FASB issues guidance to improve disclosures in notes to financial statements

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Aug 29, 2018

In August 2018, the Financial Accounting Standards Board (FASB) issued two Accounting Standards Updates (ASUs) and two changes to its conceptual framework that are intended to improve the effectiveness of disclosures in notes to financial statements.

FASB releases

Specifically, the FASB released the following:

  • ASU 2018-13, Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement — Removes, modifies, and adds certain disclosure requirements in ASC 820 on the basis of the concepts in the FASB Concepts Statement Conceptual Framework for Financial Reporting — Chapter 8: Notes to Financial Statements. The ASU is effective for all organizations for fiscal years — and interim periods within those fiscal years — beginning after December 15, 2019. Early adoption is permitted.
  • ASU 2018-14, Disclosure Framework — Changes to the Disclosure Requirements for Defined Benefit Plans — Modifies ASC 715-20 to improve disclosure requirements for employers that sponsor defined benefit pension or other post-retirement plans. The ASU is effective for fiscal years ending after December 15, 2020, for public companies and for fiscal years ending after December 15, 2021, for all other organizations. Early adoption is permitted.
  • Chapter 8 of the conceptual framework, “Notes to Financial Statements” — “Explains what information the Board should consider including in notes to financial statements by describing the purpose of notes, the nature of appropriate content, and general limitations. It also addresses the Board’s considerations specific to interim reporting disclosure requirements.”
  • Amendments to chapter 3 of the conceptual framework, “Qualitative Characteristics of Useful Financial Information” — Updates the FASB’s definition of materiality to be consistent with the definition used by the SEC, PCAOB, AICPA, and U.S. judicial system.

Review the press release and FASB in Focus newsletter on the FASB’s website.


Comparison with IFRS

The International Accounting Standards Board (IASB) is still deliberating its Discussion Paper Principles of Disclosures that was published in March 2017. In July 2018, the IASB selected IAS 19, Employee Benefits and IFRS 13, Fair Value Measurement for the targeted standards-level review of disclosures.

The FASB had already published its proposed Statement on Notes/Disclosures in 2014 and had also picked employee benefits and fair value measurement to test the concepts of the proposed Concepts Statement. This has now resulted in corresponding changes in Subtopic 715-20 and Topic 820. In selecting IAS 19 and IFRS 13, the IASB is therefore following the same path as the FASB.


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