The Financial Accounting Standards Board tentatively decided Wednesday to require companies to break out expenses for employee compensation, depreciation, intangible asset amortization and inventory in the notes to their financial statements.
During the deliberations, several board members characterized the disaggregation of income statement expenses project as a significant step forward toward making financial reports more useful to investors even as the FASB weighed the added costs that it would carry for companies.
“This is the most important project that we’re working on from an investor perspective by a factor of ten,” Board Member Gary Buesser said during the meeting, adding that he is amazed at how little information some large companies provide in their reports. “There are costs to every standard we implement but many of our projects don’t really move the needle. This could move the needle.”
It’s not clear when the new disclosure standards would be finalized as new accounting guidance. The FASB is expected to issue a draft proposal of the standards in the first half of this year.
For now only public companies would be subject to the new guidance. The board will discuss whether the guidance would also apply to private companies at an upcoming meeting. In terms of the next step in the project, the FASB will address transition requirements, applicability to interim financial statements and cost-benefit considerations.
The project is one of several initiatives that have been a priority for stakeholders under the general theme of disaggregation, Chair Richard Jones previously told CFO Dive. But it has been moving relatively slowly through the standard setting process and in October, Jones expressed concern that the board not get bogged down in details such as those around selling expenses.
As FASB kicked off its first meeting of the new year this week, some experts expect the collapse of the crypto exchange FTX will likely lead to sharper accounting oversight in 2023.
Editor's note: This story has been updated to correct where FASB has tentatively decided that the expense data will appear in financial reports.