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Key takeaways
- ASU 2024-03 requires all public business entities to disaggregate income statement expenses by natural category in footnote disclosures, effective for calendar year-end companies in 2027 for annual periods and 2028 for interim periods—and companies should start their readiness assessment now.
- DISE scope extends beyond SEC registrants to include private companies preparing IPO registration statements and acquisition targets required to file financials under Regulation S-X Rule 3-05, so deal teams should build DISE compliance into transaction readiness timelines.
- DISE creates execution risk across M&A, divestitures, and spin-offs, where acquired entities may lack the required data granularity and parent-level materiality thresholds may not hold for a stand-alone entity.
- Many organizations do not currently track expenses at the granularity DISE requires, and inventory purchase policies, selling expense definitions, and ERP system capabilities may all need to be reassessed before the effective date.
- PwC’s Deals team helps companies assess DISE readiness, develop expense categorization policies and tabular disclosures, benchmark against peers, and align finance, accounting, operations, and IT on consistent data collection.
Executive Overview
In November 2024, the Financial Accounting Standards Board (FASB) issued ASU 2024-03, Disaggregation of Income Statement Expenses (DISE). This significant accounting standard represents a major shift in financial reporting transparency, with potentially significant implications for public business entities (PBEs). For calendar-year companies, DISE is effective for annual reporting in 2027 and interim reporting in 2028, leaving less than 18 months to implement compared with the roughly 36-month adoption window originally provided by FASB. Early adoption is permitted, and companies should consider beginning their evaluation now. On May 27, 2026, the FASB held a public roundtable on DISE implementation to gather feedback as it monitors adoption. Stakeholders should continue monitoring regulatory and standard-setting developments.
Why DISE Matters: Understanding the Impetus for Change
Investors have long expressed a desire for greater transparency into the composition of income statement expenses. Historically, US GAAP has provided limited guidance on the specific expense categories that should be presented in the income statement, unless prescribed by SEC rules or industry-specific guidance. Many entities present expenses by function. However, statement users have requested greater visibility into the underlying nature of those costs, including employee compensation, purchased materials, amortization and depreciation. This information may enable users of the statements to better understand cost structures, forecast future expenses more accurately, and assess a company’s prospects for future cash flows. Investors may also use this information to feed their financial models. This move reflects a recent trend in standard setting intended to provide more detailed disclosures. The issuance of ASU 2023-09, Improvements to Income Tax Disclosures, in September 2023, and ASU 2023-07, Improvements to Reportable Segment Disclosures (“Segments guidance”), in November 2023 marked the start of this effort to provide investors with more granular financial information.
Scope: Who Must Comply with DISE?
DISE applies to all PBEs including emerging growth companies (EGCs). This includes SEC registrants and certain entities that are not SEC registrants, such as those whose financial statements must be included in another SEC registrant’s filing, as well as entities with securities traded on an over-the-counter market. Private companies and other non-PBEs are not subject to the new standard. However, certain private companies may still need to evaluate DISE when preparing for capital markets activity or a transaction involving a public company.
Key Reminders: Private Companies Planning an IPO and M&A Considerations
Private companies planning an initial public offering (IPO) must comply with DISE when preparing their registration statement in the future when the 2027 annual period and future periods are presented. As with other PBEs, early adoption is permitted but not required. Additionally, private companies that are acquisition targets of US public companies may meet the PBE definition if their financial statements are required to be filed with the SEC under Rule 3-05. This highlights the importance of transaction readiness and deal execution for such entities.
Key Requirements: What Companies Must Disclose
Under DISE, public business entities (PBEs) must disclose, within the footnotes, the amounts of specified natural expense categories included in each relevant expense caption reported on the income statement. The following illustrates the reporting under the DISE requirements:
Within a new tabular disclosure, the amounts of specified natural expenses included in each relevant expense caption:
(a) purchases of inventory
(b) employee compensation
(c) depreciation
(d) intangible asset amortization
(e) depreciation, depletion, and amortization recognized as part of oil- and gas-producing activities (DD&A) (or other amounts of 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 these expense categories.
