built on the adoption and implementation of S1 and S2. So I think this is the ISSB crowd responding here and they’re saying ‘we really want good sustainability reporting.’ And we’ve said to them ‘we can’t do everything at once so you have to choose.’ They’re not saying it’s not important—they’re saying ‘we need better sustainability information first.’”
ASB’s 2024 Workplan Includes Several Standards-Setting Projects
The AICPA’s Auditing Standards Board (ASB) has four standards-setting projects, one project under active consideration, and one research project, according to the board’s 2024 workplan. The ASB also monitors work by the International Auditing and Assurance Standards Board (IAASB) and the PCAOB—the former to try to converge as much as possible, the latter to try to eliminate unnecessary differences.
The standard-setting projects include:
- Quality management amendments to attestation standards.
- Attestation standards for ESG/sustainability
The lone research project is about leveraging technology. The task force is also working on ab audit data analytics guide update.