By Denise Lugo
The FASB on December 16, 2020, unanimously voted to issue a proposal next year to revise interim disclosure requirements, work that will not bring much change from what companies currently provide.
The board said it would not move to comprehensively overhaul the rules, but would move forward with “housekeeping” decisions made to date on the disclosures, information in Form 10Qs companies file with the SEC every three months.
Companies will get 90 days to comment.
Board members said it would be difficult to broadly overhaul interim disclosure rules and such a move would entail working closely with the SEC, which is the agency that actually decided that interim reporting is required and that it differs from annual reporting. “Based on that I would be fine if we say really the nature of this project at this point is [we’re] not doing a more fulsome evaluation of additions or removals,” FASB Vice Chair James Kroeker said.
In general, investors think 10Qs are an excellent source of information and do not have issues with what is being provided today, the discussions indicated.
“I’ve never heard an analyst complain about the 10Qs having too little or too much information,” said FASB member Gary Buesser, one of the investor voices on the board. “Generally, it’s not perfect, but clearly if I look at it around the world – if I look at U.S. GAAP and SEC regulations on 10Qs, it’s the best information in the world. So therefore U.S. companies benefit because they get a higher valuation, you have a lower cost in capital over interest rate, so to me we should not make changes in this area. I think the clean up of [Topic] 270 to make it comprehensive makes sense,” he said.
At prior meetings, the board decided to streamline interim reporting disclosure rules so that companies would look to Topic 270 with a link to various disclosure requirements in the GAAP codification.
Topic 270 would include a principle based on changes to Regulation S-X, Rule 10-01, Interim Financial Statements, the board said in August. The principle for interim reporting would establish reporting requirements in addition to a specific list of required disclosures.
Companies would continue to focus on the transaction or event that has a material effect on the business. The language of the rules would indicate that updates resulting from a significant event should be disclosed in the notes and aligned with what would be provided under the annual disclosure requirements. That is intended to make updated interim information parallel with how annual information has been conveyed to enable users to clearly identify the new information.
This article originally appeared in the December 17, 2020 edition of Accounting & Compliance Alert, available on Checkpoint.
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