Disclosure Framework—Board's Decision Process




On August 28, 2018, the FASB issued a chapter of FASB Concepts Statement No. 8, Conceptual Framework for Financial Reporting, related to notes to financial statements.  Chapter 8, Notes to Financial Statements, encompasses the Board’s decision process component of the FASB’s disclosure framework project.  The Board’s decision process helps the Board identify relevant information and establish limits on information that should be included in notes to financial statements.
Chapter 8 helps the FASB improve its procedures and promote consistent decision making when determining disclosure requirements.

Chapter 8 is similar to the rest of the FASB’s Conceptual Framework for Financial Reporting in that it establishes concepts for the Board to use in developing financial accounting and reporting standards.  It provides the Board with a tool to identify information that could be appropriate for inclusion in notes to financial statements and relevant to the users of those statements.
Chapter 8 identifies, by design, a broad range of possibilities for the Board to consider when deciding on the disclosures related to a particular FASB Accounting Standards Codification® Topic.  From that intentionally broad set, the Board would identify a narrower (and, in many cases, a far more narrow) required set of disclosures for that Topic.  It does not specify how the Board should accomplish that narrowing of disclosures. That can best be done in the context of individual standard-setting projects.
Chapter 8 discusses the information that should be considered for inclusion in notes to financial statements. It first describes the purpose and general limitations of notes and then more directly addresses the nature of their appropriate content in detail.

The Disclosure Framework Project

The disclosure framework project’s objective and primary focus are to improve the effectiveness of disclosures in notes to financial statements by facilitating clear communication of the information required by generally accepted accounting principles (GAAP) that is most important to users of each entity’s financial statements.
On March 4, 2014, the Board issued a proposed FASB Concepts Statement, Conceptual Framework for Financial Reporting—Chapter 8: Notes to Financial Statements, which the Board finalized on August 28, 2018. Chapter 8 of Concepts Statement 8 identifies a broad range of possible information for the Board’s consideration when deciding on the disclosure requirements for a particular topic. From that broad set, the Board will identify a narrower set of disclosures about that topic to be required on the basis of, among other considerations, an evaluation of whether the expected benefits of entities providing the information justify the expected costs. Chapter 8 of Concepts Statement 8 is used by the Board as part of the process for establishing disclosure requirements in accounting standards as well as for evaluating existing disclosure requirements, if and when the Board considers those requirements.
Before Chapter 8 of Concepts Statement 8 was finalized, the Board decided to test the concepts in the proposed Chapter 8 and improve the effectiveness of disclosure requirements in the following Topics:
  1. Fair Value Measurement (Section 820-10-50 of the FASB Accounting Standards Codification®)
  2. Compensation—Retirement Benefits (Section 715-20-50)
  3. Income Taxes (Section 740-10-50)
  4. Inventory (Section 330-10-50)
Additionally, disclosure requirements for interim reporting are being evaluated for modifications.

Additional Information

Have A Question?

Submit questions about the new requirements using our Technical Inquiry System.