The Financial Accounting Standards Board issued a new Accounting Standards Update on Dec. 8 that the board said improves the navigability of the required interim reporting disclosures and clarifies when that guidance is applicable.
In addition, the new accounting standard adds guidance on what disclosures should be provided in interim reporting periods.
“The ASU clarifies the applicability of the interim reporting guidance, the types of interim reporting, and the form and content of interim financial statements in accordance with Generally Accepted Accounting Principles,” FASB Chair Richard Jones said in a statement. “We expect that these clarifications will enhance consistency in interim reporting for all entities.”
According to the ASU, the amendments add to Topic 270, Interim Reporting, a principle that requires entities to disclose events since the end of the last annual reporting period that have a material impact on the entity.
The FASB said it “doesn’t intend to change the fundamental nature of interim reporting or expand or reduce current interim disclosure requirements, which were determined by prior boards when the disclosure requirements were initially issued. Rather, the objective of the amendments is to provide clarity on the current interim reporting requirements.”
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The FASB received feedback from stakeholders that Topic 270 is challenging and complex to navigate. The complexity, according to the board, is mainly a result of the development of the source literature, the initial codification of the historical content, and subsequent amendments to Topic 270 as new accounting guidance was issued over time. Accordingly, the FASB said it sought to clarify the types of interim reporting that are subject to the requirements in Topic 270.
The amendments in the ASU:
- Clarify that the guidance in Topic 270 applies to all entities that provide interim financial statements and notes in accordance with GAAP.
- Create a comprehensive list in FASB Accounting Standards Codification Topic 270 of interim disclosures that are required in interim financial statements and notes in accordance with GAAP.
- Incorporate a disclosure principle, which is modeled after previous Securities and Exchange Commission guidance, that requires entities to disclose events and changes that occur after the end of the most recent fiscal year that have a material impact on the entity.
- Improve guidance about information included in and the format of interim financial statements.
“The board considers the amendments in this update to be necessary to reflect the development of interim reporting over time,” the ASU states.
The amendments in the ASU are effective for interim reporting periods within annual reporting periods beginning after Dec. 15, 2027, for public business entities and for interim reporting periods within annual reporting periods beginning after Dec. 15, 2028, for entities other than public business entities.
Early adoption is permitted for all entities. The amendments in the ASU can be applied either prospectively or retrospectively to any or all prior periods presented in the financial statements.
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