Disclosure Rules for Income Statement Expenses Might Come Late Summer, FASB Chair Says

Disclosure rules that will reveal certain types of expenses that analysts say are too obscure in income statements might be issued late summer, Chair Richard Jones told the board’s trustees.

The guidance is the result of the “disaggregation of income statement expenses” or “DISE” project and “was probably the highest priority we heard from investors,” he said at the Financial Accounting Foundation’s quarterly meeting on May 22, 2024.

Jones’ remarks put a finer point on exactly when the rules will be issued – provisions that will come about six years after efforts started in 2017 as a “performance reporting” project, which got suspended in 2019. (See FASB Suspends Work to Revise Income Statement After Research Comes to Stalemate in the December 13, 2019, edition of Accounting & Compliance Alert.)

In 2022, the FASB reframed the project to make it narrower and changed its name. Subsequently, the board issued Proposed Accounting Standards Update (ASU) No. 2023-ED500, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses in 2023 to solicit public comment.

The proposal aims to require public companies to — annually and on an interim basis — disclose certain expense items in footnotes that have previously been totaled under a few captions in the income statement. Items such as employee compensation and inventory, for example, would be broken out. The resulting information would provide investors in the US capital marketplace with enough information to better understand a company’s performance, prospects for future cash flows, and compare its performance over time with those of other companies, the board said last year.

The proposal received about 79 comment letters, some of which pushed back on the changes as being too costly. At a December 2023 roundtable views differed between accountants and investors over costs and other challenges, signaling the board had a tough road toward being able to finalize the rules.

Redeliberations on the proposal started in January and last took place on May 8 – all of which signal the board won’t veer too far from what was proposed, although refinements and clarifications will be made.

Nervous about reworking certain areas, the board brought its decisions to its Investor Advisory Committee on May 16 and got positive feedback from investment and credit analysts. (See Coming FASB Disclosure Rules on Income Statement Expenses Backed by Investors, Board Advisers Say in the May 21, 2024, edition of Accounting & Compliance Alert.)