FASB completes redeliberations on DISE

Prescribed natural expense categories

Disaggregation in the notes of relevant expense captions will be required using prescribed natural expense categories:

• purchases of inventory
• employee compensation
• depreciation
• intangible asset amortization
• depreciation, depletion and amortization (DD&A) for oil and gas entities, and depletion expense for all other entities

A practical expedient for entities following S-X Rule 9-04 regarding salaries and employee benefits will exempt them from redefining employee compensation for disaggregation. 

Examples of relevant expense captions are:

• cost of services
• costs of goods sold (CoGs)
• research and development
• selling, general and administrative expenses

“One stop shop” table

Certain expense disclosures already required by US GAAP will be combined into the same tabular format as the new disaggregated expense disclosures.

Other items

Entities will be required to qualitatively describe other expenses in a relevant expense caption not required to be quantitatively disaggregated. 

Selling expenses

Entities will be required to disclose the total amount and composition of selling expenses, as defined by the entity. 

Annual and interim periods

New disclosures will be required on an annual and interim reporting basis (except for the description of selling expenses). 

Transition

Prospective or retrospective application will be permitted.

Relevant expense captions

• An expense caption that is described as a natural expense on the face of the income statement may be a relevant expense caption subject to disaggregation.
• The ASU will, however, include a practical expedient to limit situations in which disaggregation is required (i.e. for entities that present purchases or materials in the income statement, for which substantially all of that expense caption comprises amounts recognized in accordance with ASC 330).

Disaggregation will not be required for management fees, certain liability-related expenses, and expenses from equity method investments. The final ASU will include clearer guidelines for excluding certain liability-related expenses from disaggregation requirements. Entities will not be required to disaggregate their share of profit or loss in equity method investees or their disclosure of summarized information of results of operations of such investees.

Cost reimbursement arrangements

Entities will have the option to either disclose aggregate reimbursement amounts separately in tabular format or map them to required expense categories, with a mandatory qualitative description of related natural expense categories.

Estimates

The final ASU will clarify that estimates and other methods can generally be used in the disaggregation process.

Additional expense information

An entity will not be precluded from disclosing information considered relevant to the users of the financial statements. However, the ASU will require such voluntary disclosures to be separate from the required expense amounts and will not exempt the entity from complying with the required disclosures outlined in the ASU.

Changes in disclosures

• Changes in the definition of selling expenses will require recasting prior-period disclosures unless it is impracticable to do so. A preferability assessment will not be required.
• Changes in basis of presentation (e.g. cost-incurred basis to expenses-incurred basis) for disaggregated relevant expense captions that contain amounts recognized in accordance with ASC 330 will require recasting prior-period disclosures unless it is impracticable to do so. 

CoGs

The double-layer disaggregation approach whereby the total of inventory and other manufacturing costs (i.e. inventoriable costs) is disaggregated in a separate table from other costs (i.e. non-inventoriable costs) included in CoGs will not be required. Instead, CoGs will be disaggregated directly into the prescribed expenses. 

Costs incurred vs expenses incurred

For relevant expense captions that contain amounts recognized in accordance with ASC 330 (inventory) - e.g. CoGs - entities will have the option to disaggregate on either a costs-incurred or expenses-incurred basis. 

Effective date

• Annual periods: fiscal years beginning after December 15, 2026.
• Interim periods: the following year, i.e. within fiscal years beginning after December 15, 2027.