The FASB has been diligently working on creating new guidance for disclosures on financial statements. Their goal is to improve the effectiveness of the disclosures so they will more clearly communicate information needed by the readers. The FASB also hopes to improve the process so it becomes less burdensome to the companies issuing the statements and, at the same time, make the statements more useful. After all, the footnotes to financial statements can be extremely important because often the information they provide may otherwise be unavailable elsewhere.

What I found particularly interesting in the FASB discussion was the mention that it is possible to have too much disclosure. This occurs in the form of too many footnotes giving too much information. Usually, it’s just the opposite: is sufficient information being disclosed to allow one sufficient insight into the company’s financial position? So, can too much transparency actually be a bad thing? There certainly have been occasions when excessive disclosures have proved to be not especially informative and, in fact, have been so overwhelming that important information may actually be overlooked! The sheer volume of some companies’ footnotes makes their annual and quarterly reporting exceedingly tedious to plow through. When the FASB project was first announced several years ago, the press release cited complains of “disclosure overload.”

At the beginning of the board’s undertaking of this task, they announced they were going to discuss the scope of the project as well as certain areas of the financial reporting process, including:

• Will the new guidance apply to all entities or only to public and for-profit businesses?
• Should the guidelines apply to interim reporting?
• Will only high-level principles be published or should they be more detailed?
• Will the guidance only apply to the notes on financial statements or should it extend to how well the information provided is integrated into the entire reporting package of the company?

The question is whether it will be possible for the board to create the necessary guidelines so the decision-making process, as to what needs to be included in one’s disclosures, can be made clear enough, with all companies becoming more consistent in their reporting standards.

When reading the FASB’s objectives for this task they have, in addition, included the hope of providing guidance that will “improve the organization, formatting, and style of the notes to financial statements.” This project may still require a good deal of time to complete.

In a separate, but related meeting, the FASB has issued Proposed Accounting Standards Update No. 2014-220, which is intended to simplify income statement presentation by eliminating the concept of extraordinary items. Currently, GAAP requires the disclosure of all extraordinary items. However, this can cause difficulties as so many businesses are unsure which items should be determined to be so infrequent and unusual in nature as to require reporting. This presents yet another interesting development to follow. The deadline for comments is September 30. 2014.