August 10, 2022

Financial Reporting: FASB Revisits Segment Disclosure

At its last meeting, FASB proposed several changes that would impact segment reporting.  These include requiring disclosure of the title & position of its chief operating decision maker and enhanced disclosure of significant expenses.  This excerpt from a WSJ article on the proposal summarizes the proposed changes to expense disclosure:

U.S. public companies would have to start breaking out big-ticket expenses incurred by their business divisions under a new proposal from the U.S. accounting standards-setter aimed at helping investors get a clearer view of financial performance. Companies usually split their operations into segments by business line or geography. They are required to disclose a measure of their profits or losses by operating segment in financial statements, but don’t have to go into much more detail.

Under a proposal from the Financial Accounting Standards Board, companies would have to disclose significant expenses in those divisions, which could cover things like labor, technology fees, rent or cost of goods sold.

In addition, FASB proposes to permit companies to report multiple measures of a segment’s profit or loss, so long as at least one of those measures is one that is most consistent with those used in measuring the corresponding amounts in the consolidated financial statements. FASB’s staff is drafting a proposed Accounting Standards Update and interested parties will have 75 days to comment on the proposal.

John Jenkins