Note Disclosures

FASAB Contact: Grace Wu, WuG@fasab.gov, 202-512-7377

Project Objective:

The Federal Accounting Standards Advisory Board (FASAB) is undertaking this project primarily because recent FASAB survey results, as well as other accounting standards boards’ activities, suggest that improvements in disclosures are necessary. Note disclosures are an integral part of financial statements. Users rely on them to understand the financial statements and reach conclusions about the operating performance and stewardship of government resources. However, the disclosure requirements have accumulated on a Statement-by-Statement basis over many years. An overall review would improve balance across the disclosures and enhance their understandability to readers.

During the February 2017 meeting, the Board agreed to consider opportunities for streamlining note disclosures and looking at the disclosure principles. To accomplish this task, the Board agreed to a top-down approach: first to develop a framework by concentrating on the principles and the materiality level to guide disclosures, then to identify important individual topics to address next.

The primary objectives of this project are to improve the relevance, clarity, consistency, and comparability of note disclosures among the federal entities. The project is divided into two phases:

  • Phase I – Identify and develop a set of principles for disclosure to be used by the Board to reduce repetition and improve relevance and consistency in note disclosure
  • Phase II – Use the principles to modify the existing note disclosure requirements for component reporting entities to improve the disclosures’ usefulness and effectiveness

To accomplish these objectives, the project will address the following:

  • Research and recommend a principles-based framework
  • Evaluate how judgments can be used to increase relevance and minimize burden for note disclosures
  • Research and recommend specific improvements in clarity, consistency, and comparability of note disclosures among the component reporting agencies
  • Develop and propose amendments to existing FASAB guidance related to component reporting entity note disclosure requirements

A working group was formed in August 2017 to perform the aforementioned research. If you are interested in joining the working group, please contact Ms. Wu.

Disclosure Working Group Roster as of 12/28/2017

HISTORY OF BOARD DELIBERATIONS


October 25-26, 2017

At the October 2017 meeting, the Board approved the note disclosure project plan. The primary objectives of this project are to improve the relevance, clarity, consistency, and comparability of note disclosures among the federal entities. It includes two phases:

  • Phase I consists of identifying and developing a set of principles for disclosure to be used by the Board and preparers to reduce repetition and improve relevance and consistency in note disclosure.
  • Phase II consists of using the principles to modify the existing note disclosure requirements for component reporting entities to improve the disclosures’ usefulness and effectiveness.

On August 31, 2017, FASAB initiated an online note disclosure survey. The survey results confirmed the need to improve disclosures and targeted areas for improvement. Most respondents agreed that providing principle guidance would give flexibility to the agency while adhering to the objectives and increasing consistency. The respondents stated that the causes of note disclosure issues vary. These could be due to compliance with Circular A-136, input from the Certificate of Excellence in Accountability Reporting reviewers, or the auditor’s requirements (which are more rigorous than those required by FASAB).

During the meeting, the Board reviewed the survey results and provided some suggestions on the following topics:

  • Audiences of the future note disclosure principles – While it is critical to identify the primary users of both the component reporting entities’ financial reports and the consolidated financial report of the U.S. Government, it might be more relevant to make the note disclosures appealing to different groups. As identified in SFFAC 1, Objectives of Federal Financial Reporting, both internal and external users will be considered in the project: citizens, Congress, federal executives, and federal program managers. Instead of defining the primary users, this project will utilize the objectives defined in SFFAC 1 as guidance to develop the note disclosure principles. SFFAC 1 summarizes the objectives as such:

The objectives are designed to guide the Board in developing accounting standards to enhance the financial information reported by the federal government to (1) demonstrate its accountability, (2) provide useful information, and (3) help internal users of financial information improve the government’s management.

  • Principle-based framework with a concentration on providing relevant information – If an entity engages in the type of activity required by a note, and amounts involved are material, then the entity should present the information in the note. Disclosure should not be optional.
  • Judgment – Materiality should be described in both qualitative and quantitative terms, and it should be evaluated at the component level.
  • Improve clarity, consistency, and comparability – Taking a two-tiered approach to setting standards would not be particular helpful. There are pros and cons for providing illustrations and/or a checklist. Principles addressing readability would help the clarity and increase consistency of the note disclosures.

This project will be challenging considering the broad scope, complexity, and uniqueness of the federal government. The working group will resume its research in November after agencies’ year-end work is complete.

Issue Papers for October 25-26, 2017 – Tabs H-1 and H-2 (PDF)

August 31, 2017 Board Meeting

On August 31, 2017, the Board initiated an online note disclosure survey. The objective of the note disclosure survey was to solicit ideas for improving note disclosures and identifying areas where FASAB’s guidance could aid in streamlining the reporting of note disclosures in financial reports.

February 22, 2017 Board Meeting

During its February 2017 meeting, the Board approved a project to review and streamline existing note disclosures. To streamline note disclosures, the Board intends to review the materiality guidance and identify and develop a set of principles for note disclosures.

Issue Paper for February 22, 2017 – Tab E (PDF)