Response to the Financial Accounting Standards Board’s Exposure Draft “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40)”

The Financial Accounting and Reporting Section of the American Accounting Association has charged the Financial Reporting Policy Committee with responding to requests for comment from standard setters on issues related to financial reporting. The Committee is pleased to respond to proposed disclosure amendments in the FASB’s Exposure Draft, Disaggregation of Income Statement Expenses. The proposed disclosures in the Exposure Draft are intended to help investors better understand the components of an entity’s expenses and overall performance. The Committee evaluated the Exposure Draft and believes that, overall, the proposed amendments will provide decision-useful information to investors by enhancing their ability to evaluate and predict an entity’s performance. However, the Committee has several specific recommendations that we believe will better meet the objectives of the Exposure Draft. We summarize relevant findings from academic research to support our conclusions and recommendations. We also offer suggestions for future research. JEL Classifications: M41; M48.