FASB swiftly clarifies new DISE rule’s effective date

Dive Brief:

• The Financial Accounting Standards Board said that public companies including those with non-calendar year-ends must comply with its new Disaggregation of Income Statement Expenses standard in their organization’s first annual reporting period beginning after Dec. 15 of 2026, according to an update published Monday. Companies must adopt the guidance in interim or quarterly reporting periods beginning after Dec. 15, 2027. 
• The move clarifies but does not change the compliance date. “During its December 18 Board meeting, FASB members agreed it was important to address potential confusion by updating the effective date wording as soon as possible,” a FASB spokesperson said in an email. “The FASB is not deferring an effective date — rather, it’s clarifying the wording to more clearly reflect the Board’s prior decisions.” 
• The tweak to the guidance comes about two months after the issuance of the long-anticipated standard that will require companies to disclose and break out details about certain expense line items such as purchases of inventory, employee compensation, depreciation and intangible asset amortization in tabular-style notes to financial statements.

Dive Insight:

The clarification is relatively minor but notable because the update is one of the most closely watched changes to accounting guidance recently issued by the FASB. Compliance with DISE “isn’t going to be cheap” for many firms but the FASB has taken steps to reduce the cost to preparers, board member Fred Cannon told CFO Dive previously. 

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After the DISE update was issued in November, the board was asked for clarification because the original guidance on its effective date might have mistakenly been interpreted as requiring companies with non-calendar annual reporting periods to first comply in a quarterly or interim reports, according to the update.

“The Board’s intent in the basis for conclusions of Update 2024-03 is clear that all public business entities should initially adopt the disclosure requirements in the first annual reporting period beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning after December 15, 2027,” the update states. “However, the Board acknowledges that there was ambiguity between the intent in the basis for conclusions in Update 2024-03 and the transition guidance that was included in the Codification when Update 2024-03 was issued.”

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The FASB almost always requires that companies first comply with new standards in more comprehensive annual reports before it requires them in less comprehensive and unaudited quarterly reports, Jack Castonguay, an associate professor of public accounting at Hofstra University, said in an email. “The original language of ASU 2024-03…goes against the FASB’s usual approach,” but the new language removes that ambiguity, he said.