News built for finance pros
CFO Brew helps finance pros navigate their roles with insights into risk management, compliance, and strategy through our newsletter, virtual events, and digital guides.
The Financial Accounting Standards Board (FASB) wants companies to get more granular about income statement expenses in their financial reporting with its latest accounting standards update (ASU).
According to FASB, the ASU will require public companies to disclose “specified information about certain costs and expenses” in the notes of financial statements in interim and annual reports.
The report says that the new standards will require companies to:
- Disclose purchases of inventory; employee compensation; depreciation; intangible asset amortization; and depreciation, depletion, and amortization “recognized as part of oil- and gas-producing activities (or other amounts of depletion expense) included in each relevant expense caption.”
- Include certain amounts they already need to disclose under GAAP “in the same disclosure as the other disaggregation requirements.”
- “Disclose a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively.”
- Disclose selling expenses totals as well as, in annual reports, “an entity’s definition of selling expenses.”
The requirements are effective for annual reporting periods beginning after Dec. 15, 2026, and for interim reporting periods starting after Dec. 15, 2027.
FASB unleashed the ASU after outreach efforts three years ago revealed that investors paid close attention to expense information in gauging an organization’s performance, its prospects for future cash flow, and how it compares to other companies, according to a news release.
The update “was one of the highest priority projects cited by investors in our extensive outreach with them as part of our 2021 agenda consultation initiative,” Richard Jones, FASB chair, said in the release. “We heard time and again from investors that additional expense detail is fundamental to understanding the performance of an entity and we believe that this standard is a practical way of providing that detail.”