FASB clarifies date of income statement expense disaggregation standard

The Financial Accounting Standards Board released an accounting standards update Monday to clarify the interim effective date of its recently issued standard on disaggregation of income statement expenses for public companies whose fiscal year-end doesn’t coincide with the end of the calendar year.

FASB said public business entities are required to adopt the guidance in Update 2024-03 in annual reporting periods starting after Dec. 15, 2026, and interim periods within annual reporting periods beginning after Dec. 15, 2027. But early adoption of the new standard is permitted.

FASB released the standard on disaggregation of income statement expenses in November, requiring public companies to disclose, in their interim and annual reporting periods, more information about certain expenses in the notes to financial statements in response to  demand from investors for more detailed information. 

The update originally said that the amendments are effective for public business entities for annual reporting periods beginning after Dec. 15, 2026, and interim reporting periods beginning after Dec. 15, 2027. But after the update was issued, FASB was asked to clarify the initial effective date for entities that don’t have an annual reporting period ending on Dec. 31 (known as non-calendar year-end entities).

Because of how the effective date guidance was written, those companies could have concluded they would be required to initially adopt the disclosure requirements in an interim reporting period, as opposed to an annual reporting period. FASB’s intention was for all public business entities to initially adopt the disclosure requirements in the first annual reporting period starting after Dec. 15, 2026, and interim reporting periods within annual reporting periods starting after Dec. 15, 2027. It acknowledged there was some ambiguity about that intention in the original guidance, so it has issued the new update to clarify the effective date for non-calendar year-end businesses.