Within the same tabular disclosure, certain expense, gain, or loss amounts that are already required to be disclosed under US GAAP
A qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively
The total amount of selling expenses and, in annual reporting periods, an entity’s definition of selling expenses
Implementation Timeline: The Window for Action is Now
Although the year-end 2027 reporting period may seem far off, companies may want to consider evaluating now whether they have the necessary data and processes in place. DISE requires prospective adoption, but companies have the option to adopt the standard retrospectively. For calendar year-end companies, retrospective adoption would require comparative disclosures for 2026 and, if elected, 2025, necessitating data collection beginning as early as January 1, 2025. Investors may desire consistent period-over-period disclosures to evaluate cost structure and performance trends; companies considering retrospective adoption should begin preparing without delay. Even if retrospective adoption is not pursued, internal stakeholders may request prior period information for comparison purposes in management reporting.
Practical Implementation Considerations
Aligning DISE with Business and Technology Transformation Initiatives
As companies engage in large-scale business and technology transformations, they may gain efficiencies by concurrently developing business requirements for DISE. For example, organizations implementing an enterprise resource planning (ERP) or an enterprise performance management system will benefit from defining business requirements that facilitate DISE reporting during the implementation process.
DISE increases transparency without changing accounting fundamentals
| Current Guidance | New Guidance - What's Changing? | |
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Investor Considerations
DISE aims to give investors a clearer picture of a company’s expense profile. For finance leaders, this means breaking down expenses in greater detail. However, meeting these requirements isn’t just a reporting exercise. It could mean new levels of data aggregation, potential system changes, and tighter collaboration between teams across the business.
Depending on a company’s structure and operations, finance leaders may consider whether they need to update processes and technology to collect and report expense details, especially if the company operates in multiple countries, has several business lines, or holds significant inventory. For multinational and decentralized organizations, understanding exactly what the new standard requires and evaluating current readiness are essential steps to avoid surprises. CFOs and CAOs should ensure teams are aligned and everyone understands the scope of the new disclosure requirements.
While the DISE standard allows companies to use estimates or reasonable methods for breaking out expense categories, significant judgment may still be needed. For example, companies will need to decide which expenses are relevant, establish policies for presenting purchases of inventory and expense reimbursements, and determine how to explain the “other items” in the footnote disclosures. Just as importantly, controls must be in place not only for the initial rollout but for ongoing compliance. Finance leaders should start preparing now to ensure their teams, systems, and processes are ready, and to avoid last-minute challenges.
Why DISE matters to executives: financial metrics, comparability, and investor confidence
Adopting DISE is more than a disclosure exercise. It has the potential to reshape how investors, analysts, and other stakeholders evaluate a company’s cost structure and operating performance. The new disclosures will provide increased visibility into the natural expense composition underlying functional expense captions, with the intention of enabling more meaningful period-over-period and peer-to-peer comparisons.
Organizations should consider how the new disaggregated disclosures may affect investor and analyst models, earnings calls, and management’s discussion and analysis (MD&A). While the new standard does not directly affect MD&A requirements under Regulation S-K 303, an entity should consider the additional information disclosed under the DISE standard in preparing its MD&A. For example, if the DISE disclosures indicate a material change in employee compensation for a certain expense caption, the entity may consider addressing such changes within MD&A when discussing that expense caption. Companies that begin planning early can use this as an opportunity to strengthen the discussion around their cost structure and operational efficiency.
Executives should consider striking the right balance between meeting the standard's disaggregation requirements and overburdening the disclosure and reporting function. The standard permits the use of reasonable estimates, provides certain practical expedients, and does not require disaggregation of immaterial amounts, giving companies meaningful latitude to tailor the depth and granularity of their disclosures to what is decision-useful without creating potentially unsustainable reporting processes.
IPO Preparation & Acquisition Targets:
As the deals market rebounds and IPO activity accelerates—driven by a growing backlog of ready issuers (PwC’s US Deals 2026 midyear outlook)—executives should treat DISE adoption as a core element of transaction readiness rather than a routine compliance exercise. Although ASU 2024-03 applies only to PBEs, the standard's reach extends further in a transactional context: a private company preparing a registration statement for an IPO will need to provide DISE disclosures when filing with the SEC, and a target whose financial statements are required to be filed under Regulation S-X Rule 3-05 likewise meets the PBE definition and will be in the scope of the DISE requirements.
Divestitures and Spin-Offs:
Companies contemplating a divestiture or spin-off must evaluate whether the stand-alone entity will itself qualify as a PBE and, if so, prepare it to comply with DISE—likely at a materially lower threshold than the one applied at the parent level. Materiality expedients, estimates, and cost allocations that were supportable in the parent's consolidated financial statements may not withstand scrutiny when applied to the smaller entity's stand-alone financials, making it essential to reassess the adequacy of those approaches well before separation.
