Securities Law

MONTH-IN-BRIEF (Nov 2024)

FASB Adopts Accounting Standard on Disaggregation of Income Statement Expenses

By: Thomas W. White, Retired Partner, WilmerHale

On November 4, the Financial Accounting Standards Board (“FASB”) finalized new disclosure requirements regarding “disaggregation of income statement expenses” or “DISE.” Under current accounting standards, the income statement generally presents expenses under broad functional captions such as “cost of products sold,” “cost of services,” “general and administrative,” and “research and development.” FASB adopted the DISE standard in response to requests by investors for more detail about the specific types of expenses included within the expense captions on the income statement. The standard applies only to public business entities (SEC registrants and certain other entities whose financial statements are publicly filed).

The DISE standard will not change the information presented on the face of the income statement. It will require disclosure in each annual and interim report of disaggregated expense information in the financial statement footnotes, as follows:

• For each relevant expense caption, tabular disclosure of the amounts of
  • purchases of inventory
  • employee compensation
  • depreciation
  • intangible asset amortization
  • depreciation, depletion, and amortization recognized as part of oil- and gas-producing activities or other depletion expense
  A “relevant expense caption” is an expense caption presented on the face of the income statement within continuing operations that contains any of the foregoing expense categories.
  The tabular disclosure will also include certain expense, gain, or loss amounts that are already required to be disclosed under GAAP.
• Qualitative description of amounts remaining in the relevant expense captions that are not separately disaggregated quantitatively
• Separate disclosures about the total amount of selling expenses and, in annual reports, the entity’s definition of selling expense