FASB issues final ASU on disclosure changes
Defining Issues | October 2023
ASU 2023-06 updates US GAAP disclosures in response to the SEC’s disclosure update and simplification initiative.
The SEC’s August 2018 release, Disclosure Update and Simplification, referred certain of its disclosure requirements that overlap with US GAAP but provide incremental information to the FASB for potential incorporation into the FASB’s Accounting Standards Codification. Several of the FASB’s changes apply to private and not-for-profit entities in addition to public entities.
Applicability
- All entities, with certain disclosure exemptions for entities other than public business entities.
Relevant dates
| Effective date | Entities subject to the existing SEC disclosure requirements, including those preparing for sale or issuance of securities | All other entities |
|---|---|---|
| Each amendment will be effective | As of the effective date to remove the related disclosure from Reg S-X or S-K. | Two years later |
| Early adoption allowed? | No | Yes |
Main provisions
ASU 2023-06 incorporates into the Codification several disclosures and presentation requirements currently residing in SEC Regulations S-X and S-K.
As a result, the ASU is not expected to significantly affect entities currently subject to these SEC requirements. However, certain disclosures currently presented outside the financial statements as a result of Regulation S-K may need to be relocated into the financial statements.
Conversely, the ASU adds requirements for private and not-for-profit entities, including new disclosures about:
- Accounting policy for presentation of derivative instruments and their related gains and losses in the statement of cash flows
- Assets mortgaged, pledged or subject to lien and the obligations collateralized
- Amounts and terms of unused lines of credit and unfunded commitments
- Material prior-period adjustments and the effect on retained earnings when there has been a change in reporting entity in interim period financial statements
- Repurchase and reverse repurchase agreements
Disclosure of the weighted-average interest rates on short-term borrowings and repurchase liabilities is required only for public business entities.
If by June 30, 2027, the SEC has not removed the existing disclosure requirement from Regulations S-X or S-K, the corresponding disclosure pending requirement will be removed from the Codification and will not become effective for any entities. The ASU is applied prospectively.
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