Global Sustainability Reporting Standards Released

by Jennifer Louis, CPA

On July 31, 2023, the FASB released a proposed Accounting Standard Update – Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses for public comment. Comments are due by October 30, 2023.

Investors observed that more detailed information about expenses is critically important in understanding an entity's performance, assessing an entity's prospects for future cash flows, and comparing an entity’s performance both over time and with that of other entities. The following detailed information may be provided either in the notes to financial statements or specified categories underlying certain expense captions on an annual and interim basis:

• Disclose the amounts of (a) inventory and manufacturing expense, (b) employee compensation, (c) depreciation, (d) intangible asset amortization, and (e) depreciation, depletion, and amortization recognized as part of oil- and gas-producing activities (DD&A) included in each relevant expense caption (which is a caption presented on the face of the income statement within continuing operations containing any of these listed expense categories).
• Disclose a further disaggregation of inventory and manufacturing expense into the following categories of costs incurred: (a) purchases of inventory, (b) employee compensation, (c) depreciation, (d) intangible asset amortization, and (e) DD&A. Include costs that are either capitalized to inventory or directly expensed as incurred during the current period. On an annual basis, an entity would disclose its definition of other manufacturing expenses. 
• Include certain amounts that are already required to be disclosed under existing generally accepted accounting principles (GAAP) in the same disclosure as the other disaggregation requirements.
• Disclose a qualitative description of the amounts remaining in relevant expense captions or in inventory and manufacturing expense that are not separately disaggregated quantitatively.
• Disclose the total amount of selling expenses and, on an annual basis, an entity's definition of selling expenses.

The disclosures would be provided on a prospective basis, with an option for entities to apply the guidance retrospectively. The effective date and whether early application should be permitted is yet to be determined.

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