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Companies Raise Objections to Proposed FASB Rule on Expense Disclosures

S.J. Steinhardt
Published Date:
Nov 1, 2023

GettyImages-950986656 Data Tablet Computer Expenses Meeting Deal

Executives at large public companies have voiced their objections to the Financial Accounting Standards Board (FASB)’s proposed Accounting Standards Update,  which would require public companies to provide detailed disclosure of specified categories of expenses in interim and annual periods, The Wall Street Journal reported.

The proposal would mandate quarterly disclosure of the amounts of employee compensation, depreciation of property and equipment, amortization of intangible assets such as trademarks, and inventory expenses in the footnotes further clarifying the income-statement entries.

The public comment period, which ended on Oct. 31, elicited letters from companies such as Apple, Starbucks and Charter Communications.

Charter said it would have to revise its internal and external reporting system capabilities to comply with the proposal, resulting in significant additional costs with no real benefit to investors. “Any additional costs incurred would be significant in relation to investor benefit,” Chief Accounting Officer and Controller Kevin Howard said in an Oct. 27 letter. The proposed requirements also create “disclosure overload” and could provide misleading results to investors, Howard he said.

Starbucks questioned whether it could accurately break down its inventory and manufacturing expenses under the proposal. The company might need to make extensive estimates to “approximate comparable inventory expenses with appropriate capitalizable distribution costs” in certain cases, Chief Financial Officer Rachel Ruggeri said in an Oct. 27 letter.

While Apple generally agreed with the proposal, it said that allowing companies to create their own definitions for manufacturing-related expenses as well as selling expenses would confuse businesses, as well as investors, who would find it harder to compare them.  

“To address these concerns, we suggest the Board create a single definition for inventory and manufacturing expense and base the definition on existing, longstanding accounting guidance,” Chris Kondo, Apple’s senior director of corporate accounting and principal accounting officer, said in an Oct. 26 letter, adding that companies will have less flexibility under Apple’s suggested approach. 

Boeing and Sherwin-Williams, among others, believed that the disclosures would not provide meaningful information to investors.

To stay up to date on accounting guidance issued by the Financial Accounting Standards Board (FASB), attend the Foundation for Accounting Education's FASB Accounting Update with Renee Rampulla Webcast on Nov. 17.

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