FASB released a discussion paper for its disclosure framework project Thursday, a significant step in the effort intended to improve the effectiveness of disclosures in financial statements.
The 81-page document, which FASB calls an invitation to comment, came the same day the European Financial Reporting Advisory Group (EFRAG) released a draft to address the handling of unwieldy notes in financial statements.
FASB added the disclosure framework to its agenda in July 2009 in response to concerns from business leaders, investors, and auditors about difficulty understanding disclosures in notes to financial statements of public, private, and not-for-profit organizations.
The FASB document does not propose specific changes but suggests options that FASB believes could lead to more effective disclosures.
The FASB report said its staff worked in conjunction with EFRAG and the financial-reporting organizations of the United Kingdom and France in developing the documents. “The objectives of the two documents are the same,” FASB’s report said. “That is, both aim to improve the effectiveness of disclosure.”
FASB’s invitation to comment addresses five topics:
- Establishing requirements that address relevant information and only relevant information for investors and other stakeholders
- Flexible disclosure requirements that could be adapted by reporting organizations and applied to information that is relevant to the organizations’ specific circumstances
- A judgment framework that helps reporting organizations determine which disclosures are relevant to the organizations’ circumstances
- Techniques that help organize and format information so it’s easier to understand and find
- Disclosure requirements for interim period financial statements
“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,” FASB Chairman Leslie F. Seidman said in a statement. “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.”
FASB is asking for comments by Nov. 16. EFRAG’s press release asked for comments by Dec. 31.
—Neil Amato (email@example.com) is a JofA senior editor.