Batch of SEC disclosure rules to be pulled into GAAP

The Financial Accounting Standards Board (FASB) is moving a variety of Securities and Exchange Commission (SEC) disclosure rules into U.S. generally accepted accounting principles (GAAP), part of a broader effort to simplify compliance without significantly altering the total mix of information.

The board voted on March 6, 2019, to issue a proposal about the effects of incorporating into GAAP a variety of disclosures that originate in either Regulation S-X or Regulation S-K within the SEC’s rules and regulations. Companies will have a 45-day period to comment on the changes, according to board discussions.

The disclosures being added to U.S. GAAP would be subject to audit in the financial statements.

The board will propose adding and streamlining the following topics from Reg S-X and Reg S-K into U.S. GAAP:

  • foreign currency
  • derivative accounting policies
  • clarifications for investment company rules
  • real estate investment trusts
  • consolidations
  • preferred shares
  • repurchase and reverse repurchase agreements
  • earnings per share in interim periods
  • common control transactions in interim periods
  • products or services
  • oil and gas producing activities
  • debt

In addition, the board decided to incorporate the disclosure on intra-entity profits and losses of related party transactions in separate financial statements in the codification for public companies only.

The FASB decided against incorporating disclosures related to equity compensation plans, discounts on shares, major customers, authorized amount of debt and financial statement presentation of related party transactions. Those disclosures wouldn’t be useful to investors, the discussions indicated.

Those topics the board decided against including would still be available elsewhere, the discussions indicated.

“If we say ‘no’ that doesn’t mean that this information is no longer available,” board member Marsha Hunt said. “It just means that the SEC will then take a look at its rules, and then to the extent that we’re incorporating something in the codification, they’ll be evaluating do they need to modify their rules or is their rule still good where it is,” Hunt said.

If finalized, the proposed changes would require prospective application, the FASB said.

The SEC in 2018 finalized amendments to its disclosure requirements in Release No. 33-10532, Disclosure Update and Simplification. The agency has been working to eliminate duplicative, overlapping or outdated disclosure rule stemming from other commission disclosure requirements, U.S. GAAP or changes in the information environment.

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