Effective date of new ‘DISE’ standard to be amended to prevent premature adoption, FASB says

The FASB has voted to issue a narrow proposal amending the interim effective date of its new disclosure standard on breaking down income statement expense items, after discovering that the original wording could lead to premature adoption by some companies.

The proposal will be released before year-end with a 15-day comment period to clarify the effective date for companies with non-standard fiscal years to adopt Accounting Standards Update (ASU) No. 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, known as the "DISE" standard.

The guidance was originally slated to take effect for fiscal years beginning after Dec. 15, 2026, and interim periods starting after Dec. 15, 2027. However, the proposal will clarify that the effective date is for interim reporting periods "within annual reporting periods beginning after Dec. 15, 2027," according to board discussions on Nov. 20, 2024.

FASB Chair Richard Jones acknowledged that the original wording of the standard may have caused confusion, stating, "Our words in our final standard were slightly different than I think what we had intended. We've gotten some questions, should we clarify this, and I think we should. I think the words can be much clearer, and I think it's better to change them through a due process approach than to simply say 'no, that's what we meant'."

The issue was flagged to the board as one that could potentially cause companies with fiscal years that don't match the calendar year to mistakenly think they had to adopt disclosure requirements before their first annual reporting period, according to the discussions.

The clarification would align with the board's original intent and facilitate proper planning by stakeholders, board members said. FASB member Christine Botosan added, "I also wanted to add my thanks to the stakeholder who caught this early so it didn't become a bigger issue, and I just think this is really good evidence that we very often read what we're thinking, not what we're seeing."

ASU No. 2024-03, issued in November, requires public companies to provide more detailed and organized disclosures of their expenses in their income statements. This means breaking down expenses into specific categories, such as purchases of inventory, employee compensation, and costs related to depreciation and amortization, and presenting them in a clear, tabular format.

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