Disclosure Framework

Why Did the FASB Decide to Add a Disclosure Framework Project to Its Agenda?

In 2009, the FASB added the disclosure framework project to its technical agenda with the goal of establishing an overarching framework intended to make financial statement disclosures more effective and coordinated and less redundant. The project was added in response to requests and recommendations received from several constituents, including the Investors Technical Advisory Committee (ITAC) and the Securities and Exchange Commission’s (SEC) Advisory Committee on Improvements to Financial Reporting (Recommendations 1.2 and 1.3).

In July of 2012, the FASB issued Invitation to Comment, Disclosure Framework which asked for stakeholder input on ways to improve effectiveness of disclosures in notes to financial statements of public, private, and not-for-profit organizations. The staffs of the FASB and the European Financial Reporting Advisory Group (EFRAG) cooperated in the development of the ideas discussed in Invitation to Comment and a similar discussion paper issued by EFRAG.
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What Is the Objective of the Disclosure Framework Project?

The objective of the Disclosure Framework project is to improve the effectiveness of disclosures in notes to financial statements by clearly communicating the information that is most important to the users of financial statements. The framework is intended to promote consistent decisions by the Board about disclosure requirements and guide reporting organizations when making disclosure decisions.

The Disclosure Framework project comprises the following two components:

THE BOARD’S DECISION PROCESS. The Board’s decision process is intended to help the Board improve its own procedures and promote consistent decision-making when determining disclosure requirements.

THE ENTITY’S DECISION PROCESS. The entity’s decision process is intended to guide reporting organizations when they are making decisions about which disclosures are relevant for their particular circumstances.

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What are the Recent Developments of the Board’s Decision Process?

On March 4, 2014, the FASB issued a proposed concepts statement—Conceptual Framework for Financial Reporting: Chapter 8 Notes to Financial Statements. If approved, it would be incorporated into the FASB’s Conceptual Framework and would become a basis for the Board when both evaluating existing disclosure requirements and creating disclosure requirements in the future.

The proposal explains what information should be considered for inclusion in notes by describing the purpose of notes and general limitations, and then more directly addressing the nature of the appropriate content. An item that may be considered for disclosure by the Board because of the decision process will not automatically become a required disclosure. The Board and its staff will continue to evaluate the costs and benefits associated with each potential disclosure.



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What Are the Recent Developments of the Entity’s Decision Process?

The FASB is now deliberating how disclosure requirements can be less prescriptive and promote the use of discretion. The FASB is currently discussing how to promote the use of discretion in the context of the Topics it has selected for disclosure reviews.
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What Are the Next Steps?

The comment period on the Exposure Draft, Conceptual Framework for Financial Reporting: Chapter 8 Notes to Financial Statements closed on July 14, 2014. The Board is redeliberating the issues raised in the comment letters while it uses the proposed concepts to review current disclosure requirements.


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