The Financial Accounting Standards Board proposed an
The proposal would allow disclosures that may be transaction- or event-specific. It would require disclosures of a significant event or transaction that has a material effect on an entity and results in disclosures that are transaction- or event-specific.
The proposed ASU is part of FASB’s disclosure framework project that aims to improve the effectiveness of disclosures in the notes to financial statements. The proposal would update FASB Accounting Standards Codification® Topic 270, Interim Reporting, which clarifies the application of accounting principles and reporting practices for entities preparing interim financial statements and notes in accordance with GAAP. The amendments to Topic 270 would apply to all entities that provide interim financial statements and notes in accordance with GAAP.
The proposed ASU would contain a requirement that was previously included in SEC Regulation S-X requiring disclosure at interim periods when a significant event or transaction has occurred since the prior year-end that has a material effect on an entity.
The Securities and Exchange Commission removed language in 2018 from the Regulation S-X rules on interim financial statements, considering them duplicative. The amendments in FASB’s proposed ASU would add a new principle, based on the removed portion of Regulation S-X, which would apply to all entities that provide interim financial statements and notes in accordance with GAAP. The proposed ASU also says that the resulting disclosures may be transaction- or event-specific.
In addition, the proposal would clarify the presentation and disclosure alternatives for interim financial statements and notes in accordance with GAAP. It would also clarify that the following three forms of financial statements and notes are in accordance with GAAP:
- Financial statements prepared with the same level of detail as the previous annual statements subject to all the presentation and disclosure requirements in GAAP;
- Financial statements prepared with the same level of detail as the previous annual statements subject to all the presentation requirements in GAAP and limited notes subject to the disclosure requirements in Topic 270; and,
- Condensed financial statements and limited notes subject to the disclosure requirements in Topic 270.
The proposal would also answer the feedback FASB has received from some of its stakeholders who asked for interim reporting requirements to be clarified and consolidated into a single topic of the FASB Accounting Standards Codification. The document also includes some amendments to clarify when comparative disclosures are required.
FASB is asking its stakeholders to review and provide comments on the proposal by Jan. 31, 2022.
