Project Pages

Note Disclosures

Research Description: The objective of this pre-agenda research is to evaluate whether currently required note disclosures are sufficiently meeting the information needs of the users of state and local government financial reports. The research will provide the Board with the information necessary to consider whether additional or revised guidance is needed and, if so, to support deliberations over specific note disclosure requirements.

Added to Research Agenda: April 2016

Note Disclosures—Project Plan

Background: Note disclosures represent a fundamental component of the information that financial statement users rely on to make decisions related to a government’s financial health, as well as to assess whether governments have been fiscally and operationally accountable. The GASB last conducted a comprehensive review of note disclosures in 1997. That research, which led to the development of No. Statement 38, Certain Financial Statement Note Disclosures, focused on disclosure requirements effective through 1994. The GASB has developed extensive guidance on many types of financial reporting topics since that time.

Existing guidance for notes to the financial statements identifies 17 distinct disclosures (including the summary of significant accounting policies, which itself comprises 13 or 141 required disclosures) that are essential to fair presentation (Codification Section 2300, paragraph .106) and 61 additional disclosures that should be presented if applicable (paragraph .107). Paragraph .108 further states that governments may need to present other disclosures that they determine are necessary for fair presentation in their specific circumstances.

Those 78 note disclosures are included within various NCGA and GASB pronouncements through GASB Statement No. 72, Fair Value Measurement and Application. Most of those pronouncements are related to specific types of transactions or accounting and financial reporting topics, such as derivative instruments, fund balance, and pollution remediation obligations. A variety of disclosure requirements also are found in Statement 38.

This research is reexamining all existing disclosure requirements except the following:
  • Note disclosures required by pronouncements that have not been effective for at least three years.
  • Note disclosures related to leases, debt extinguishments, and outstanding debt, which currently are being reviewed by the Board.
  • Note disclosures that currently are the subject of the pre-agenda research project on going concern disclosures and conduit debt.
The research encompasses the note disclosures found in the pronouncements related to the financial reporting model. Although the financial reporting model currently is being reviewed by the Board, note disclosures—such as changes in capital assets and changes in long-term liabilities—are not identified within the scope of that project.

Major Research Issues: The research is considering the following issues:
  • Does Concepts Statement 3 provide a sufficient framework for establishing disclosure requirements or should additional framework criteria be developed for all disclosures? What approach, if any, would help to reduce repetition within disclosures and the overall length of the notes section?
  • Do the required note disclosures meet their intended objectives and continue to provide information that is useful for making decisions and assessing accountability?
  • What unmet user needs exist that might require new note disclosures? Alternatively, what existing disclosure requirements do not provide useful information to users of governmental financial reports?
  • What is the nature and extent of disclosures that governments currently include in their financial reports that are not specifically required by existing financial reporting standards?
  • Is there sufficient guidance for determining what information about component units should be included in a primary government’s notes? If not, how can the existing guidance be improved?
  • Pre-agenda research approved: April 2016
  • Consultative group established: Yes
  • The staff presented the results of the pre-agenda research: July 2018
Current Developments: Staff completed in-person and telephone interviews with stakeholders, and continued analysis of the research results and drafting of the various components of the research memorandum.

Research Work Plan: The plan for the pre-agenda research includes the following activities:

Board Meetings

Research Activities

July 2018:    Discussed research memorandum with Board.

1Budget-related disclosures are required in notes to the financial statements if the budgetary comparison is presented as a basic financial statement.