Project Update

Disclosure Framework—Board's Decision Process

Last updated on March 4, 2014. Please refer to the Current Technical Plan for information about the expected release dates of exposure documents and final standards.

(Updated sections are indicated with an asterisk *)

The staff has prepared this summary of Board decisions for information purposes only. Those Board decisions are tentative and do not change current accounting. Official positions of the FASB are determined only after extensive due process and deliberations. Please refer to the main Disclosure Framework project page for additional information related to all aspects of the Disclosure Framework project.

*Due Process Documents
Decisions Reached at Last Meeting
Tentative Board Decisions
Next Steps
Board/Other Public Meeting Dates
Contact Information
 

*Due Process Documents

On March 4, 2014, the FASB issued the Exposure Draft, Conceptual Framework for Financial Reporting: Chapter 8 Notes to Financial Statements. The due date for comment letters has been set for July 14, 2014.

On July 12, 2012, the Board issued Invitation to Comment – Disclosure Framework. The original due date for comment letters was set for November 16, 2012 but due to Hurricane Sandy the comment period was extended two weeks to November 30, 2012.

Decisions Reached at Last Meeting (November 12, 2013)

The Board made the following decisions:
  1.  The Board decided which indicators should be used to assist the Board in evaluating whether an annual disclosure should also be required for interim reporting periods.
  2. Employee benefit plans should not be within the scope of the Board’s decision process. Rather, the Board acknowledged that, when developing standards for disclosure, special consideration should be given to whether those standards apply to employee benefit plans.
The Board directed the staff to draft, for vote by written ballot, an Exposure Draft that would add a new chapter regarding disclosures to FASB Concepts Statement No. 8, Conceptual Framework for Financial Reporting. The comment period would be at least four months from the Exposure Draft’s date of issuance and would not end earlier than May 15, 2014.

Tentative Board Decisions (as of March 4, 2014)

The Board has made the following decisions related to the Board’s Decision Process:

Role of the Notes
  1. The Board’s decision process would include the following short, very high-level summary of the purpose of notes to financial statements, the types of information that should be included in notes, and the types of information reporting entities should not be required to include in notes:
    Consistent with the objective of financial reporting in general, the purpose of notes to financial statements is to supplement or further explain the information on the face of the financial statements by providing information relevant to existing and potential investors, lenders, and other creditors about the following matters:
    1. The reporting entity and its activities
    2. Financial statement line items
    3. Past events and existing conditions that have not met the criteria for recognition in the entity’s financial statements but that are capable of making a difference in decisions about providing resources.
  2. Reporting entities should not be required to include the following even if relevant to existing and potential investors, lenders, and other creditors:
    1. Assumptions and expectations about future events unless they are inputs to measurements made by management for purposes of presentation on the face of the financial statements or disclosure in notes
    2. Information about matters that are common knowledge or readily available from other sources on a timely basis and without significant cost or difficulty and not specific to the entity and its financial statements, for example, general economic conditions.
Disclosure Overlap
  1. The Board’s decision process would state that the Board could require disclosure in the notes, even if that information is required elsewhere in the report or outside of the report by a securities regulator or other regulator, if including the information in the notes
    1. Represents an improvement in financial reporting and
    2. The benefits of providing the information justify the costs.
Forward-looking Information
  1. The following items relating to the future would be appropriate for consideration by the Board in establishing disclosure requirements:
    1. Information about existing conditions or specified future changes that have implications for the future.
    2. Management’s plans.
    3. Expectations and assumptions about the future that are inputs to a measurement presented or disclosed in current period financial statements and that are intended to explain that measurement. The Board also agreed that examples of disclosures that would likely not be considered by the Board for disclosure would be:
      1. Expectations and assumptions about the future used as inputs to an impairment test that does not result in recognition of an impairment loss. (A disclosure about an entity being close to the threshold for impairing an asset would be a disclosure of a current condition not a disclosure of an expectation or assumption about the future.)
      2. Expectations and assumptions about the future that are inputs to a measurement if they are being used for some purpose other than explaining that measurement.
      3. Expectations and assumptions about the future that are implied by an observable market price but that are not actually used by the entity as inputs to a measurement.
Decision Questions
  1. The decision questions address appropriate issues but some of the indicated disclosures should be modified to focus more sharply on past events and existing conditions. The Board specifically identified the following changes and directed the staff to consider whether other indicated disclosures might need similar modifications:
    1. Replace the current language in “Information to Be Considered for Disclosure” from decision question G2(c) with the following:
      1. “Judgments and assumptions made by an entity when determining whether to consolidate an entity.”
    2. Modify the “Information to Be Considered for Disclosure” from decision questions O1(d) and O2(e) to say:” A current measure of the possible effect of the event or condition on future cash flows.”
    3. Remove “A judgment of the prospects for losing the customers or suppliers” as “Information to Be Considered for Disclosure” in decision question O3(b).
  2. In response to comments that some of the decision questions about other events and conditions may not be comprehensive and should be less specific, the Board decided to add an introductory statement to the questions that relate to the inputs, outputs, and external factors that affect an entity’s operations (questions O3 to O7). That introduction would acknowledge that although the questions are intended to be general enough to include all known factors, the Board should consider periodically whether there are others or whether new factors arise.
  3. The indicated disclosure in Question L13 regarding the effect of changes in accounting standards that are not yet effective should be revised to make it clearer that an entity would not be expected to expend significant time and money to precisely and supportably estimate the effect if it has not already done so for its own purposes.
  4. A decision question related to the relationships between line items should be added to the Board’s decision process as follows in an Exposure Draft:
Question L17—Does a line item have a direct relationship to another line item or items in another statement that is not otherwise apparent?

