A PDF of the below Comment Letter can be downloaded here »
Mr. Jackson M. Day
Technical Director
Financial Accounting Standards Board
801 Main Avenue, PO Box 5116
Norwalk, CT 06856-5116
Re: File Reference No. 2024-ED600
Dear Mr. Day,
This letter is submitted by Financial Executives International’s (FEI) Committee on Corporate Reporting (CCR) in response to the Financial Accounting Standards Board’s (FASB or Board) Proposed Accounting Standards Update—Interim Reporting (Topic 270)—Narrow-Scope Improvements (Exposure Draft or proposed Update).
FEI is a leading international organization comprised of members who hold positions as Chief Financial Officers, Chief Accounting Officers, Controllers, Treasurers, and Tax Executives at companies in every major industry. CCR is FEI’s technical committee of approximately 50 Chief Accounting Officers and Corporate Controllers from Fortune 100 and other large public companies, representing more than $16 trillion in market capitalization. CCR reviews and responds to pronouncements, proposed rules and regulations, pending legislation, and other documents issued by domestic and international regulators and organizations such as the U.S. SEC, PCAOB, FASB, and IASB.
This letter represents the views of CCR and not necessarily the views of FEI or its members individually.
Executive Summary
We commend the Board for updating the guidance in Topic 270 to clarify the existing interim reporting requirements. CCR supports the proposed Updates to clarify the applicability, form, and content of interim reporting – including replacing “interim financial information” with “interim financial statements and notes in accordance with GAAP” and including references to SEC Regulation S-X Rule 210.10-01 and Regulation S-X Rule 210.8-03. We support the Board’s approach to provide a comprehensive list of interim disclosure requirements, along with an event-driven disclosure principle. CCR believes a list of all possible event-driven disclosures would be onerous, and a disclosure principle allows management to exercise judgment in determining which events occurring in interim periods will be meaningful to investors. We generally believe the proposed amendments are clear and operable; however, we have included a few minor suggestions to improve clarity and operability in the Appendix.
Consistent with the Board’s objective to clarify the existing interim disclosure requirements, CCR companies do not anticipate an impact to their interim disclosures nor to incur significant costs to implement the proposed Update. We believe the prospective transition method proposed is operable and support the option to elect early adoption. We believe it would be beneficial to provide preparers at least 12 months to implement after a final standard is issued. While CCR companies generally do not expect changes to their interim reporting, companies will need time to confirm the completeness of their disclosures. Additional time is also needed given the expected concurrent implementation of other standards.
Recommendation for a Future Project
While CCR believes the Board met its objective of clarifying existing interim reporting requirements with the proposed Update, we believe it would be beneficial for the Board to consider a future project to critically reassess and streamline the interim reporting requirements in Topic 270. Consistent with the discussion on outdated disclosures in the FASB’s 2025 Invitation to Comment (ITC) – Agenda Consultation, CCR generally believes the interim disclosure requirements are manageable; however, we believe certain requirements may not provide meaningful information to investors on an interim basis. For example, some CCR companies believe interim disclosures related to variable interest entities (VIEs) provide little incremental value to investors (assuming there have been no significant changes during an interim period). In addition, consistent with discussion in the 2025 ITC – Agenda Consultation, some CCR companies believe the fair value measurement disclosures within Topic 820 and derivative disclosures within Topic 815 are burdensome and costly to provide.
Furthermore, we understand the Board intended to align US GAAP with SEC guidance by making the amendments in the proposed Update – including incorporating (modified) language from Regulation S-X Rule 10.10-01(a)(5) into paragraph 270-10-50-67, which states:
Interim financial statements and notes in accordance with GAAP shall include disclosures either on the face of the financial statements or in accompanying footnotes sufficient so as to make interim financial statements and notes in accordance with GAAP presented not misleading. An entity that is an SEC registrant may presume that users of interim financial statements and notes in accordance with GAAP have read or have access to the audited financial statements for the preceding fiscal year and that the adequacy of additional disclosure needed for a fair presentation may be determined in that context… Accordingly, footnote disclosure which would substantially duplicate the disclosure contained in the most recent annual report to security holders or latest annual financial statements, such as a statement of significant accounting policies and practices and details of accounts which have not changed significantly in amount or composition since the end of the most recently completed fiscal year, may be omitted.
However, we believe the Board could achieve further alignment with the SEC regulations referenced above, improve clarity, and reduce diversity in practice by removing explicit interim requirements in paragraphs 270-10-50-12 through 50-66 related to accounting policies or methodologies – such as the requirements in paragraphs 326-20-50-11(a) and 50-11(b) and 460-10-50-8(b). Instead, consistent with the event-driven disclosure principle in the proposed Update and SEC guidance, companies should only be required to disclose significant changes in accounting policies or methodologies during interim periods.
