The FASB proposes to modify the disclosure rules for interim financial reports
The Financial Accounting Standards Board has proposed a updating of accounting standards On Monday, that would change the disclosure requirements for interim financial reports.
The proposal would allow for disclosures that may be specific to a transaction or an event. It would require disclosure of a material event or transaction that has a material effect on an entity and gives rise to information specific to a transaction or event.
The proposed ASU is part of the FASB’s proposed disclosure framework aimed at improving the effectiveness of disclosures in financial statements. The proposal would update the FASB Accounting Standards CodificationÂ® 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 changes 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 in SEC Regulation SX requiring disclosure at interim periods when a material event or transaction has occurred since the end of the previous fiscal year and has a material effect on an entity.
The Securities and Exchange Commission removed the wording in 2018 from the SX Regulation’s interim financial statement rules, considering them to be redundant. The changes to the ASU proposed by the FASB would add a new principle, based on the deleted part of the SX Regulation, which would apply to all entities that provide interim financial statements and notes in accordance with GAAP. The proposed ASU also indicates that the resulting information may be specific to a transaction or to an event.
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 comply with GAAP:
- Financial statements prepared with the same level of detail as previous annual statements, subject to all GAAP presentation and disclosure requirements;
- Financial statements prepared with the same level of detail as previous annual statements subject to all GAAP presentation requirements and limited notes subject to the disclosure requirements of subject 270; and,
- Condensed financial statements and limited notes subject to subject disclosure requirements 270.
The proposal would also respond to comments the FASB has received from some of its stakeholders who have requested that interim reporting requirements be clarified and consolidated into a single subject of the FASB accounting standards codification. The document also includes some modifications to clarify when comparative information is required.
The FASB is asking its stakeholders to review and comment on the proposal by January 31, 2022.