Financial Statements Disclosures ChecklistWhat items to be disclosed on financial statements of a commercial business? The disclosure checklist presented in this post provides a quick reference to those disclosures that are common to the financial statements of most commercial business enterprises. Selected references to items required by the SEC, for public companies only, are also incorporated as many private company financial statement preparers believe these to be best practices to be emulated. This financial statement disclosures checklist is adapted from the “GAAP’s – Accounting Standard Codifications [ASC]“. 

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Note: This checklist does not purport to be suitable for use as a comprehensive SEC disclosure checklist, nor is it designed to be used for reporting entities that are not-for-profit organizations, state or local governments, or that are engaged in other industries that are subject to specialized accounting and reporting rules. Enjoy!

Notes to the Financial Statement Preparer: The most effective way to use this checklist to document the preparer’s thought process is to use a standardized tick mark or letter key such as the following:

  • M– Disclosure made;
  • IM– Disclosure considered and judged to be immaterial;
  • NA– Disclosure not applicable; and
  • X– Disclosure not made (For each item marked X, append an explanation)

 

 
Basis of Reporting Disclosures 

[1].  Name of entity for which statements are being presented (if d/b/a different name than legal name, indicate both).     

[2].  Titles of statements should be appropriate (certain titles denote and should be reserved for GAAP financial statements; other titles denote other comprehensive basis of accounting [OCBOA] financial statements).     

[3].  Dates and periods covered should be clearly stated.     

[4].  If one or more consolidated subsidiaries have different fiscal periods than the parent (not to exceed 3 months), disclose any intervening events that materially affect financial position or results of operations.     

[5].  If comparative statements are presented, repeat footnotes from prior years to extent appropriate.    

[6].  Differences between “economic” entity and legal entity being presented should be noted (e.g., consolidated or not? subsidiaries included and excluded, combined statements?, etc.)  Disclose summarized financial information for previously unconsolidated subsidiaries.     

[7].  Identify new accounting principles not yet adopted and expected impact of adoption.

     

 
Accounting Policies Disclosures

[1].  Description of business unless otherwise apparent from statements themselves.     

[2].  Identify and describe significant accounting principles followed and methods of applying them that materially affect statements; disclosures should include principles and methods that involve
Selection from acceptable alternatives.     

  • Principles and methods peculiar to the company’s industry.     
  • Unusual or innovative applications  of generally accepted accounting principles.    
  • Consolidation or combination policy.

     
[3].  If there have been any material changes in classifications made to previously issued financial statements, these should be noted.

     

 
Accounting Changes Disclosures  

[1].  Nature and justification of change in accounting principle:     

  • The nature of and reasons for making the change, addressing preferability of the newly adopted principle.      
  • Descriptions of prior period items that have been restated.     
  • The effects of the change for both  current period and prior period(s) being presented; specific quantification of  the effects on income from continuing operations, net income, any other financial statement caption materially affected, and corresponding per share amounts for each.     
  • The cumulative effect on retained  earnings at the beginning of the earliest period’s financial statements presented.     
  • If ASC 250 requirement to restate prior periods is not adhered to, based on impracticability criterion, explain and provide details regarding method of accounting applied.     
  • When indirect effects of change in accounting principle are included, describe these effects and state the amounts recognized in the current reporting period, together with per share amounts.  If possible, also state the indirect effects of the change in each of the prior periods being presented.     

[2].  For change in reporting entity, nature of change and reason for it; also, effect of change on income before extraordinary items and net income for all periods presented (also per share amounts).     

[3].  For a change in entity not having material effect currently but anticipated to have such effect in later periods, the nature of the change and reason the change was made.    

[4].  For a change in accounting estimate, if  the change affects several future periods (e.g., for change in useful lives of fixed assets), disclose the effect on income from continuing operations and net income of current period (and related per share amounts).    

[5].  For a change in estimate not having material effect in the current period, but which is deemed likely to have material effects on later periods, describe the change.     

[6].  For the correction of an error, disclose the nature of the error in previously issued statements and the effect of its correction on income before extraordinary items and net income (only in period of discovery and correction), with per share equivalents.

