IFRS 18 and DISE: What the New Expense Disclosure Standards Mean for Your Disclosure Controls and Procedures

Every article covering IFRS 18 and FASB's DISE standard explains the accounting mechanics. Almost none of them explain what happens to your disclosure controls and procedures (DC&P) and internal controls over financial reporting (ICFR) when these standards land. That gap is expensive to ignore.

This walkthrough is for CFOs, controllers, and SOX compliance teams at US SEC registrants, foreign private issuers (FPIs) on Form 20-F, and dual-registrants who need to understand not just what the standards require, but what new controls, data flows, and CEO/CFO certification obligations they create.

Key takeaway: Both IFRS 18 and DISE introduce new categories of required disclosure that must be captured inside your DC&P framework and supported by your SOX Section 302 certifications. The accounting change is the easy part. The controls change is where most companies are underinvested right now.

What IFRS 18 and DISE Actually Require

IFRS 18 was issued by the IASB on 9 April 2024 and replaces IAS 1. It is effective for annual reporting periods beginning on or after 1 January 2027, with retrospective application required. IFRS Accounting Standards apply in more than 140 jurisdictions, making this a global compliance event.

The standard makes three structural changes:

1. Five mandatory income statement categories: operating, investing, financing, income taxes, and discontinued operations.
2. Two mandatory subtotals: operating profit (after operating, before investing) and profit before financing and income taxes (after investing, before financing). These are defined by the standard, not by management, which is the point.
3. Management-defined performance measures (MPMs): any non-IFRS measure of profit or loss that management uses publicly to communicate financial performance must now be reconciled to the nearest IFRS-defined subtotal, with an explanation of why it is useful.

For a deeper look at how the five categories and subtotals work in practice, see our IFRS 18 subtotals practitioner walkthrough.

FASB ASU 2024-03 (DISE) was issued in November 2024 and applies to all public business entities (PBEs) under US GAAP. It is effective for annual periods beginning after 15 December 2026 (fiscal year 2027 for calendar-year companies) and for interim periods within annual periods beginning after 15 December 2027. Early adoption is permitted; application is prospective with an option for retrospective.

DISE does not touch the face of the income statement. Instead, it requires a new tabular footnote disclosure at each interim and annual period, disaggregating five natural expense categories from within each relevant expense caption:

• Purchases of inventory
• Employee compensation
• Depreciation
• Intangible asset amortization
• DD&A for oil and gas entities

DISE also requires disclosure of total selling expenses and, in annual periods, management's definition of selling expenses. That definition requirement is not cosmetic: it creates a new management judgment that must be documented, approved, and controlled.

For a side-by-side comparison of how IFRS 18 and DISE differ structurally, see our IFRS 18 vs ASU 2024-03 comparison.

Who Each Standard Applies To

The PBE definition under the ASC Master Glossary is broader than most teams assume. It includes entities whose financial statements must be included in another SEC registrant's filing under Regulation S-X Rules 3-05 or 3-09, and entities with securities traded on an over-the-counter market. A private company preparing a Form S-1 must apply DISE in its registration statement. If your company is considering an IPO, DISE is already your problem.

For FPIs filing on Form 20-F, IFRS 18 applies directly. DISE does not apply to IFRS reporters, but FPIs that also file US GAAP reconciliations or have US GAAP subsidiaries face a layered obligation.

Why These Standards Create New DC&P and ICFR Obligations

Disclosure controls and procedures are defined under SEC Rules 13a-15(e) and 15d-15(e) as controls designed to ensure that information required to be disclosed in SEC reports is recorded, processed, summarised, and reported within required timeframes. The key word is "required to be disclosed." Every new disclosure requirement from IFRS 18 and DISE is a new item that must be brought inside that framework.

SOX Section 302 requires the CEO and CFO to certify, quarterly and annually, that they have evaluated DC&P and disclosed their conclusions about effectiveness. New disclosures mean new items in scope for that evaluation. Here is where companies are getting caught short.

IFRS 18 MPMs: A New Controls Layer

The MPM disclosure requirement is the most significant new controls obligation under IFRS 18. Consider what it actually requires:

• Management must identify which non-IFRS measures they communicate publicly and assess whether each qualifies as an MPM.
• For each MPM, a reconciliation to the nearest IFRS-defined subtotal must appear in the audited financial statements.
• The reconciliation must explain why the MPM provides useful information and how it is calculated.
• Any changes to an MPM must be disclosed and explained.

None of this happens without a controlled process. The disclosure committee needs to own the MPM inventory. Finance needs a documented methodology for each reconciliation. The reconciliation itself lands in the audited financial statements, which means the external auditor has procedures over it.