Post-Close Integration Considerations
In a market defined by scale, selectivity, and speed of execution—particularly in M&A-active industries—companies should be building the data infrastructure needed to produce disaggregated expense disclosures now, rather than risk delays and execution risk in competitive deal processes. This urgency is heightened for entities considering retrospective adoption, which may include providing comparative data as early as 2025 and early investment in systems and processes. Consistent, well-documented expense disclosures also strengthen the credibility of financial information provided to potential acquirers or investors during due diligence. And while DISE does not alter purchase accounting, it can materially affect post-close integration—particularly around the alignment of expense classification policies, inventory-related cost methodologies, and reporting systems across the combined entity. For companies actively pursuing or evaluating transactions, the following considerations highlight how DISE readiness intersects with deal execution and post-close integration:
| Category | Considerations |
| Data availability | Acquired entities may have a disparate chart of accounts structures requiring harmonization, different cost classification frameworks requiring standardization, or—in the case of carve-outs—financial data that lacks disaggregation at the DISE level. |
| Finance and reporting readiness |
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| Integration complexity | Post-acquisition ERP integration timelines may extend the company’s DISE implementation timeline or require interim solutions, particularly where acquired entities operate on legacy or incompatible systems that lack the granularity needed for DISE-level cost capture and reporting. |
The interaction between DISE and Segments also warrants attention. While both standards require additional expense disclosures, the methods for determining the required expense information differ significantly. The DISE standard requires disclosure of specific natural expense categories within income statement expense captions, whereas the Segments guidance requires entities to determine and disclose significant segment expenses based on how the business is managed. Entities may disclose different categories, types, and amounts of expenses under each standard and should consider whether additional disclosure is needed to differentiate between expense amounts that may appear similar in nature but are determined using different definitions.
Strategic Implementation Considerations for Leadership
Many organizations do not currently track natural expense components at the level of granularity the standard requires, particularly across multiple reporting systems, geographies, and business segments. The complexity is compounded by the need to apply judgment to areas such as policies for disaggregating inventory purchases, expense reimbursements, and the integration of existing disclosure requirements into the new tabular format. Redesigning systems and processes to meet the standard's requirements can involve significant cost and time—companies should not wait to begin an initial impact and data gap assessment to identify the operational changes needed to produce reliable, auditable disclosures within the required timeframe.
DISE applies to both annual and interim reporting periods, meaning that the systems and processes developed for annual compliance will also need to support quarterly and year-to-date disclosures. Organizational leaders should champion cross-functional collaboration to ensure that the data infrastructure and internal controls are in place well ahead of the effective date. Key items for management teams to consider:
Identifying and quantifying the required natural expense categories within each relevant income statement caption
Balancing estimate precision, auditability, and transparency
Deriving inventory purchases and support required reconciliations
Preparing to consistently disclose selling expenses and related cost types
Assessing how the DISE disclosures interact with Segments
Refer to our In-depth and Podcast for more information on the new standard.
People, Process, and Technology Implications
| Category | Potential Impact |
| People | DISE requires close coordination across finance, accounting, operations, and IT to understand expense captions and apply consistent natural expense categorization. |
| Processes | Companies may need to update processes to capture natural expense data at the required level, including policies for inventory-related costs, selling expenses, and “other items” descriptions. |
| Technology | ERP and reporting systems may need enhancements to capture and aggregate natural expense data across segments, geographies, and systems for annual and interim disclosures. |
How PwC Can Help
PwC is a trusted resource for helping organizations of all sizes navigate the accounting, financial reporting, and operational challenges of implementing the new DISE requirements, including coordination across complex, multi-segment organizations.
Our knowledge and advisory services help companies:
- Assess readiness against the DISE requirements across systems, processes, and data
- Develop expense categorization policies
- Design tabular disclosures that incorporate existing US GAAP requirements and expense reimbursements
- Draft qualitative descriptions for other items and expense reimbursements
- Develop entity-specific selling expense definitions and disclosure language
- Benchmark disclosures against peers and leading practices
- Enhance reporting systems for annual and interim disaggregated expense disclosures
- Provide change management and training on the new disclosure framework
- Align finance, accounting, operations, and IT on consistent data collection and reporting
With thanks to Anh Pham for her contributions to this report.
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