    

 
Related Parties Disclosures 

[1].  Nature of relationship and amounts due  to or from related parties with significant terms and manner of settlement.     

[2].  For each income statement presented, a description of and dollar amounts of transaction, including those to which no or nominal amounts are assigned, as well as guarantees or other terms which are needed for understanding of financial statement impact, and description of any change in terms.     

[3].  Economic dependency (e.g., major customer, supplier, franchisor, franchisee, distributor, general agent, borrower, or  lender) should be described and amount of transactions disclosed.     

[4].  Nature and extent of related-party leases.     

[5].  The nature of control relationship, even absent any transactions, of companies under common ownership or management control, if such could lead to operating results or financial position significantly different than what would have resulted if entities were autonomous.     

[6].  Amount of investments in related parties.     

 

Contingencies and Commitments Disclosures

[1].  When accruals are not made because probable loss could not be estimated, describe the nature of the contingency.     

[2].  Report the upper limit of range of estimates for cases in which lower limit is accrued because no best estimate exists.     

[3].  The nature of reasonably possible losses and either the estimated amount of the loss or a statement that no estimate is possible.     

[4].  Describe unasserted claims for which it  is both probable that a claim will be asserted, and reasonably possible that an unfavorable outcome will result.     

[5].  Report events occurring after balance sheet date that may give rise to a loss contingency, either via a footnote or by means of a pro forma presentation.     

[6].  Gain contingencies may be disclosed (but not accrued),  if described such that the likelihood of realization is not overstated.     

[7].  Disclose about guarantees, including guarantees of the indebtedness of others  

  • The nature of the guarantee, including the approximate term, how the guarantee arose, and the events or circumstances that would require the guarantor to perform under the guarantee.     
  • The maximum potential amount of the future payments (undiscounted) that the entity would be required to make, or if the guarantee provides no limitation on future payments, that fact.     
  • The reasons why the maximum future payments cannot be estimated, if the entity is unable to estimate that amount.     
  • The current carrying amount of the liability.     
  • The nature of any recourse provisions that would enable the entity to recover from third parties any amounts paid under the guarantee, and the extent to which the proceeds are expected to cover the amount in b. above.     
  • A description of any assets (collateral) that can be liquidated to recover amounts paid under the guarantee, and the extent to which the proceeds from liquidation are expected to cover the amount in the second above.

     
[8].  Disclose material commitments and purchase obligations.     

[9].  Describe any pending renegotiation of government contracts.     

[10].  Pending litigation in which the entity is  involved should be described, with gross potential losses and potential recovery (e.g., from insurance) separately identified.     

[11].  Tax contingencies or disputes to which the entity is a party should be noted.     

[12].  Unused letters of credit.     

[13].  Environmental risks and liabilities should be described.     

[14].  Accounts or notes receivable sold with recourse; other guarantees to repurchase receivables.    

[15].  Unusual purchase or sales commitments.     

[16].  Compensated absences or postemployment benefits that cannot be reasonably estimated but that otherwise meet criteria for accrual should be described.

     

 
Risks and Uncertainties Disclosures  

[1].  Nature of operations including description of major products, services, principal markets served, locations, and relative importance of operations in various businesses and basis for determination of relative importance (e.g., sales volume, profits, etc.).     

[2].  Explanation that the preparation of financial statements requires the use of management’s estimates.     

[3].  Significant estimates used in the determination of the carrying amounts of assets or liabilities or in the disclosure of gain or loss contingencies when, based on information known to management prior to issuance of the financial statements it is at least reasonably possible that the effect on the financial statements of a condition, situation, or set of circumstances existing at the balance sheet date for which an estimate has been made will change in the near term due to one or more future confirming events and the effect of the change would be material to the financial statements.  (If the estimate involves a loss contingency covered by ASC 450, include an estimate of the possible loss or range of loss, or state such estimate cannot be made.)     

