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FASB proposes improvements to income statement expenses

FASB is seeking comments on a proposed Accounting Standards Update (ASU) that is intended to provide investors with more decision-useful information regarding a public business entity’s expenses.

The ASU proposes changes to Subtopic 220-40, Income Statement — Reporting Comprehensive Income — Expense Disaggregation Disclosures, which would require public companies to provide detailed disclosure of specified categories underlying certain expense captions in interim and annual periods, FASB said.

The ASU would provide investors with “more detailed information about the types of expenses, including employee compensation, depreciation, amortization, and costs incurred related to inventory and manufacturing activities in income statement expense captions such as cost of sales; selling, general and administrative; and research and development,” according to FASB.

“Feedback from investors … provided us with a fresh approach to providing more detailed information about a company’s expenses, which investors have said is critically important to understanding a company’s performance, assessing its prospects for future cash flows, and comparing its performance over time and with that of other companies,” FASB chair Rich Jones said in a news release.

FASB said the amendments in the proposed ASU do not change or remove existing expense disclosure requirements and do not change requirements for presentation of expenses on the face of the income statement. They would require public companies to include certain existing disclosures in the same tabular format disclosure as the other disaggregation requirements set forth in the ASU.

The comment deadline is Oct. 30, and comments can be emailed to director@fasb.org. Those submitting a comment can also register to be considered for participation in a public roundtable Dec. 13.

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