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FASB recently announced that it has proposed an Accounting Standards Update for interim disclosure requirements (Topic 270), which would add to GAAP a requirement to disclose when a “significant transaction or event has occurred since the prior year-end that has had a material effect on an entity.” That disclosure previously was required by Regulation S-X Rule 10-01 – but was axed as part of the SEC’s “disclosure simplification” back in 2018. Although this wasn’t one of the specific items that the SEC had asked FASB to consider incorporating into GAAP, it is part of FASB’s ongoing disclosure framework project.

This “Jim Hamilton” blog highlights key points about the 113-page proposal. Here are a few excerpts:

Assessing materiality. In addition to reintroducing the disclosure requirement for significant events with a material effect on a company, FASB proposed to eliminate the phrase “at minimum” and add language to Topic 270 to encourage entities to exercise discretion when considering interim reporting disclosures. FASB also proposed to clarify that assessing materiality is appropriate for entities when evaluating disclosure requirements, and that assessing which disclosures to provide at interim periods involves considering information provided at the previous annual period.

Other amendments. FASB’s proposals include an update that would require that an entity refer a reader of interim financial statements and notes to the previous annual financial statements when providing condensed financial statements or limited notes. The proposed amendments would require, if applicable, that the reporting entity explain that the interim results may not be indicative of the annual results or that adjustments have been made to the period to provide a more relevant depiction of the entity’s results.

With regard to providing comparative disclosures, the proposed amendments would clarify when comparative disclosures are required. The amendments also would remove phrases such as “for each period presented” and instead refer to making comparative disclosures when comparative statements are presented.

Stakeholder feedback. FASB requested that comments be provided by the end of January 2022.

– Liz Dunshee