FASB sets new reporting standards for disclosure of expenses

FASB published an Accounting Standards Update (ASU) that is intended to improve financial reporting by requiring public companies to disclose, in interim and annual reporting periods, additional information about certain expenses in the notes to financial statements.

“This project was one of the highest-priority projects cited by investors in our extensive outreach with them as part of our 2021 agenda consultation initiative,” FASB Chair Richard Jones said in a news release. “We heard time and again from investors that additional expense detail is fundamental to understanding the performance of an entity, and we believe that this standard is a practical way of providing that detail.”

The ASU will require public companies to disclose specified information about certain costs and expenses at each interim and annual reporting period. Specifically, according to FASB, they will be required to:

• Disclose the amounts of (1) purchases of inventory; (2) employee compensation; (3) depreciation; (4) intangible asset amortization; and (5) depreciation, depletion, and amortization recognized as part of oil- and gas-producing activities (or other amounts of depletion expense) included in each relevant expense caption.

• Include certain amounts that are already required to be disclosed under current GAAP in the same disclosure as the other disaggregation requirements.

• Disclose a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively.

• Disclose the total amount of selling expenses and, in annual reporting periods, an entity’s definition of selling expenses.

The amendments in the ASU are effective for annual reporting periods beginning after Dec. 15, 2026, and interim reporting periods beginning after Dec. 15, 2027. Early adoption is permitted.

— To comment on this article or to suggest an idea for another article, contact Kevin Brewer at Kevin.Brewer@aicpa-cima.com.