New standards are being introduced to enhance the clarity and usefulness of financial information reported by companies. These changes are aimed at improving transparency and ensuring stakeholders, including investors, analysts, and regulators, have access to more detailed financial data for better decision-making. As these standards roll out, companies face implementation challenges, making it critical to start planning early to ensure compliance.


Key Upcoming Standards

ASU 2023-07: Improvements to Reportable Segment Disclosures
Public companies must adopt this standard by the 2024 year-end financial statements. ASU 2023-07 is designed to provide more detailed information about reportable segments, enabling stakeholders to gain a deeper understanding of a company’s operations and financial performance, allowing for a clearer view of the financial health of different parts of the business, which is especially useful for large, diversified companies.

ASU 2023-09: Improvements to Income Tax Disclosures
This standard, required by public companies in 2025 year-end financial statements, aims to improve income tax disclosures, making it easier for stakeholders to understand a company’s tax strategies and the impact of tax laws on its financial position. With global tax laws becoming increasingly complex, this change is critical for enhancing transparency in a company’s financial reports.

ASU 2024-03: Disaggregation of Income Statement Expenses (DISE)
One of the most significant changes on the horizon is the recently finalized DISE project r. This standard aims to provide a more detailed view of income statement expenses by disaggregating major expense categories.

With the DISE standard, companies will no longer just report expenses under broad captions like “general and administrative,” but will also provide a breakdown of the specific expense components, such as employee compensation, within that category. This level of detail will allow investors and analysts to better analyze and compare financial performance trends and results across different companies.

The DISE standard has an extended timeline for adoption, with implementation for 2026 year-end reporting (in 2027). This timeline considers the significant challenges many companies will face in extracting the required data from their existing accounting systems. The increased complexity of reporting disaggregated expenses will likely require significant adjustments to internal financial processes.


FASB’s Broader Standard-Setting Activities


The FASB is currently working on several technical projects that could impact how companies report certain transactions. These efforts are in addition to the Board’s recently finalized major disclosure initiatives. The FASB has recently issued exposure drafts for new Accounting Standards Updates (ASUs) covering topics such as the accounting for software development costs, government grants, interim reporting, and share-based consideration payable to customers.

Companies will need to reassess how they capitalize and expense software development costs for internal use which could impact companies who provide access to software to customers via the cloud. Additionally, new guidelines will clarify how to account for government grants and financial assistance, while another update will address how to report share-based payments offered to customers. With up to eight exposure drafts out or anticipated by year-end, companies should closely follow these changes as they may significantly affect financial reporting.

Preparing for Change

Given the breadth and complexity of the upcoming changes, CFOs should begin preparations now. As a first step, they should be assessing which of the new standards will have the most significant impact on their organizations. For instance, industries with manufacturing operations or complex expense structures may feel the effects of the DISE project more acutely than others, making it important to identify key areas of concern early.

Once the areas of concern are identified, companies need to ensure that relevant data is captured and organized correctly. The new standards will likely demand more detailed reporting, necessitating updated financial reporting systems and internal processes. This may involve upgrading accounting software or working with external providers to implement more advanced data management solutions, allowing businesses to meet the new compliance requirements effectively.

In order to ensure that the right areas are identified, and data is captured and assessed appropriately, organizations should be collaborating closely with external auditors and advisors. These experts can offer insights into how other companies are navigating the changes, ensuring an organization stays on track and avoids potential issues. Regular communication with audit committees and auditors will ensure early identification of any challenges, mitigating the risk of non-compliance.

Staying informed about ongoing developments from FASB is key. Teams should closely monitor FASB announcements, exposure drafts, and finalized standards to remain prepared for any upcoming changes. Continuous training will also be necessary to equip staff with the knowledge needed to comply with the new standards.

Challenges in Implementation

While the new standards are intended to improve transparency and provide more useful information to stakeholders, implementing them will not be without challenges. Many companies will need to significantly overhaul their data collection and reporting systems, which could involve major investments in technology and personnel.

The DISE standard, in particular, is expected to be one of the most challenging to implement due to the level of detail required in disaggregating expense categories. Companies may need to work with their software providers to ensure that their accounting systems can accommodate these changes, and internal teams will need to be trained on how to handle the new data requirements.

Furthermore, while the implementation timeline for some of these standards, such as DISE, is extended, it’s crucial not to delay preparations. The earlier companies begin to assess the impact and make necessary changes, the smoother the transition will be.

The new financial reporting standards being introduced by the FASB will improve the clarity and usefulness of financial information for stakeholders. However, they also represent a significant challenge for companies, particularly in terms of data collection and system updates. CFOs and finance teams should start preparing now by assessing the impact of these changes, ensuring that they are capturing the necessary data, and working closely with external auditors to stay on track. By taking proactive steps, companies can ensure they meet these new standards and continue to provide transparent, high-quality financial information to their stakeholders.