We believe investors will benefit from streamlined interim disclosures, which would focus on material information necessary to understand an entity’s financial condition during the interim period.
Conclusion
We appreciate this opportunity to provide feedback on the proposed Update related to interim reporting. We thank the Board for its consideration of our comments and welcome further discussion with the Board or staff at your convenience.
Sincerely,
Alice L. Jolla
Chair, Committee on Corporate Reporting
Financial Executives International
Appendix – CCR Suggestions
Note: Where CCR suggests edits to the language in Topic 270 below, suggested edits are tracked against the paragraph as amended (not the original paragraph).
- Update “a full year” to a “full fiscal year” in 270-10-05-2 and 270-10-15-3
CCR believes these updates will provide additional clarity, especially for companies that follow a convention of closing their books on a specific day of the week rather than the last calendar day of the month.
270-10-05-2 The determination of the results of operations on a meaningful basis for intervals of less than a full fiscal year presents inherent difficulties. The revenues of some entities fluctuate widely among interim periods because of seasonal factors, while in other entities heavy fixed costs incurred in one interim period may benefit other periods. In these situations, financial information for periods of less than a full fiscal year may be of limited usefulness… In other situations costs and expenses related to a full fiscal year's activities are incurred at infrequent intervals during the year and need to be allocated to products in process or to other interim periods to avoid distortion of interim financial results…
270-10-15-3 The guidance in the Interim Reporting Topic applies to interim financial statements and notes in accordance with GAAP. This Topic also provides disclosure requirements necessary to report on a meaningful basis for a period of less than a full fiscal year. This Topic is not intended to deal with annual reporting.
- Consider if there are other places in the guidance where “annual financial information” should be replaced with “annual financial statements”
As noted above, CCR supports the proposed amendments to clarify when Topic 270 applies – including replacing “interim financial information” with “interim financial statements and notes in accordance with GAAP” in paragraph 270-10-15-3. While we have not performed a thorough assessment (and therefore are unsure of any unintended consequences), the Board may want to consider if there are places outside of Topic 270 where “annual financial information” should be updated to “annual financial statements” for consistency.
- Streamline the language in paragraph 270-10-50-9(c)
CCR agrees with the underlying intent of paragraph 270-10-50-9(c). However, we believe streamlining the language as shown below will improve clarity for companies applying the guidance.
270-10-50-9 All entities shall disclose the following information in their interim financial statements and notes in accordance with GAAP:
- The nature and amount of costs and expenses incurred during
in an interim period that cannot be readily identified with the activities or benefits reported in the comparable periods presented in the current period financial statements. of other interim periods unless items of a comparable nature are included in both the current interim period and in the corresponding interim period of the preceding year.
- Update the language in paragraphs 270-10-50-9(d) and 50-9(e)
First, as part of the proposed amendments, the Board removed the reference to “business combinations” in paragraph 270-10-50-9(d). While the event-driven disclosure principle in paragraph 270-10-50-68 specifically cites “business combinations or dispositions,” we believe it is still appropriate and helpful to reference business combinations in paragraph 270-10-50-9(d). As a result, we suggest the Board add back in the reference to business combinations in paragraph 270-10-50-9(d).
Second, the proposed amendments result in a discussion of seasonality in both 270-10-50-9(d) and 270-10-50-9(e). Including seasonality in both places may overemphasize seasonality. In addition, we believe the guidance would be clearer and easier to apply if all discussion of seasonality was consolidated into a single paragraph, as reflected in our suggested edits below.
270-10-50-9 All entities shall disclose the following information in their interim financial statements and notes in accordance with GAAP:
- Information needed for a proper understanding of the impact of unusual or infrequent items such as
unusual seasonal results business combinations.
- The seasonal nature of activities
for an entity that result in material seasonal variations in revenue, costs, or expenses during the full fiscal year and if interim results are inconsistent with the typical seasonal results.
- Add a reference to “interim financial statements” in paragraph 270-10-50-68
CCR believes the Board should consider adding a reference to “interim financial statements” in paragraph 270-10-50-68 to clarify that the disclosure principle applies when determining whether events should be disclosed in interim financial statements in accordance with Topic 270, not in subsequent event footnotes in an entity’s annual financial statements in accordance with Topic 855.
270-10-50-68 However, disclosure shall be provided in interim financial statements where events subsequent to the end of the most recent fiscal year have occurred which have a material impact on the entity. Disclosures shall encompass (but not be limited to), for example, significant changes since the end of the most recently completed fiscal year in such items as accounting principles and practices; estimates inherent in the preparation of financial statements; status of long-term contracts; capitalization including significant new borrowings or modification of existing financing arrangements; and the reporting entity resulting from business combinations or dispositions. Notwithstanding the above, where material contingencies exist, disclosure of such matters shall be provided even though a significant change since year-end may not have occurred.