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FASB fine-tunes proposed expense disclosure rule

Written on Apr 12, 2024

FASB is moving to fine-tune some of the details of a proposed accounting standards update that would require companies to break out expenses for employee compensation, depreciation, intangible asset amortization and costs incurred related to inventory and manufacturing activities in notes to their financial statements.  

The proposal to update the rules that underpin GAAP — a project known as expense disaggregation disclosures (Subtopic 220-40) — is part of an initiative designed to provide a remedy for income statements that have drawn criticism for being something of a hodgepodge of information that is difficult to interpret. The board is seeking to address concerns raised about the proposal by certain industries and financial report preparers. 

On March 27, FASB tentatively agreed to provide some relief to banks regarding disclosures they must make related to compensation. They also moved to provide more guidance about when certain liability-related expenses do and do not need to be broken out.  

One of several initiatives that have been a priority for stakeholders under the general theme of disaggregation, it is expected to be finalized by the end of the year. 

The board is working on addressing matters that have been raised about how it should be implemented. For example, at the March 27 meeting the board agreed to grant a minor workaround or “practical expedient” to banks regarding how they disclose compensation because they already are required to provide such information in their income statement.  

FASB’s proposed compensation disclosure is “in the same spirit” as that required by the SEC, according to a statement.  

“Banks would still need to comply with other aspects of the standard. But because banks are already providing SEC-required information about employee compensation on the income statement, they would not be required to also provide that information as a disclosure,” the statement read.  

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