Financial reporting

  FASB took a step forward in its effort to make disclosures in notes to financial statements more useful to investors.

The board is building a framework that is intended to reduce unnecessary disclosures and highlight information that investors need most. FASB issued a proposed concepts statement that would help the board create a process for identifying relevant information—and the limits on information—that should be included in notes to financial statements.

If approved, the proposed statement, Conceptual Framework for Financial Reporting, Chapter 8: Notes to Financial Statements, would become part of the conceptual framework that provides the foundation for making standard-setting decisions.

The proposal, available at, would require FASB to:

  • Identify information to disclose in the notes that is likely to help those who are deciding whether to provide resources to an organization.
  • Eliminate disclosures of certain types of future-oriented information that may have negative effects on the cash flow prospects of the reporting organization.
  • Consider the costs and potential consequences of providing a disclosure in the notes.

In addition, the proposal discusses what the board should consider when determining which disclosures should be required at interim periods.

Comments on the exposure draft can be submitted at FASB’s website at by July 14.

FASB’s staff is compiling field-test study results as part of the disclosure framework project. These results will be included along with stakeholder feedback from a 2012 invitation to comment when developing the decision process an entity will use to determine what is disclosed in the notes to financial statements.

  FASB plans to research concerns about the usefulness of its fair value measurements standard for users of financial statements of employee benefit plans, not-for-profits, and private companies.

The concerns arose during a post-implementation review conducted for the board’s parent body, the Financial Accounting Foundation (FAF). The review was completed in February.

Russell Golden, the FASB chairman, announced the board’s intentions in a letter to the co-chairs of FAF’s Standard-Setting Process Oversight Committee.

The review of FASB Statement No. 157, Fair Value Measurements, was largely positive. The review team concluded that the standard meets its objectives and helps preparers provide fair value measurement information that a majority of users can understand and find useful.

But the review also found that some investors question the relevance of the information produced for users of financial statements of employee benefit plans, not-for-profits, and private companies. Golden said this information is consistent with feedback the board received and thoroughly considered while creating Statement No. 157.

Nonetheless, the board will conduct research and outreach on the issue in connection with projects and initiatives that already are in progress. These include the Disclosure Framework Project, the simplification initiative research project, and the research project on accounting issues in employee benefit plan financial statements.

The Private Company Council and the Not-for-Profit Advisory Committee also will be included in the discussion, Golden said.

Golden said the review findings show that there is no need for a comprehensive review of Statement No. 157.

Some respondents to the review team also said it is costly to comply with Statement No. 157. But the review team concluded that the ongoing costs are not exclusively due to the statement’s requirements but are the result of regulatory issues that arose after the statement was issued.

The full report is available at


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