[4].  Vulnerability due to concentrations in the volume of business with a particular customer, supplier, or lender; revenue from particular products or services; available sources of supply of materials, labor, or other inputs; and market or geographic area.  (For concentrations of labor subject to collective bargaining agreements, disclose both the percentage of the labor force covered by a collective bargaining agreement and the percentage of the labor force covered by a collective bargaining agreement that will expire within one year.  For concentrations of operations located outside of the entity’s home country, disclose the carrying amounts of net assets and the geographic areas in which they are located).

     

 
Nonmonetary Transactions Disclosures 

[1].  Nature of transaction.     

[2].  Gain or loss and basis of accounting for assets transferred.     

[3].  For advertising barter transactions  

  • Amount of revenue and expense recognized from advertising barter transactions.    
  • Volume and type of advertising surrendered and received (e.g., number of equivalent pages, broadcast minutes) that was not recognized in the income statement because the fair value was not determinable.

     

 
Subsequent Events Disclosures 

[1].  Adjust financial statements for conditions existing at balance sheet date.     

[2].  Disclose for conditions subsequent to balance sheet (consider pro forma presentation); examples are:  for sale of a bond or capital stock issue, purchase or sale of a business, settlement of litigation when event giving rise to claim occurred subsequent to balance sheet date, loss of plant or inventories as a result of fire or flood, losses on receivables resulting from conditions (such as a customer’s major casualty) arising subsequent to balance sheet date, significant net realized and unrealized marketable equity security gains and losses after the date of the financial statements, substantial loans to insiders or affiliates, significant long-term investments, substantial dividends not in the ordinary course of business, loss contingencies arising after the date of the financial statements, or significant foreign currency rate changes after the balance sheet date and their effects on unsettled balances pertaining to foreign currency transactions.

   

 
Disclosures of Rights and Privileges of Various Equity Securities Outstanding 

[1].  Show each class separately and any changes during the period.     

[2].  Par value, assigned or stated value should be disclosed.     

[3].  Liquidation preferences are to be stated.     

[4].  Participations (for preferred classes) are to be disclosed.     

[5].  Call, conversion, and exercise data are to be noted.     

[6].  Redeemable preferred stock should be described.

 

     
Disclosures of Business Combinations and Variable Interest Entities (VIEs)

Notes to the preparer:

  • Disclosures required by ASC 810 regarding a VIE are to be included in the same note to the financial statements as the information required by this section.
  • Information regarding VIEs may be aggregated for similar entities if separate reporting would not provide the user with additional material information.

Here are items to be disclosed:

[1]. Business combinations occurring during the reporting period or after the reporting date but before the financial statements are issued,  including variable interest entities (VIEs) where the VIE is a business.   The acquirer is to disclose the following information for each business combination that occurs during the reporting period:  

