Objective:

The objective of this project is to improve the disclosures about a public business entity’s expenses by providing more detailed information about certain types of expenses (such as employee compensation) that are included in expense captions commonly presented on the income statement (such as cost of sales).
 

Background:

Feedback from investors, lenders, creditors, and other allocators of capital (collectively, “investors”) on the 2021 Invitation to Comment, Agenda Consultation, indicated that more detailed information about expenses is critically important in understanding an entity’s performance, assessing an entity’s prospects for future cash flows, and comparing an entity’s performance both over time and with that of other entities. Investors specifically indicated that more granular information about cost of sales and selling, general, and administrative expenses would assist them in better understanding an entity’s cost structure and forecasting future cash flows.

In response to that feedback, beginning in February 2022, the Board revised the scope and objective of this project to improve the decision usefulness of expense information on public business entities’ income statements through the disaggregation of relevant expense captions.

Exposure Draft:

On July 31, 2023, the Board issued proposed Accounting Standards Update, Income Statement–Reporting Comprehensive Income–Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. The due date for comment letters is October 30, 2023.

• Download the proposed Accounting Standards Update.
• Read comment letters on the proposed Accounting Standards Update.

• Read the press release on the proposed Accounting Standards Update.
• Read the FASB in Focus that summarizes the proposed Accounting Standards Update.
• Read the Financial Reporting Spotlight that provides a brief overview of the proposed Accounting Standards Update.
• Watch a video that provides a brief overview of the proposed Accounting Standards Update.
• Watch a video that walks through the proposed disclosure requirements using an illustrative example from the proposed Accounting Standards Update.

Decisions Reached at Last Meeting (March 29, 2023)

The Board continued its initial deliberations by discussing clarifications of the decisions at the January 11, 2023 Board meeting, interim reporting, application to private companies, transition, cost-benefit considerations, and comment period. The Board also discussed whether to proceed to drafting a proposed Accounting Standards Update for vote by written ballot. The Board made the following decisions:

Inventory Costs

The Board clarified that manufacturing expenses should not be separated from costs capitalized to inventory when they are of the same category (for example, employee compensation). The Board revised the required category from “inventory expense” to “inventory expense and other manufacturing expenses.”

Application of Selling Expenses Disclosure to Nonbusiness Entities

The Board decided that the selling expenses disclosure requirement would apply only to entities within the scope of this project.

Requirement to Disclose Natural Expenses Included in One Caption without a Mapping Requirement

The Board decided to require that a specific list of natural expenses that are (1) already required to be disclosed in total, (2) included in only one expense caption that is also a relevant expense caption, and (3) not subject to a mapping requirement be included in the same tabular format disclosure as any other expense disaggregation requirements resulting from this project.

Other Amortization, Depreciation, and Depletion

The Board decided to link depreciation and amortization to existing disclosure requirements in paragraph 360-10-50-1 and paragraph 350-30-50-2. The Board clarified that amortization of a finance lease right-of-use asset recognized in accordance with paragraphs 842-20-35-7 through 35-8 and amortization of leasehold improvements recognized in accordance with paragraphs 842-20-35-12 through 35-13 should be included as part of either the depreciation required category or the amortization required category.

The Board decided to add depreciation, depletion, and amortization recognized as part of oil- and gas-producing activities in accordance with Subtopic 932-360, Extractive Activities—Oil and Gas—Property, Plant, and Equipment, as a separate category.

Application to Interim Periods

The Board decided to require all disclosures for interim reporting periods.

Entities Subject to Disaggregation Requirements

The Board decided that the disaggregation requirements would apply only to public business entities.

Practical Expedients

The Board decided not to pursue the following practical expedients:

1. Qualitative disclosure when substantially all of an expense line item relates to a single type of relevant expense category
2. Scoping expedient when an expense line item includes immaterial amounts of required expense categories
3. Inventory expense is not a required category when inventory is not presented separately on the balance sheet.

Transition

The Board decided to require prospective application of the disaggregation disclosure requirements (with optional retrospective application).

Analysis of Costs and Benefits

The Board concluded that it has received sufficient information and analysis to make an informed decision on the expected costs and expected benefits of the amendments in the proposed Update and that the expected benefits of those amendments would justify the expected costs.

Comment Period

The Board decided on a 90-day comment period for the proposed Update.

Permission to Ballot

The Board directed the staff to draft a proposed Accounting Standards Update for vote by written ballot.

Cumulative Tentative Board Decisions Reached to Date (since February 16, 2022)

A summary of the Board’s tentative decisions reached since February 16, 2022 can be found here.

Reached Before the Scope and Objective Revision (before February 16, 2022)

A summary of the Board’s tentative decisions reached before February 16, 2022 can be found here.

The Board meeting minutes, handouts, and videos 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.

The following are links to the minutes for each meeting. To view Board meetings and handouts from the past 90 days, click here.
 

March 29, 2023	Board Meeting— The Board discussed clarifications of the decisions at the January Board meeting, interim reporting, application to private companies, transition, cost-benefit considerations, and comment period. The Board also discussed whether to proceed to drafting a proposed Accounting Standards Update for vote by written ballot.
January 11, 2023	Board Meeting—The Board discussed what information entities would be required to provide when disaggregating income statement expenses.
October 5, 2022	Board Meeting—The Board refined the project’s scope and decided to continue focusing on expense disaggregation.
July 27, 2022	Board Meeting—The Board discussed the feedback received through various outreach efforts and the project’s next steps.
February 16, 2022	Board Meeting—The Board revised the scope and objective of the project.

See below for decisions made before the revision of the scope and objective of the project.
 

December 11, 2019	Board Meeting—Discussed feedback received from stakeholder outreach on the internal view approach to disaggregation and the path forward for the project.
April 24, 2019	Board Meeting—Discussed an internal view approach to disaggregating expense information and related alternatives.
December 19, 2018	Board Meeting—Discussed the feedback received during outreach with entities on their system capabilities to disaggregate income statement line items.
March 28, 2018	Board Meeting—Discussed the staff’s suggested terminology to describe the lines from the income statement to be the focus of the disaggregation.
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.

Stakeholders are asked to review and provide comments on the proposed Accounting Standards Update by October 30, 2023.

The FASB will host a public roundtable on December 13, 2023, to obtain additional feedback on the proposed Accounting Standards Update. Details about the roundtable, including registration information for both participants and observers, will be announced on the FASB website.

Gary Sardo
FASB Practice Fellow
gsardo@fasb.org

Julie Um
Project Manager
jcum@fasb.org

Michael Lupo
Project Manager
mlupo@fasb.org

Adam Thurman
FASB Practice Fellow
athurman@fasb.org

Josh Costo
Postgraduate Technical Assistant
jcosto@fasb.org

Maddie Stolper
Postgraduate Technical Assistant
mstolper@fasb.org