Skip to content

Accounting Rulemakers Aiming to Keep Segment Expense Disclosure Rules Robust

Denise Lugo  Editor, Accounting and Compliance Alert

· 5 minute read

Denise Lugo  Editor, Accounting and Compliance Alert

· 5 minute read

Analysts and other financial statement users will likely get the level of detail they have clamored for related to segment expense disclosures, as the FASB plans to add more disclosures as opposed to eliminating any, according to March 10, 2021, board discussions.

Companies would need to provide more expense disclosures based on the FASB’s discussion of how a disclosure principle it decided on would be applied, the discussions indicated. Specifically, each significant expense category would need to be reconciled to the corresponding entity-wide total amount.

“Investors want the information to go across the page to the consolidated statements to have some basis for comparison,” FASB member Gary Buesser said. “And I think this is how we’re going to improve the segment disclosures and add real value to the analyst community, so I support that.”

The discussions aimed to build on prior board decisions to pursue a disclosure principle that requires the disclosure of the significant expense categories that are regularly provided to the chief operating decision maker (CODM) and are included in the reported measure of segment profit or loss.

Hammering Out Nitty Gritty Issues

Deliberations focused on drilling down on five knock-on issues related to the principle.

In addition to the reconciliation issue, the board agreed on the following:

  • How the significant expense categories under the principle interact with the existing requirements to disclose certain expenses by reportable segment: the board said it would not remove the current list under Topic 280, Segment Reporting, of expenses companies would need to disclose – items such as depreciation, depletion, and amortization expense, income tax expense and significant noncash items other than depreciation expense.
  • Whether to require disclosure of an “all other” expense amount and a description of its composition: public companies would give a narrative description starting from segment revenue down to segment profit so that investors are able to see the components that are otherwise included in segment profit.
  • Whether to require entities to provide a narrative description of the basis of allocating expenses to the segments: the board said it would not require a specific allocation method on a year-to-year basis, but if a company changes the basis for which it allocates its expenses, then it has to disclose that.

Next Steps

Discussions on expenses were not completed.

The board will continue at a future meeting to discuss matters related to expenses being easily derivable for interim reports that are provided to the CODM.

Board members discussed issues relative to easily derivable, i .e. segment expense information provided on a variance basis or ratio basis, but said they needed to carefully look at how to word the matter. “This one is the most significant,” FASB member Marsha Hunt said. “It actually may drive the most additional disclosure from what is actually available today,” she said.


This article originally appeared in the March 11, 2021 edition of Accounting & Compliance Alert, available on Checkpoint.

Subscribe to our Checkpoint Daily Newsstand email to get all the latest tax, accounting, and audit news delivered to your inbox each weekday. It’s free!

More answers