  • The name and a description of the acquiree.     
  • The acquisition date.     
  • The percentage of voting equity interest acquired.     
  • A description of how the acquirer obtained control over the acquiree.     
  • The primary reasons for the business combination.     
  • The amounts recognized as of the acquisition date for each major class of assets acquired and liabilities assumed.     
  • Receivables acquired not subject to ASC 310-30, such as trade receivables with repayment terms of one year or less: The following disclosures are to be provided by major class of receivable such as loans, direct finance leases under ASC 840, and any other class of receivables:  (1)  The fair value of the receivables (2)  The gross contractual amount of the receivables (3)  The best estimate at the acquisition date of the contractual cash flows not expected to be collected.     
  • Contingent consideration arrangements and indemnification assets: (1)  Amounts recognized as of the acquisition date (2)  A description of the arrangements and the basis for determining the amount of payment (3)  An estimate of the range of outcomes (undiscounted) or, if a range cannot be estimated, that fact and the reasons why (4)  If the maximum amount potentially due under the arrangement is unlimited, the acquirer is to disclose that fact.     
  • Assets and liabilities arising from acquiree contingencies. The acquirer is permitted to aggregate these disclosures for assets and liabilities that are similar in nature (1)  The amounts recognized at the acquisition date or an explanation of why no amount was recognized (2)  The nature of recognized and unrecognized contingencies (3)  An estimate of the range of outcomes (undiscounted) for contingencies (recognized and unrecognized) or, if  a range cannot be estimated, that fact and the reasons why a range cannot be estimated.     
  • Goodwill: (1)  A qualitative description of the factors that make up goodwill recognized (e.g., expected synergies from combining acquiree operations with those of the acquirer, intangible assets that do not qualify for recognition separately from goodwill, or other factors) (2)  The total amount of goodwill that is expected to be deductible for tax purposes (3)  If the assignment of goodwill to reporting units (as required by ASC 350) has not been completed on the financial statements’ issuance date, the acquirer is to disclose that fact.     
  • Bargain purchases: (1) The amount of gain recognized (2)  The line item in the income statement in which the gain is recognized (3) A description of the reasons why the transaction resulted in a gain.     
  • Transactions recognized separately from the acquisition of assets and assumption of liabilities in the business combination (e.g., settlement of preexisting acquirer/acquiree relationships, arrangements to compensate employees or former owners of the acquiree for future services, acquirer reimbursements made to the acquiree or its former owners for paying acquisition-related costs of the acquirer): (1)  A description of each transaction (2)  How the acquirer accounted for each transaction. (3)  The amounts recognized for each transaction and the line item in the financial statements in which each amount is recognized (4)  If the transaction effectively settled a preexisting relationship, the method used to determine the settlement amount.     
  • Acquisition-related costs: (1) The amount recognized as expense  and the line item or items in the income statement in which recognized (2) Amount of issuance costs not recognized as an expense and how they were recognized.     
  • Step acquisitions (business combinations achieved in stages): (1)  The fair value at the acquisition date of the equity interest in the acquiree held by the acquirer immediately preceding the acquisition date (2)  The amount of gain or loss recognized from the re-measurement to fair value of the equity interest in the acquiree held by the acquirer prior to the business combination and the line item in the income statement in which that gain or loss is recognized.     
  • Business combinations where the acquirer holds less than 100% of the equity interests of the acquiree at the acquisition date: (1)  The fair value of the noncontrolling interest in the acquiree at the acquisition date (2)  The valuation technique or techniques used to measure the fair value of the noncontrolling interest and the significant inputs used.     
  • Acquirers that are public entities: (1)  The amounts of revenue and the net income of the acquiree since the acquisition date included in the consolidated income statement for the reporting period (2)  The following supplemental pro forma information. If the acquirer believes disclosure of any of the information required by this section is impractical, the acquirer is to disclose that fact accompanied by an explanation of why management believes this to be the case (3) If the acquirer is required to disclose segment information, the amount of goodwill by reportable segment.     
  • The primary beneficiary  of a VIE that is not a business is to disclose the amount of gain or loss recognized on the initial consolidation of the VIE.     
  • For business combinations occurring during the reporting period that are deemed immaterial individually but that are considered collectively material, the acquirer is to disclose the information required.     
  • Subsequent business combinations—If the acquisition date of a business combination is after the reporting date but before issuance of the financial statements, the acquirer is to disclose the information required. unless the initial accounting for the business combination is incomplete at the time the financial statements are issued.  If this is the case, the acquirer is to indicate which disclosures it is unable to make and the reasons why.

     

[2].  Adjustments to current and prior period business combinations, including variable interest entities (VIEs) where the VIE is a business. The following disclosures are to be made for each material business combination or, in the aggregate for individually immaterial business combinations that collectively are material:

