FASB Still Working to Address Disclosure Overload in Financial Statement Footnotes
Since 2014, the Financial Accounting Standards Board (“FASB”) has been working to simplify U.S. GAAP disclosure requirements for financial statement footnotes. The project, which was released under Proposed Statement of Financial Accounting Concepts No. 2014-200, Conceptual Framework for Financial Reporting—Chapter 8: Notes to Financial Statements, aimed to avoid writing rules that would lengthen a company’s financial statements without benefiting investors.
Despite its efforts, the FASB has received frequent complaints from companies who were frustrated over the various disclosure requirements. Board representatives are also concerned about what they consider disclosure overload. They believed investors were becoming overwhelmed with additional information that made financial reports difficult to understand.
Efforts to fix the disclosure requirements are considered equally challenging. At the American Institute of Certified Public Accountants’ National Conference on Banks and Savings Institutions in Maryland last week, FASB member Harold Schroeder said he previously dismissed the notion that investors complained about too much disclosure in a company’s financial statement footnotes. Conversely, he also noted that it would be difficult for the FASB to strike the proper balance for setting the disclosure rules.
Schroeder stated that project’s goal isn’t about disclosure overload or the amount of information presented, but rather improving the effectiveness of the financial statement footnotes.