A new FASB proposal would require preparers of financial statements to present in one place information about the amounts reclassified out of accumulated other comprehensive income (OCI).
On Thursday, FASB issued a Proposed Accounting Standards Update (ASU) for public comment. The board presented a plan to require a tabular disclosure that would present information in one place about the amounts reclassified out of accumulated OCI and provide a road map to related financial disclosures.
The purpose of the proposal is to improve presentation for users of financial statements without creating significant costs to preparers. U.S. GAAP currently requires information about amounts reclassified out of accumulated OCI to be presented throughout the financial statements, so FASB does not expect preparers to incur significant costs if the Proposed ASU is approved.
OCI includes gains and losses that initially are excluded from net income for an accounting period. Those gains and losses later are reclassified out of accumulated OCI into net income.
The Proposed ASU is the result of a FASB cost/benefit analysis that originated last year. In June 2011, FASB issued ASU No. 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income, which was intended to increase the prominence of OCI in financial statements and facilitate convergence of U.S. GAAP and IFRS.
Simultaneously, the International Accounting Standards Board (IASB) issued amendments to International Accounting Standard (IAS) 1, Presentation of Financial Statements. FASB noted that while it reached agreement with the IASB on how items of comprehensive income should be reported, differences between U.S. GAAP and IFRS remained.
In December, FASB deferred the ASU No. 2011-05 requirement to present items that are reclassified from OCI to net income, in order to further evaluate the costs and benefits of the requirements. That deferral was issued in ASU No. 2011-12, Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income In Accounting Standards Update No. 2011-05.
The amendments in the ASU proposed Thursday provide different requirements on how to present reclassifications out of accumulated OCI.
FASB Chairman Leslie Seidman said in a statement that stakeholders had raised concerns that certain reclassification requirements in the previous standard would be costly and add unnecessary complexity to financial statements.
“Based on this new feedback, the board is proposing a revised approach that will present information about other comprehensive information in a useful way that is more cost-effective,” Seidman said.
FASB will decide on an effective date for the Proposed ASU after seeking public comment. The comment period ends Oct. 15. Information on how to offer feedback can be found on the FASB website.
—Ken Tysiac ( ktysiac@aicpa.org ) is a JofA senior editor.