  • Provisional amounts recognized during measurement period — If the initial accounting for the business combination is incomplete with respect to certain assets, liabilities, non-controlling interests, or items included in the consideration transferred and the amounts recognized in the financial statements for the business combination are considered to be provisional: (1)  The reasons why the initial accounting is incomplete (2)  The assets, liabilities, equity interests, or items included in the consideration transferred for which the initial accounting is incomplete (3)  The nature and amount of any measurement-period adjustments recognized during the reporting period.
  • Contingent consideration assets/liabilities — For each reporting period after the acquisition date until the entity collects, sells, or otherwise loses the right to an asset representing contingent consideration, or until the entity settles a contingent consideration liability or the liability is cancelled or expires: (1)  Any changes in the recognized amounts, including any difference arising upon settlement (2)  Any changes in the range of outcomes (undiscounted) and the reasons for those changes (3)  The disclosures required to be made in each interim and annual reporting period by ASC 820-10-50 regarding recurring fair value measurements subsequent to initial recognition.  These disclosures are to be made separately for each major category of assets and liabilities that represents contingent consideration.
  • Acquiree contingencies — For each reporting period after the acquisition date, until the acquirer collects, sells, or otherwise loses the rights to recognized assets arising from contingencies, or the acquirer settles recognized liabilities or its obligation to settle them is cancelled or expires: (1)  Any changes in the recognized amounts of assets and liabilities arising from contingencies and the reasons for those changes (2)  Any changes in the range of outcomes (undiscounted) for both recognized and unrecognized assets and liabilities arising from contingencies and the reasons for those changes.
  • Goodwill reconciliation — The reconciliation of the carrying amount of goodwill at the beginning and end of the reporting period required by ASC 350.

    

[3].  Any additional information necessary to meet the overarching disclosure objectives with respect to business combinations,  including variable interest entities (VIEs) where the VIE is a business, to enable users of the financial statements to;     

  • Evaluate the nature and financial effects of business combinations occurring either during the current reporting period, or after the reporting date but before issuance of the financial statements.  
  • Evaluate the financial effects of adjustments recognized in the current reporting period that relate to business combinations that occurred in the current or previous reporting periods.

  
[4].  Disclosures to be made by the primary beneficiary of a variable interest entity (unless that party also holds a majority voting interest);  

  • The nature, purpose, size, and activities of the VIE.     
  • The carrying amount and classification of consolidated assets that are collateral for the VIE’s obligations.     
  • Any lack of recourse by creditors (or beneficial interest holders) of a consolidated VIE to the general credit of the primary beneficiary.

 

[5].  Disclosures to be made by an enterprise that holds a significant variable interest in a VIE but is not the primary beneficiary;  

  • The nature of its involvement with the VIE and when that involvement began.     
  • The nature, purpose, size, and activities of the VIE.     
  • The enterprise’s maximum exposure to loss as a result of its involvement with the VIE.

 

[6].  An enterprise that does not apply ASC 810 to one or more VIE or potential VIE because after exhaustive efforts it is unable to obtain the necessary information is to make the following disclosures:  

  • The number of entities to which ASC 810 is not being applied and the reason why the information required to apply ASC 810 is not available.     
  • The nature, purpose, size (if the information is available), and activities of the VIE or potential VIE and the nature of the enterprise’s involvement with those entities.     
  • The enterprise’s maximum exposure to loss as a result of its involvement with the entity or entities     
  • The amount of income, expense, purchases, sales, or other measure of activity between the reporting enterprise and the entity (entities) for all periods presented [If not practicable to present the prior period information in the first set of financial statements to which this requirement applies, that prior period information may be omitted].

     

 
Consolidations Disclosures  

[1].  A parent with one or more less-than-wholly-owned subsidiaries is to disclose for each reporting period:  

  • Separately on the face of the consolidated financial statements, the amounts of consolidated net income and consolidated comprehensive income and the related amounts of each attributable to the parent and the non-controlling interest.    
  • Either on the face of the consolidated income statement or in the notes, amounts attributable to the parent for the following items, if reported in the consolidated financial statements: (1)  Income from continuing operations (2) Discontinued operations (3) Extraordinary items.    
  • Either in the consolidated statement of changes in equity if presented, or in the notes, a reconciliation of beginning of period and end of period carrying amounts of total equity, equity attributable to the parent, and equity attributable to the noncontrolling interest separately disclosing: (1) Net income (2)  Transactions with owners acting in  their capacity as owners, separately showing contributions and distributions (3)  Each component of other comprehensive income.     
  • A separate schedule in the notes to the consolidated financial statements showing the effects of any changes in the parent’s ownership interest in a subsidiary on the equity attributable to the parent.

