FASB Proposes Expanded Income Statement Expense Disclosures

By Nikki Cerchione, CPA and James Mercaldo, CPA

The Financial Accounting Standards Board (FASB) recently issued a proposal that would require public business entities to provide detailed disclosure in the notes to financial statements about specific expense categories on an annual and interim basis. This information is currently not generally presented in the financial statements.

Proposed Disclosures

The expanded expense disclosures would include the following:

• Amounts of employee compensation, depreciation, intangible asset amortization and inventory and manufacturing expense included in any expense caption within continuing operations presented on the income statement. Depreciation, depletion and amortization (DD&A) recognized as part of oil or gas-producing activities will also require disclosure.
  
  
• Inventory and manufacturing expenses will need to be further disaggregated into purchases of inventory, employee compensation, depreciation, intangible asset amortization and DD&A. This includes costs that are capitalized to inventory or directly expensed as incurred.

The proposed Accounting Standards Update (ASU) would provide users of the financial statements with additional information about the above expenses included in the income statement expense sections as well as cost of sales; selling, general and administrative; and research and development.

Disclosures in the proposed update would be on a prospective basis, with an option for retrospective application. Existing expense disclosure requirements are not changed or removed by the proposal.

Comment Period

The comment deadline for the proposed ASU is October 30, 2023.  The FASB will host a public roundtable on December 13, 2023.

Contact Us

For more information on how PKF O’Connor Davies can assist you with regulatory compliance or an audit, contact your client engagement partner or either of the following:

Nikki Cerchione, CPA
Senior Manager
ncerchione@pkfod.com | 646.699.2871

James Mercaldo, CPA
Manager
jmercaldo@pkfod.com | 212.564.4012

Jonathan Zuckerman, CPA
Partner
jzuckerman@pkfod.com | 646.699.2842