For FPIs, there is an additional layer: IFRS 18's MPM requirements overlap with, but are not identical to, the SEC's non-GAAP rules under Regulation G and Item 10(e) of Regulation S-K. An FPI on Form 20-F must satisfy both regimes. The MPM reconciliation in the IFRS financial statements and the non-GAAP reconciliation in the Form 20-F filing are governed by different rules and may produce different results. That difference needs to be documented and controlled.

For a detailed walkthrough of the MPM identification and disclosure process, see our IFRS 18 management-defined performance measures guide.

DISE: The Interim Burden Nobody Is Talking About

Most implementation discussions focus on the annual tabular disclosure. The more operationally demanding requirement is that DISE applies at each interim period as well. Calendar-year companies must produce the natural expense disaggregation every quarter once the standard is effective for interim periods (annual periods beginning after 15 December 2027).

That quarterly cadence has direct ICFR implications:

• The data systems that produce the tabular disclosure must be reliable enough to support quarterly close.
• Controls over the completeness and accuracy of natural expense data must be tested as part of the quarterly SOX 302 evaluation, not just annually.
• If the tabular disclosure contains errors in Q1, the CEO and CFO have certified over a materially incorrect disclosure.

PwC's In Depth on DISE (updated November 2025) is direct: "It is expected that nearly all PBEs will be required to disclose more information about income statement expenses upon adoption of the new standard. Depending on an entity's specific facts and circumstances, new system and process changes may be required as well as coordination across geographies, business segments, and multiple reporting systems."

That coordination is a controls problem, not just a systems problem.

The Selling Expenses Definition: A Sleeper Risk

DISE requires management to define selling expenses and disclose that definition annually. This sounds minor. It is not. The definition determines what is included in the selling expenses disclosure, which is a quantitative number that investors will use to compare companies. If the definition changes, that must be disclosed. If it is inconsistently applied across periods or segments, that is a controls failure.

The definition must be documented, approved at an appropriate level (disclosure committee, at minimum), and applied consistently. It belongs in your accounting policy documentation and in the controls narrative supporting your DC&P evaluation.

The Dual-Registrant Problem

Companies that report under IFRS for local or EU purposes and also file with the SEC face compounded complexity. They must:

1. Restructure the income statement under IFRS 18 (effective 1 January 2027).
2. Produce the DISE tabular footnote under US GAAP for their SEC filing (effective for annual periods beginning after 15 December 2026).
3. Reconcile MPMs under IFRS 18 in the IFRS financial statements.
4. Comply with SEC non-GAAP rules for any non-GAAP measures in the Form 20-F.
5. Maintain DC&P and ICFR documentation covering all of the above.

The natural expense categories required by DISE (employee compensation, depreciation, amortization, inventory purchases) overlap conceptually with IFRS 18's supplementary nature-of-expense disclosure, which applies to companies that present operating expenses by function. But the specific line items and thresholds differ between the two standards. A dual-registrant cannot simply copy one disclosure into the other. Each must be prepared, controlled, and reviewed independently.

For the full structural comparison, see our IFRS 18 vs ASU 2024-03 expense disaggregation comparison.

2026 Readiness: What to Do Now, Step by Step

For calendar-year companies, the DISE mandatory effective date is fiscal year 2027. Retrospective application requires collecting natural expense data beginning in fiscal year 2025. That window is already open. Here is the sequenced action list for the rest of 2026.

Step 1: Confirm Scope and Filer Category

• Determine whether your entity meets the PBE definition for DISE purposes, including subsidiaries and entities included in other SEC registrants' filings.
• Confirm whether IFRS 18 applies (IFRS reporter) or DISE applies (US GAAP PBE), or both (dual-registrant).
• Assess whether any affiliates or subsidiaries have different scopes.

Step 2: Run a Gap Assessment on Data and Systems

• Map your current chart of accounts against the five DISE natural expense categories. Most companies that present by function (cost of sales, SG&A) do not have natural expense data readily available at the segment or geography level.
• Identify which general ledger accounts roll into each relevant expense caption and whether the natural expense split is currently tracked.
• For IFRS 18, assess whether the supplementary nature-of-expense disclosure can be produced from existing systems or requires new cost allocation logic.

For a detailed guide on chart of accounts mapping for DISE, see our ASU 2024-03 chart of accounts mapping guide.

Step 3: Define Selling Expenses Now

• Draft management's definition of selling expenses before the standard is effective. Do not leave this to the first adoption period.
• Get the definition approved by the disclosure committee and documented in accounting policy.
• Assess whether the definition is consistent with how selling expenses are tracked in your ERP and whether any reclassifications are needed.

