The Financial Accounting Standards Board has added a project on financial performance reporting to its agenda. This comes amid recent criticism that current financial statements don’t provide timely — or truly meaningful — information to investors and creditors.
“The project’s objective is to improve the quality of information displayed in annual and interim financial statements so that the public is better able to evaluate a company’s performance,” according to a FASB press release.
The project will determine the usefulness of adding certain aggregations, classifications, line items, and subtotals covered in annual and interim financial statements. “As part of this project, the Board will examine whether financial statements provide sufficient information to allow investors and others to calculate key financial measures, such as ratios and other metrics,” noted the release.
Among the items that may be required to determine key measurements include depreciation, amortization, and research-and-development expenses.
As previously reported, last week SEC commissioner Harvey Pitt said in a speech that he will explore a way to use technology to supplement periodic disclosure (quarterly) with what he called “current” disclosure. “In that type of system, public companies might be required affirmatively to disclose unquestionably material information when it arises and becomes available, even if the information is learned before the next-scheduled periodic report is due to be filed,” he said. FASB plans to coordinate its efforts with the International Accounting Standards Board, which recently adopted a similar project.
“It is important to note that because FASB does not have authority over how a company describes itself in press releases, analyst presentations, and similar media, the FASB project will not address the use of pro forma earnings commonly used in corporate press releases,” added the release.
