PROJECT UPDATE

Financial Performance Reporting—Disaggregation of Performance Information

Last updated on January 11, 2018. Please refer to the Current Technical Plan for information about the expected release dates of exposure documents and final standards.

(Updated sections are indicated with an asterisk *)


The staff has prepared this summary of Board decisions for information purposes only. Those Board decisions are tentative and do not change current accounting. Official positions of the FASB are determined only after extensive due process and deliberations.

Project Objective
Due Process Documents
*Decisions Reached at the Last Meeting
*Tentative Board Decisions Reached to Date
*Next Steps
*Board/Other Public Meeting Dates
Background Information
*Contact Information

Project Objective

The objective of this project is to improve the decision-usefulness of the income statement through the disaggregation of performance information.

Due Process Documents

No due process documents have been issued.

*Decisions Reached at the Last Meeting (December 13, 2017)

The Board discussed the staff’s research on the common presentation practices of private company financial statements and the project plan for the financial performance reporting project. The project plan discussed different ways to approach disaggregating functional lines into natural components.
 
The Board discussed how to identify and describe the functional expenses lines that the project should target for disaggregation, those being Cost of Goods Sold and Selling, General, and Administrative expense. Because of the limited presentation guidance for private companies, the Board directed the staff to first focus on public companies and the SEC’s reporting regulations. The presentation requirements in Regulation S-X could be used as a basis for describing the meaning of Cost of Goods Sold and Selling, General, and Administrative expense (or similar terms).  

After evaluating the merits of this approach, the project would then consider whether and how to disaggregate other common functional expenses, such as research and development expense.  The Board would later decide whether this type of disaggregation would be useful for private company users and, if so, how to adapt this approach for private companies.
 
The Board also discussed how to approach defining natural expense classification and directed the staff to start with the existing definition of natural expense classification in the Master Glossary of the Codification.

*Tentative Board Decisions Reached to Date

September 20, 2017
 
The Board decided to add a project to the technical agenda to focus on the disaggregation of performance information either through presentation in the statement of income or disclosure in the notes. The Board decided to base the project on disaggregating functional lines into natural components.

*Next Steps

The staff will research using the presentation requirements in Regulation S-X as a basis for describing the meaning of Cost of Goods Sold and Selling, General, and Administrative expense (or similar terms).

*Board/Other Public Meeting Dates

The Board meeting minutes are provided for the information and convenience of constituents who want to follow the Board’s deliberations. All of the conclusions reported are tentative and may be changed at future Board meetings. Decisions become final only after a formal written ballot to issue a final standard.
 
*December 13, 2017 Board Meeting—Discussed the project plan and research relating to the presentation and disaggregation of functional and natural information in the performance statements of private companies.
September 20, 2017 Board Meeting—Added a project on the disaggregation of performance information to the technical agenda. The Board decided to retain the issue of structuring the performance statement by developing an operating performance measure on the research agenda.

Background Information

In January 2014, the FASB decided to add a project on financial performance reporting to its research agenda. In June 2014, the Board decided to focus on two aspects of performance reporting: (a) the disaggregation of performance information and (b) the structure of the performance statement. As part of the research, the staff developed various alternatives for improving the disaggregation of performance information and structuring the performance statement with an operating performance measure. A summary of the activities and decisions of the research project can be found here.

In August 2016, the Board issued an Invitation to Comment (ITC), Agenda Consultation, to solicit feedback about the major financial reporting issues that the FASB should consider in its future technical agenda. Many respondents to the ITC commented that performance reporting is a priority area and recommended that disaggregating performance information and requiring an operating performance measure should be a priority in the FASB’s future agenda. In general, respondents supported efforts to provide greater granularity of performance information through either presentation or disclosure in the notes. In January and May 2017, the Board discussed the feedback received to the ITC and the various approaches for disaggregating performance information and defining operating income.

In September 2017, the Board decided it would add a technical project to the active agenda that would focus on the disaggregation of performance information either through presentation in the income statement or disclosure in the notes. The Board discussed improving the structure of the performance statement by developing an operating performance measure. However, it decided to prioritize its efforts on the disaggregation of performance information. Accordingly, the Board decided to retain this issue on the research agenda. (This issue will now appear as a separate research project under the research tab of the technical agenda).

*Contact Information

Lauren Mottley
Project Manager
lmottley@fasb.org

Richard Cole
Supervising Project Manager
racole@fasb.org

Carly Lapins
Postgraduate Technical Assistant
clapins@fasb.org

Gabrielle Roe
Postgraduate Technical Assistant
groe@fasb.org