FASB focuses on stakeholder-centric standard-setting

Issued at the end of November, ASU 2023-07 (improvements to segment reporting) requires public entities to disclose the significant expense categories in each reportable segment in addition to all segment disclosures currently required. Companies also have the ability to report multiple measures of segment profit or loss.

Jones mentioned that the ASU’s effective date is soon – fiscal years beginning after December 15, 2023. However, most registrants should already have the necessary information to implement the new requirements. The possible exception is single reportable segment entities, which must start complying with ASC 280 in its entirety for the first time as of the ASU’s effective date.

Read more about the amendments in our Defining Issues, FASB issues ASU requiring new segment disclosures.

The proposed amendments would require public business entities (PBEs) to disaggregate five specified expense categories within each relevant caption in the income statement, with further disaggregation required for one of the categories – inventory and manufacturing expense. PBEs would also disclose the amount of their selling expenses.  

The Board is deliberating the proposed ASU in light of comments received and will continue its outreach at a public roundtable meeting on December 13, 2023. This project is particularly significant not only for the amount of new information it would yield but also for the expected cost of compliance.

Jones noted that greater granularity through disaggregation of income statement information is a top priority for investors. Read more about the project in our Defining Issues, FASB proposes income statement disaggregation disclosures.

The FASB issued an exposure draft in March 2023 and anticipates issuing the final standard by the end of December. The exposure draft proposed significantly expanding what is disclosed and how the information is disaggregated – giving investors a detailed look at a company’s global tax obligations. 

• Public business entities would disclose a tabular effective tax rate reconciliation, broken out into specific categories with certain reconciling items above a 5% threshold, and further broken out by nature and/or jurisdiction.
• Other entities would disclose the nature and effect of significant differences between the statutory tax rate and the effective tax rate by specific categories of reconciling items, including individual jurisdictions.
• All entities would disclose income taxes paid (net of refunds received) – broken out between federal, state and foreign – as well as net amounts paid to an individual jurisdiction that exceed 5% of the total.

Salo noted this project is a top priority because current tax disclosures are “a bit of a blind spot,” meaning they are challenging to understand. Read more about the project in our Defining Issues, FASB proposes improvements to income tax disclosures.

After adding the project to its technical agenda, the FASB met in October 2023 to refine its project scope and discuss recognition and measurement criteria. The FASB has tentatively taken a position on several issues, including:

• Scope. Environmental credits would include credits that are enforceable and transferable, are acquired, granted by a regulatory agency or designee or internally generated, lack physical substance and do not meet the definition of financial assets under US GAAP, and are represented to prevent, control, reduce, or remove emissions or other pollution.
• Recognition. A credit would be recognized as an asset (at cost) when it is probable that it will be used to settle an environmental credit obligation, sold or traded.

ASU 2021-10 created disclosure requirements for the receipt of certain government assistance but did not address recognition, measurement or presentation. In response to feedback, the FASB added a project to its technical agenda to address these issues. 

The FASB has tentatively taken a position on several issues, including:

• Scope. Government grants would be defined as assistance by a government in the form of transfers of monetary and tangible nonmonetary assets to a business entity.
• Recognition. A business entity would recognize a government grant when it is probable the entity will comply with the conditions attached to the grant and the grant will be received.

Read more about the project in our web article here.