FASB Issues Report on Voluntary Disclosures, Improving Business Reporting: Insights into Enhancing Voluntary Disclosures

Norwalk, CT, January 29, 2001—Companies can markedly improve their business reporting by voluntarily disclosing more available information about which the investment community and shareholders have a keen interest.

These matters include identifying factors important to the financial success of the company, delineating management's plans and strategies for managing those factors in the past and future, and specifying measurements used by management to assess its effectiveness in implementing those plans and strategies.

These were key recommendations in a broad report entitled Improving Business Reporting: Insights into Enhancing Voluntary Disclosures. The recommendations resulted from a two-year project supervised by a 14-member Steering Committee of Financial Accounting Standards Board (FASB) constituents. The Steering Committee guided and directed the activities of a group of more than 50 professionals representing the preparer, financial statement user, auditing, and academic communities who worked on the project.

In addition to this report on voluntary disclosures, two other reports that resulted from the Business Reporting Research Project address the electronic distribution of business information and redundancies between the Securities and Exchange Commission's and the FASB's reporting requirements.

The objective of this report on voluntary disclosures is to help companies improve their business reporting by providing evidence that many leading companies are making extensive voluntary disclosures and by listing examples of those disclosures. The examples serve to provide companies with useful ideas on how to describe and explain their investment potential to investors. The basic premise underlying the Business Reporting Research Project is that improving disclosures makes the capital allocation process more efficient and reduces the average cost of capital.

The project studied the present practices for the voluntary disclosure of business information by six to nine companies in each of eight industries: automobiles, chemicals, computer systems, foods, oil-integrated domestic, pharmaceuticals, regional banks, and textile-apparel. The companies provided the project with copies of all materials that had been available to the public over the course of a year -- materials such as annual and quarterly reports, SEC filings, press releases, fact books, and transcripts of presentations to shareholders, analysts, and potential investors. Corporate Web sites also were reviewed.

Some of the findings and recommendations noted in the report include:

  • The importance of voluntary disclosures is expected to increase in the future because of the fast pace of change in the business environment.


  • Voluntary disclosures related to matters that are important to the success of individual companies are very useful, particularly disclosures of management's view of the company's "critical success factors" and trends surrounding those factors.


  • Although some disclosures were found about unrecognized intangible assets, additional data about those assets would be beneficial because of the importance of intangibles to a company's value.


  • Voluntary disclosure should cover not only good news but also disappointments. Disclosures are most useful if they report on previously disclosed plans and goals and the results achieved in meeting those plans and goals.


  • The metrics used by companies to manage their operations and drive their business strategies often are very useful voluntary disclosures. Those metrics should be explained and consistently disclosed from period-to-period to the extent they continue to be relevant to a company's success.

"Most important," said Paul Kolton, Chairman of the Steering Committee for this project and former Chairman of the American Stock Exchange and of the Financial Accounting Standards Advisory Council, "the dedication, diligence and perception underlying the selections and observations of 65 members who worked on this project were remarkable."

The report is available free of charge on the FASB Web site at A limited number of original copies is available free of charge by writing to the FASB Order Department, 401 Merritt 7, PO Box 5116, Norwalk, CT 06856-5116.

About the Financial Accounting Standards Board

Since 1973, the Financial Accounting Standards Board has been the designated organization in the private sector for establishing standards of financial accounting and reporting. Those standards govern the preparation of financial reports and are officially recognized as authoritative by the Securities and Exchange Commission and the American Institute of Certified Public Accountants. Such standards are essential to the efficient functioning of the economy because investors, creditors, auditors, and others rely heavily on credible, transparent, and comparable financial information. For more information about the FASB, visit our Web site at