Step 4: Build the MPM Inventory (IFRS 18)

• Identify every non-IFRS measure of profit or loss that management uses publicly: earnings releases, investor presentations, annual reports, regulatory filings.
• Assess which qualify as MPMs under IFRS 18. The test is whether the measure is a subtotal of income and expenses and is communicated externally.
• For each MPM, document the reconciliation methodology, the nearest IFRS-defined subtotal, and the rationale for why the measure is useful.
• Assign ownership: who prepares the reconciliation, who reviews it, who approves it before it enters the financial statements.

Step 5: Update the DC&P Framework

• Add the DISE tabular disclosure and the IFRS 18 MPM reconciliation to your disclosure checklist as new required disclosure items.
• Update the DC&P evaluation process to include controls over the completeness and accuracy of natural expense data (for DISE) and MPM reconciliation data (for IFRS 18).
• For DISE, extend the quarterly DC&P evaluation to cover the tabular disclosure once interim reporting requirements are effective.
• Update the supporting documentation for SOX 302 certifications to reflect the new disclosure scope.

Step 6: Expand SOX Testing Scope

• Work with internal audit to identify the new key controls that support the DISE tabular disclosure and the IFRS 18 MPM reconciliation. For guidance on how internal audit should update risk assessments and audit plans for these standards, see our internal audit DISE and IFRS 18 guide.
• Design controls over: data extraction from source systems, allocation of expenses to natural categories, completeness of the MPM inventory, accuracy of MPM reconciliations, and consistency of the selling expenses definition across periods.
• Discuss the expanded audit scope with your external auditors now. New disclosures expand the scope of the external audit. Auditors will need new procedures over the MPM reconciliation and the qualitative description requirement under DISE. Starting that conversation in 2026 avoids surprises in the 2027 audit.

Step 7: Brief the Audit Committee

• Present the DC&P and ICFR implications of both standards to the audit committee before year-end 2026.
• Specifically: the new MPM oversight responsibilities under IFRS 18, the new data governance requirements for DISE, the expanded audit scope, and the timeline for system and process changes.
• Audit committees have oversight responsibility for the financial reporting process. These standards change that process materially.

Step 8: Decide on Retrospective vs Prospective Adoption for DISE

• Retrospective adoption of DISE requires natural expense data for comparative years beginning as early as fiscal year 2025. As PwC notes, "entities considering adopting the new standard on a retrospective basis will need to collect data for the comparative years beginning as early as 2025."
• If your systems cannot produce that data reliably, prospective adoption avoids the restatement risk but means the first year of disclosure has no comparative.
• Document the adoption decision and the rationale in accounting policy. The decision itself is a management judgment that belongs in the DC&P record.

Key Timelines at a Glance

FAQ

Does DISE apply to private companies? No. DISE applies to public business entities as defined in the ASC Master Glossary. Private companies, not-for-profit entities, and employee benefit plans are excluded. However, a private company preparing a Form S-1 for an IPO must apply DISE in its registration statement.

Is "disclosure controls and procedures" an IFRS concept? No. DC&P is a US SEC concept defined under Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934. It applies to SEC registrants, including FPIs on Form 20-F. IFRS 18 and DISE create new items that must be brought within the DC&P framework, but the DC&P obligation itself comes from SEC rules, not from the IASB or FASB.

Does IFRS 18 change how expenses are recognised or measured? No. IFRS 18 changes how income and expenses are presented and disclosed. It does not change recognition or measurement. The same amounts appear in the financial statements; they are structured and labelled differently.

What is the biggest ICFR risk from DISE? The tabular disclosure requires natural expense data that most function-based presenters do not currently track at the required level of granularity. If the underlying data is unreliable, the disclosure is unreliable, and the CEO/CFO have certified over it. The data infrastructure gap is the primary ICFR risk.

Do IFRS 18's MPM requirements replace the SEC's non-GAAP rules? No. For FPIs on Form 20-F, both apply. The IFRS 18 MPM reconciliation appears in the audited financial statements. SEC non-GAAP rules under Regulation G and Item 10(e) of Regulation S-K govern non-GAAP measures presented elsewhere in the filing. The two regimes are not identical and must be managed separately.

When should companies start preparing? Now. For DISE retrospective adoption, fiscal year 2025 data collection is already required. For IFRS 18, KPMG notes that system, process, and control changes should be in place by 1 January 2026 for December year-end companies. The 2027 effective dates feel distant; the readiness work does not.