FASB exposes financial statement element definitions

The FASB’s proposed definitions seek to clarify and improve the definitions of financial statement elements.

Applicability

Proposed update to Statement of Financial Accounting Concepts: Elements of financial statements

• All entities subject to US GAAP

Relevant dates

• July 16, 2020 – FASB issued proposed Statement
• November 13, 2020 – Comments due on proposed Statement

Key impacts

• The proposed Chapter to CON 8, Conceptual Framework for Financial Reporting, defines 10 elements of financial statements and would replace CON 6, Elements of Financial Statements.
• The proposed Chapter would establish concepts that the FASB would use in developing standards of financial accounting and reporting.
• The proposals aim to clarify and improve the definitions of financial statement elements by:
  • Clearly identifying the right or obligation that gives rise to an asset or a liability
  • Eliminating terminology that purports to make the definitions of assets and liabilities difficult to understand and apply
  • Clarifying the distinction between liabilities and equity, and between revenues and gains and expenses and losses
  • Modifying the distinctions in equity for not-for-profit entities. 

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