Not-for Profit Considerations
  1. The Board’s decision process, including the decision questions and indicated disclosures, in the Invitation to Comment (as adjusted for subsequent Board decisions) is sufficient to address the needs of donors if the wording is modified to refer specifically to (a) donors in addition to investors, lenders, and other creditors and (b) pursuit of the entity’s mission or services it has provided and its ability to provide future services in addition to prospects for future cash flows. 
Other Considerations
  1. The Board has additionally decided that the chapter in the conceptual framework on disclosures should address:
    1. Nonrecognized subsequent events
    2. Error corrections
    3. Changes in estimates
    4. Past transactions or events or existing conditions that will create future rights and obligations
    5. Amounts and transactions within line items that if not disclosed would reduce the quality of the assessment of cash flow prospects
    6. Claims related to equity instruments issued by an entity
Scope
  1. Employee benefit plans should not be within the scope of the Board’s decision process. Rather, the Board acknowledged that, when developing standards for disclosure, special consideration should be given to whether those standards apply to employee benefit plans.
Interim Reporting
  1. The Board decided that the chapter in the conceptual framework on disclosures should address:
    1. How the Board decides which annual disclosure requirements should be required for interim financial statements
    1. Differences in the accounting and reporting used for interim periods relative to those used for annual reporting
    1. Information needed to understand the interim results as they relate to the full year
    1. Consideration of more aggregated versions of annual disclosure requirements at interim periods.
  1. The Board decided which indicators should be used to assist the Board in evaluating whether an annual disclosure should also be required for interim reporting periods.
Technical Plan
  1. The Board decided to separate the entity’s decision process and the Board’s decision process on the Board’s current technical plan to make clear that the two are separate issues and will be the subjects of separate Exposure Drafts. The Board also decided to consider disclosures in financial statements for interim periods at the same time as it considers disclosures in annual financial statements.
  1. The Board directed the staff to draft, for vote by written ballot, an Exposure Draft that would add a new chapter regarding disclosures to FASB Concepts Statement No. 8, Conceptual Framework for Financial Reporting. The comment period would be at least four months from the Exposure Draft’s date of issuance and would not end earlier than May 15, 2014.

Next Steps

Please refer to the current technical plan for information about the project timeline.

Board/Other Public Meeting Dates

The Board meeting minutes are provided for the information and convenience of constituents who want to follow the Board’s deliberations. All of the conclusions reported are tentative and may be changed at future Board meetings. Decisions become final only after a formal written ballot to issue a final standard.

November 6, 2013 Board Meeting—Interim Reporting, Scope of the Board’s Decision Process, and Permission to Ballot
October 9, 2013 Board Meeting—Additions and other Changes to the Board’s Decision Process and Interim Reporting
August 7, 2013 Board Meeting—The needs of providers of resources to not-for-profit entities and Line Items Decision Questions
July 25, 2013 Board Meeting—Role of the Notes, and SEC Disclosure Overlap within the Financial Report, and Other Regulatory Disclosure Overlap outside the Financial Report
June 19, 2013 Board Meeting—Forward-Looking Disclosure Information, Decision Questions, and Changes to the Technical Plan
February 13, 2013 Board Meeting—Comment Letter Summary and Analysis of Comments and Possible Next Steps
April 25, 2012 Board Meeting —Interim Disclosures and Cost Consequence
August 24, 2011 Board Meeting—Decision Process for Disclosures about Line Items
August 18, 2010 Board Meeting—Objectives, Principles, and Criteria for Use in Setting Standards for Required Disclosures of Financial Information

July 8, 2009

Board MeetingAgenda Announcement

Contact Information

Ron Lott
Research Director
rwlott@fasb.org

Nick Cappiello
Project Manager
ntcappiello@fasb.org

Jenifer Wyss
Project Manager
jjwyss@fasb.org

Sean May
Industry Fellow
srmay@fasb.org

Kristan Hinn
Postgraduate Technical Assistant
kahinn@fasb.org

Danika Tibbetts
Postgraduate Technical Assistant
drtibbetts@fasb.org