Note Disclosures

FASAB Contacts: Ross Simms, simmsr@fasab.gov, 202-512-2512, and Robin Gilliam, gilliamr@fasab.gov, 202-512-7356

Project Objective:

This project is a segment of the Board’s reporting model initiative.

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.

The project will be conducted in the following 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

HISTORY OF BOARD DELIBERATIONS

February 26-27, 2020

The Board plans to conduct the note disclosures project in two phases. The first phase will involve developing conceptual guidance and the second phase will involve using the conceptual guidance to reexamine existing note disclosure standards.

Issue Paper for February 26-27, 2020 – Tab D (PDF)

December 17-18, 2019

At the December 2019 meeting, the Board discussed the interrelationships between the reporting model, note disclosures, and MD&A projects. Please see the reporting model phase II section for a detailed discussion on the session.

Issue Paper for December 17-18, 2019 – Tab F (PDF)

October 23-24, 2019

At the October 2019 meeting, the Board reviewed the updated note disclosures principles outline. The Board discussed condensing the principles to a few core principles. The Board noted that the principles should not be tied to any one topic.

The Board noted that the reporting model should be considered when developing the principles, including the relationship between the financial statements and the note disclosures.

The Board agreed to continue reviewing the core principles. Staff will research and provide recommendations for the remaining core principles.

Issue Paper for October 23-24, 2019 – Tab F (PDF)

August 28-29, 2019

At the August 29 meeting, staff and representatives from the note disclosures working group presented draft research results regarding proposed decision questions that may be considered when establishing disclosure requirements. They discussed the following three areas for each topic: (1) proposed NODI questions for FASAB, (2) applicability to the federal environment, and (3) examples that may apply. The Board generally agreed with the proposed decision questions and the method to categorize the questions by topic. The following eleven decision question topics were discussed in detail during the meeting:

  • New or modified accounting pronouncements
  • Alternative GAAP
  • Line item considerations
  • Budgetary/proprietary impact considerations
  • Method of measurement
  • Uncertainties
  • Phenomenon
  • Binding arrangements/obligations
  • Changes to nonfinancial assets
  • Stewardship
  • Categorization

Staff and the working group will update the topics and proposed decision questions based on the feedback received during the meeting.

Issue Paper for August 28-29, 2019 – Tab F (PDF)

June 26-27, 2019

The Board discussed updates to the draft note disclosure principles, including the newly added section related to note content. Members suggested minor edits and suggestions on the draft. Staff and the working group continue their research on the proposed decision questions for the Board to consider in establishing disclosure requirements.

Issue Paper for June 26-27, 2019 – Tab J (PDF)

April 24-25, 2019

The working group, in conjunction with staff, continues its research on developing the note disclosure principles, specifically questions for the Board to consider with developing note disclosure requirements.

Issue Paper for April 24-25, 2019 – Tab B (PDF)

February 27, 2019

At the February Board meeting, the Board approved updated partial draft language for note disclosure principles. This updated version addressed the comments from the last Board meeting and added additional language to help the Board apply the principles. A few minor modifications will be made in this updated version based on the February Board meeting discussion. In addition, the note disclosure working group resumed its activity in February and will continue developing principles.

Issue Paper for February 27, 2019 – Tab B (PDF)

December 18-20, 2018

The Board approved a partial draft of the note disclosure (NODI) principles. The draft covered the disclosure purpose and most of the disclosure content sections from the NODI principles outline. Staff will refine the partial draft based on input from members. Staff will focus on the following areas:

  • Whether the notes can be used as a substitute for the proper recognition and/or measurement of an element in the financial statement
  • Relevance versus materiality
  • Usefulness and disclosure objectives

This partial draft will be discussed with the working group for feedback from preparers and auditors.

Issue Paper for December 19-20, 2018 – Tab B (PDF)

October 24-25, 2018

The Board approved the proposed outline for the note disclosure principles framework, which included four sections: disclosure purposes, disclosure content, what should not be disclosed, and disclosure style. The Board agreed that the user’s need for disclosures should be incorporated in the disclosure purpose. Members also believed a potential section title such as “list of items to consider in deciding on disclosure” could be used to replace the proposed section title “what should not be disclosed.”

The Board also considered topics related to note disclosure including future-oriented information, the role and content of note disclosure compared to management’s discussion and analysis (MD&A), and sensitive disclosures. The members made the following conclusions:

  • Future-oriented information can be categorized in two ways—future oriented information recognized in the statements and unknown future events.
  • What is required in the notes and MD&A should be driven by what users need. The basic financial statements and the notes should be a standalone portion of each report. The notes are an integral part of the financial statements.
  • Sensitive disclosures may be limited to national security, procurement, and litigation.

Issue Paper for October 24-25, 2018 – Tab B  (PDF)

August 29-30, 2018

The note disclosure (NODI) working group presented its initial research results to the Board through four different topics: NODI communication, NODI questions for the Board, pilot note summary of significant accounting policies (SOSAP), and the pilot note fund balance with Treasury (FBWT). After discussing the working group’s research, the presenters gave the following suggestions to the Board:

  • Seven principles of effective communication
  • Decision questions that the Board could use when evaluating potential disclosures in the federal environment
  • A need for developing guidance in the FASAB Handbook for SOSAP, including developing a principle framework for the SOSAP note and distinguishing SOSAP from content in management’s discussion and analysis (MD&A)
  • Potential changes on certain FBWT disclosure requirements

The Board agreed that the activities conducted by the working group are in line with the NODI project’s objectives. Members provided specific guidance on each topic to the working group. The working group will temporary stop research during the year-end busy season.

Issue Paper for August 29-30, 2018 – Tab B  (PDF)

June 27-28, 2018

The Board did not discuss the Note Disclosures project in June 2018.

April 25-26, 2018

During the October 2017 meeting, the Board approved the note disclosure (NODI) project’s two-phased project plan. Currently, the project is in the first phase. The NODI working group resumed its tasks after the year-end busy season in December 2017.

During the April 2018 meeting, the Board approved the NODI project’s approach, scope, and some potential principles. Members discussed the following:

  • Disclosure objectives for each Statement to help preparers stay focused and potentially use their judgment to remove unnecessary disclosure
  • A project approach with the traditional disclosure method and a focus on disclosure principles
  • A concentration of the project scope on the disclosure principles and some discussion of non-FASAB information
  • The Board did not favor the two-tiered approach suggested by other accounting standards board staff (required summary and potential additional information for each disclosure).

Issue Paper for April 25-26, 2018 – Tab B & C (PDF)

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)