The FASB has issued an Exposure Draft requesting comment by January 31, 2022 related to potential changes to disclosure requirements for interim reporting. The amendments in the proposed ASU would add a principle to Topic 270, Interim Reporting that would require disclosure for a significant event or transaction that has a material effect on an entity and results in disclosures that are transaction or event specific. The proposed ASU would also include language that would state that Topic 270 and its related subtopics would include (1) complete guidance on interim reporting requirements and (2) references to interim requirements in other Topics.
The Exposure Draft includes a clarification that interim reporting could be presented in the following three forms: (1) financial statements prepared with the same level of detail as the previous annual statements subject to all presentation requirements in GAAP and notes subject to all GAAP disclosure requirements, (2) financial statements prepared with the same level of detail as the previous annual statements subject to all presentation requirements in GAAP and limited notes subject to the disclosure requirements in Topic 270, or (3) condensed financial statements and limited notes subject to the disclosure requirements in Topic 270.
For those entities that elect to present condensed financial statements, the content of those statements shall be as follows: (a) interim balance sheets shall include captions from an entity’s previous balance sheet. Where a balance sheet caption is less than 10% of total assets and the amount in the caption has not increased or decreased by more than 25% since the end of the preceding fiscal year, the caption may be combined with other captions; (b) interim statements of comprehensive income shall include captions from an entity’s previous annual statement of comprehensive income. When any statement of comprehensive income caption is less than 15 percent of average net income for the most recent 3 fiscal years and the amount in the caption has not increased or decreased by more than 20% as compared with the corresponding interim period of the preceding fiscal year, the caption may be combined with others; (c) The statement of cash flows may be abbreviated starting with a single figure of cash flows from operating activities and showing cash changes from investing and financing activities individually only when they exceed 10% of the average of net cash flows from operating activities for the most recent 3 years. The proposed ASU would include requirements for entity to disclose that the interim financial statements are to be read in conjunction with the prior annual financial statements and notes.
The proposed effective date has not yet been determined. The FASB intends for the amendments in the proposed ASU to be applied prospectively, but will determine if early adoption is permitted after it considers stakeholder feedback on the proposed changes.
The full text of the Exposure Draft is available here.
Readers should not act upon information presented without individual professional consultation.