FASB project to target performance reporting

The Financial Accounting Standards Board (FASB) is in the early stages of developing guidance for performance reporting. The goal is to make it easier for investors and securities analysts to understand how a business works using a company’s financial statements. This project could be one of the most significant changes to financial statements in years.

Broad scope

The FASB added this project to its agenda in September 2017 after it sought feedback from the public on where to focus its efforts upon completion of its major projects, such as the updated standards on recognizing revenue, credit losses, and leases.

This project won’t address recognition or measurement; rather, it’s broadly described as “performance reporting.” The FASB’s plan is to examine the presentation and display of revenue, expenses, and gains and losses that can be reported in the statement of performance, segment information, financial statement footnotes, and the statement of cash flows.

On the income statement, the FASB plans to address such issues as:

• Presenting operating vs. non-operating activities in a more user-friendly format
• Disaggregating income by product line or segment
• Evaluating the components of other comprehensive income and the basis for which those items may be reclassified into net income

Feedback from public stakeholders indicates that the performance reporting project is a priority for investors. In response, the FASB outlined a research plan in March 2018.

Long-term project

FASB member Marsha Hunt told attendees at the Current Financial Reporting Issues conference in November 2018 that the FASB doesn’t plan to rush this project.

“This is very early … and this is really a departure from what we’ve done in the past,” she said. “Our staff is getting a better understanding of the different ways data is captured within financial systems and getting a better understanding of the limitations of certain systems. They’re working on extended research to present in a very public format the results of that, for us to try to evaluate: Is there a better system?”

Work in progress

For now, the FASB is a long way from issuing an exposure draft on the performance reporting project. The standard setter wants to gather as much information as possible before proceeding. It’s initially focusing on how companies should break down, or disaggregate, information on their income statements by speaking directly with corporate controllers and other accounting officers.

In the meantime, contact us for more information about how this program might impact you. We’ll be happy to answer your questions.

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