     
[2].  If a subsidiary is deconsolidated during the reporting period, the parent is to disclose: 

  • The amount of gain or loss recognized.     
  • The caption in the income statement in which the gain or loss is recognized unless presented separately on the face of the income statement.     
  • The portion of any gain or loss that relates to the re-measurement to fair value of any investment retained by the former parent in its former subsidiary.

     

 
Collaborative Arrangements Disclosures

In the initial interim or annual period and all annual periods thereafter, a participant to a collaborative arrangement is to disclose the following information. This information is to be disclosed separately for each individually significant collaborative arrangement:  

[1].  Information regarding the nature and purpose of its collaborative arrangements.     

[2].  The entity’s rights and obligations under the arrangements.     

[3].  The accounting policy for collaborative arrangements.     

[4].  The amounts attributable to transactions arising from the collaborative arrangement between participants for each period an income statement is presented and their classification in the income statement.     

[5].  Upon initial application of 07-1, the following is to be disclosed:  

  • A description of the prior period information that was retrospectively adjusted, if any.     
  • The effect of the change on revenue and operating expenses (or other appropriate captions of changes in the applicable net assets, and on any other affected financial statement line item.

     

Fair Value and the Fair Value Option Disclosures

Notes to the preparer: Unless otherwise indicated, the disclosures included in this section are required to be presented in interim and annual financial statements.

Disclosures required to be made separately for each major category of assets and liabilities measured at fair value on a recurring basis in periods subsequent to initial recognition:  

[1].  The amount of the fair value measurements at the reporting date.     

[2].  The level within the fair value hierarchy in which the fair value measurements fall within their entirety; separately disclosing the amounts of fair value measurements that use quoted prices in active markets for identical assets or liabilities (Level 1), significant other observable inputs (Level 2), and significant unobservable inputs (Level 3).     

[3].  For those fair value measurements using significant unobservable (Level 3) inputs, a reconciliation of the beginning and ending balances, separately stating changes during the period attributable to:

  • Total realized and unrealized gains or losses for the period segregating those gains or losses included in income (changes in net assets) and a description of where those gains or losses are reported in the statement of income (statement of activities): (1)  The unrealized gains or losses included in this disclosure that relate to assets and liabilities still held at the balance sheet date (2)  A description of where, in the statement of income, those unrealized gains or losses are reported.     
  • Purchases, sales, issuances, and settlements (net).     
  • Transfers in and/or out of Level 3 (e.g., due to changes in the observability of significant inputs).

     
[4].  In the first interim period of the fiscal year of adoption and subsequently in annual financial statements, the valuation techniques used to measure fair value and discussion of changes in valuation techniques, if any, during the period. Separate disclosures required for each major category of assets and liabilities measured at fair value on a nonrecurring basis in periods subsequent to initial recognition.  

[5].  Fair value measurements recorded  during the period and the reasons for the measurements.    

[6].  The level within the fair value hierarchy in which the fair value measurements fall; in their entirety; separately disclosing the amounts of fair value measurements in Level 1, Level 2, and Level 3.     

[7].  For Level 3 fair value measurements, a description of the inputs and the information used to develop them.     

[8].  In the first interim period of the fiscal year of adoption and subsequently in annual financial statements, the valuation techniques used to measure fair value and a discussion of changes in valuation techniques used to measure similar assets and/or liabilities in prior periods.     

[9].  Any entity that has not applied the provisions of ASC 820 in interim or annual financial statements is to disclose the following until that Statement is applied in its entirety to all assets and liabilities within its scope:  

  • The fact that, pursuant to the deferral provided by FSP FAS 157-2 for certain nonfinancial assets and nonfinancial  liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually), the entity has only partially applied ASC 820.
  • Each major category of assets and liabilities that are recognized or disclosed at fair value for which the entity has not applied the provisions of ASC 820.     
  • Fair Value Option (FVO) disclosures required by ASC 825-10-25. Disclosures required as of each interim and annual balance sheet date.

 

[10].  The reasons that management elected  the FVO for each eligible item or group of similar eligible items.     

