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The Financial Accounting Standards Board published new rules Monday that will require public companies to break out more details related to certain expenses in tabular-style notes to financial statements.
The accounting standards update represents the final formal step in the years-long project — known as the disaggregation of income statement expenses or DISE — by the U.S. accounting standard setter. The rules will be effective for annual reporting periods beginning after Dec. 15, 2026 and for interim or quarterly periods beginning after Dec. 15, 2027, the FASB press release states.
The change follows other recent updates to accounting standards that underpin Generally Accepted Accounting Principles which have mandated more detailed corporate information in financial reports, including on income taxes and business segments. But the expense rules represent what may be one of the biggest changes for the income statement when it comes to disaggregation, FASB member Fred Cannon said in an interview.
“In my view this one is really a key pillar in that effort that’s been going on for 20 years,” Cannon said. “When I think about it broadly it’s a move to give investors much more disaggregation and a better understanding of the income statement cash flows.”
Cannon, a former analyst, noted that the FASB’s recent interest in providing more detailed income statement disclosures comes as income statements have become increasingly important for evaluating information-age companies like tech firms, while the balance sheet data aligns more with industrial companies.
Prior to the new accounting standards update, the information provided in income statement expense disclosures is tied largely to Securities and Exchange Commission presentation requirements in Regulation S-X, which governs the form and content of financial statements. In addition, some discreet accounting rules also set targeted rules on the matter.
“You may have a piece here and a piece there but...the problem with that, from an investor’s standpoint, is that it’s very difficult for investors to forecast on a go-forward basis,” Cannon said.
Now, under the updated standards, companies will break out details about the relevant expense line items in their income statement, such as purchases of inventory, employee compensation, depreciation and intangible asset amortization. While there will be industry-specific effects of how the new rules impact reporting, Cannon expects generally to see more information on cost of sales, cost of goods sold, SG&A and research and development in reports.