The Financial Accounting Standards Board (FASB) is proposing changes to the income statement presentation for public businesses, with the primary objective being the disaggregation of expenses in the income statement and related footnote disclosures. This means that companies would need to provide a more detailed breakdown of their expenses, including costs that are initially capitalized as part of inventory and later expensed when sold. The FASB is focusing on disclosing the total "natural cost" incurred and reconciling it to the amount expensed, which is particularly relevant for costs that are capitalized in inventory and then flow through the Cost of Goods Sold (COGS) when the inventory is sold.
For publicly traded companies, this disclosure requirement will impact their income statements. It's worth noting that the International Accounting Standards Board (IASB) has already implemented a fully disaggregated disclosure requirement for companies using IFRS. As a result, U.S. companies with parent companies in Korea, subject to the full disclosure rule, might also need to furnish relevant information to meet these requirements.
If you're looking for more information or a deeper understanding, you can refer to the resources provided, such as the video and the Proposed Accounting Standards Update from FASB that offers an overview of the proposed rule regarding the disaggregation of income statements. This should aid in comprehending the new requirement and its implications for financial reporting.
Proposed Accounting Standards Update: Proposed Accounting Standards Update—Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40)—Disaggregation of Income Statement Expenses (fasb.org)
Overall, the key concept is that the FASB wants companies to disclose the detailed breakdown of expenses, including those that are initially capitalized and later expensed, such as labor costs related to manufacturing inventory. This disclosure aims to provide a clearer picture of the financial performance and cost structure of businesses.