GAAP Flash – Important disclosure information – 09.28.18
GAAP Flash – Important disclosure information – 09.28.18

GAAP Flash – Important disclosure information – 09.28.18

This is a busy time for the accounting world, especially considering the implementation of the “Big 3” accounting standards: ASC 606, Revenue from Contracts with Customers; ASC 842, Leases; and ASC 326, Financial Instruments – Credit Losses. And even though the “Big 3” has been top priority, there have been other recent updates issued by both the FASB and SEC, which primarily focus on disclosures. So, in today’s post, we are going to summarize some of these recent updates and provide some useful links.

FASB

Recently, the FASB updated its FASB Concepts Statement No. 8 (CON 8), Conceptual Framework for Financial Reporting, which establishes the concepts that underline financial reporting standards. As part of the update, Chapter 3 (of CON 8), Qualitative Characteristics of Useful Financial Information, was amended to provide guidance on the difference between materiality and relevance, and to define materiality consistently with how the SEC, PCAOB and AICPA define materiality. Additionally, the FASB added an entire new chapter to CON 8: Chapter 8, Notes to Financial Statements! This chapter serves as a framework for what type of information needs to be disclosed within a company’s financial statement notes and includes a list of decision questions to consider when preparing disclosures. These changes are effective immediately for all companies (because CON 8 is nonauthoritative, there is no explicit effective date).

The FASB’s focus on disclosures did not stop there! Two new ASU’s were also recently issued to address disclosure items:

  • ASU 2018-13, Fair Value Measurement (Topic 820) – Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement
  • ASU 2018-14, Compensation – Retirement Benefits – Defined Benefit Plans – General (Subtopic 715-20) – Disclosure Framework – Changes to the Disclosure Requirements for Defined Benefit Plans

 Some of the key changes resulting from ASU 2018-13 related to Level 3 disclosures. New Level 3 measurement disclosures were added for public companies (changes in unrealized gains/losses; more information on significant inputs used) and disclosures were modified for nonpublic companies relating to Level 3 measurements (transfers into and out; purchases/issues). As it relates to defined benefit and OPEB plans, ASU 2018-14 eliminated a number of disclosure requirements that were deemed not useful to decision makers (e.g., the effect of a 1%-point change in healthcare cost trends) but added ones that were deemed not costly to prepare. As this article discusses, these updates were a big step for disclosure effectiveness!

 SEC

Not to miss out on the disclosure party, the SEC also issued a final rule that amends certain disclosure requirements that have become redundant and/or outdated. The impact of these amendments will vary by company, but the overall expectation is that the burden/complexity of reporting will be reduced. 

Some of the higher-level changes include:

  • Eliminating the earnings to fixed charges ratio
  • Changes to stockholders equity, which is summarized here
  • Eliminating the quarterly requirement of presenting dividends per share on the face of the income statement
  • Elimination of S-K, Item 101(b) (Segment information in the description of the business), and S-K Item 101(d) (financial information disclosure by geographic area in the description of the business)

This reference provides a helpful summary of some of the more significant changes made, and this article provides a nice recap of other current developments at the SEC.

 Quarterly reporting

In case you might have missed it, President Trump is pushing for the SEC to move away from quarterly reporting and instead, report results on a semi-annual basis! As you might have guessed, there are many who think it’s a great idea but there are also others that oppose the idea. It really all boils down to disclosures, which has been the theme of this post. Where do you stand on this matter? We’d like to know your thoughts! But in the meantime, we’ve included some discussion articles:

Disclaimer

This post is published to spread the love of GAAP and provided for informational purposes only. Although we are CPAs and have made every effort to ensure the factual accuracy of the post as of the date it was published, we are not responsible for your ultimate compliance with accounting or auditing standards and you agree not to hold us responsible for such. In addition, we take no responsibility for updating old posts, but may do so from time to time.

New Revenue Standard
 
Join the Revolution!

Comments (0)


Add a Comment




Allowed tags: <b><i><br>Add a new comment:


Ready To Make a Change?

Cookies on the GAAP Dynamics website

To give you the best possible experience, this website uses cookies. By continuing to browse this website you are agreeing to our use of cookies. For more details about cookies and how to manage them, please see our privacy policy.