Accounting Rules and Laws

FASB pushes for more expense disclosure

Public companies may soon have to add a lot more detail to financial statements.
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Public companies are going to have to be a lot more transparent and detailed about their expenses under new accounting rules.

The Financial Accounting Standards Board (FASB) has decided to require publicly reporting companies to explicitly list out expenses related to employee compensation, depreciation of physical assets, amortization of intangible assets, and inventory on their income statements.

The new FASB rules would mandate two categories requiring disclosure of these four types of expenses. Incurred costs that are expensed as incurred need to include the four expense categories. Capitalized costs would be disclosed as inventory and also require the four categories.

So in other words, under the new rules, you’ll need to list out your expenses for employee compensation, depreciation, amortization, and inventory for both incurred and capitalized costs.

These changes are part of FASB’s disaggregation project, aimed at giving investors more insight into a company’s financial performance, FASB chair Richard R. Jones told a conference of accountants in December. “When we did our outreach with investors, time and again what we heard was that as they look at the income statement, they just weren’t seeing the level of detail they needed to really understand those operations,” Jones said at the conference.

FASB did not say when the disaggregation rules would be finalized. The body will continue to deliberate on disaggregation throughout 2023 and may add other expenses requiring disclosure to reporting requirements later in the year. The board is also considering adding private companies to the requirements, although it’s not clear how FASB could mandate such companies to comply.—DA

News built for finance pros

The latest news and insights corporate finance professionals need to know to keep up with their constantly evolving industry.