[11].  If management elected the FVO for some but not all of the eligible items within a group of similar items:  

  • A description of the items in the group and the reasons for the partial election.     
  • Information sufficient to enable users to understand how the group of similar items relates to the individual line items presented on the balance sheet.

     
[12].  For each balance sheet line item that includes one or more items for which the FVO was elected:  

  • Information sufficient to enable users to understand how each balance sheet line item relates to major categories of assets and liabilities presented in accordance with the fair value disclosure requirements of ASC 820 (see above) that provide the reader with information with respect to the level or levels within the fair value hierarchy in which the assumptions used to measure fair value (referred to as “inputs”) are derived.     
  • The aggregate carrying amount of items included in each balance sheet line item, if any, that are not eligible for the FVO.

     
[13].  The difference between the aggregate fair value and the aggregate unpaid principal balance of  

  • Loans and long-term receivables (other than securities subject to ASC 820) with contractual principal amounts and for which the FVO has been elected.     
  • Long-term debt instruments that have contractual principal amounts and for which the FVO has been elected.

     
[14].  For loans held as assets for which the FVO has been elected  

  • The aggregate fair value of loans on nonaccrual status if the entity’s policy is to recognize interest income separately from other changes in fair value.     
  • The aggregate fair value of loans that are 90 or more days past due.     
  • The difference between the aggregate fair value and the aggregate unpaid principal balance for loans that are 90 or more days past due, in nonaccrual status, or both.     
    [15].  For investments that, absent election of the FVO, would have been accounted for under the equity method, the following disclosures from ASC 323 are to be made.
  • The extent of disclosures necessary to inform the reader of the financial position and results of operations of an investee is based on management’s evaluation of the significance of an investment to the financial position and results of operations of the reporting entity.  
  • Parenthetical disclosure, or disclosure in the notes to the financial statements or in separate statements or schedules of (1) The name of each investee and the percentage of ownership of its common stock held by the reporting entity (2)  The accounting policies of the investor with respect to investments in common stock.     
  • When investments in common stock of corporate joint ventures or other investments accounted for under the equity method are, in the aggregate, material to the investor’s financial position and results of operations, it may be necessary to present in the notes, or in separate statements, either individually or in groups, summarized information as  to assets, liabilities, and results of operations of the investees.     
  • Disclosures required in each interim and annual period for which an income statement is presented about items for which the FVO has been elected.

  
[16].  For each line item in the balance sheet, the amounts of gains and losses from changes in fair value included in net income during the period and the specific line in the income statement on which those gains and losses are reported. ASC 825-10-25 permits management to meet this  requirement by aggregating these disclosures with respect to items for which  the FVO was elected with the amounts of gains and losses from changes in fair value with respect to other items measured at fair value as required by other authoritative literature.    

[17].  A description of how interest and dividends are measured and where they are reported in the statement of income.     

[18].  With respect to gains and losses included in net income during the period attributable to changes in instrument-specific credit risk associated with loans and other receivables held as assets  

  • The estimated amount of such gains or losses.     
  • How the gains or losses were determined.

     
[19].  For liabilities with fair values that have been significantly affected during the reporting period by changes in instrument-specific credit risk:

  • The estimated amount of gains and losses from changes in fair value included in net income attributable to changes in the instrument-specific credit risk.     
  • How the gains and losses were determined.     
  • Qualitative information regarding the reasons for those changes.
  • Other required disclosures

 

[20].  In annual financial statements only, the methods and significant assumptions used to estimate the fair value of items for which the FVO was elected.     

[21].  If management elects the FVO upon the  occurrence of an event where (1) an investment newly becomes subject to the  equity method, (2) a subsidiary or a variable interest entity that the investor previously consolidated ceases to qualify for consolidation but the investor continues to hold common stock in the entity, or (3) an eligible item is required to be measured or re-measured at fair value at the time of the event but is not required to  be subsequently re-measured at each succeeding reporting date, the following disclosures are required in the financial statements covering the period of the election:  

  • Qualitative information about the nature of the event.     
  • Quantitative information by balance sheet line item indicating which line items in the income statement include the effect on net income of initially electing the FVO for the item.