On August 24, the FASB held a meeting which included a discussion on the disclosure framework. The disclosure framework project has been broken up into three parts: a decision process for disclosures related to financial statement line items, a decision process for disclosures about the general entity, and a decision process for disclosures related to items not currently recognized in the financial statements (i.e. risks). This meeting focused on a first draft of the decision process for disclosures related to financial statement line items. Discussions related to the other two processes will occur at a later date.

The Board has stuck to the idea that this is to be a conceptual framework and not a checklist-style update. The decision process is designed to formalize the Board’s decision process for disclosures in their standard setting projects but leaves judgments to the Board. This first draft uses a series of questions the board would consider. For instance, “Are there acceptable alternative accounting practices that might have been applied to this line item” or “Does the line item include components of different natures that could affect the assessment of future cash flows”. For each question, there is a discussion of the following aspects:

• Disclosures the Board should consider
• Why the information is important
• Decisions to be made by the Board
• Decisions to be made by each entity

This is only a first draft for line item disclosure decisions and there is no guarantee it will stay in this format but this gives the first idea of what a finalized framework could look like. With that in mind, here are some more general notes about the project:

• The Board is still working closely with the European Financial Reporting Advisory Group (EFRAG)
• The staff is expected to begin consultations with stakeholders soon and projects a discussion paper to be available in late Q1 of 2012.
• The goal is to make line item disclosures more efficient and effective by focusing on unique information not apparent from the financials that would be likely to make a difference in users’ assessments of future cash flows. To accomplish this, the Board hopes to have a principles-based framework that will bring about a behavioral change in how companies disclose.

• To successfully implement a principles-based framework, the Board recognizes the importance of establishing materiality (in both management removing immaterial disclosures and management disclosing all material items without specific rules). The Board plans to work with the SEC and PCAOB on this matter but has indicated SAB 99 will be a starting point.
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