What Is DISE? ASU 2024-03 and Its Effect on Financial Statements

For decades, investors have complained that functional expense lines like SG&A and cost of sales are black boxes. FASB's answer, issued in November 2024, is the Disaggregation of Income Statement Expenses standard, universally called DISE. The main effect of DISE on financial statements is not a new income statement format, but a mandatory new footnote table that breaks open those black boxes and reveals what is actually inside them.

This article is the canonical reference for what DISE is, why it exists, and what it requires. For implementation timelines and compliance calendars, see ASU 2024-03 effective date: 2026 compliance calendar for public companies. For the controls implications, see what ASU 2024-03 DISE changes about your controls.

Key takeaway: DISE does not touch the face of the income statement. It adds a new tabular footnote disclosure that disaggregates specified expense captions into natural expense categories. Every public business entity will be affected.

What Is DISE in Financial Reporting?

DISE stands for Disaggregation of Income Statement Expenses. It is codified in ASC 220-40 through ASU 2024-03, issued by FASB on November 4, 2024. The standard requires public business entities to disclose, within the footnotes to their financial statements, the natural expense components embedded in each relevant income statement expense caption.

The word "natural" is doing real work here. Under current US GAAP, most companies present expenses by function: cost of sales, selling, general and administrative expenses (SG&A), research and development. Functional presentation tells investors what the company spent money on in an organizational sense. It does not tell them whether that SG&A line is mostly salaries, depreciation, or something else entirely. DISE forces that answer into the footnotes.

PwC's In depth on ASU 2024-03 summarizes the investor rationale plainly: "Investors have provided feedback to the FASB that additional details about expenses are important to understanding an entity's performance, assessing its prospects for future cash flows, and comparing its performance both over time and with that of other entities."

Why Did FASB Create DISE? The Investor Problem It Solves

The problem DISE solves is structural, not incidental. US GAAP has never required companies to present expenses by nature unless industry-specific guidance or SEC rules mandated it. That left investors trying to reverse-engineer cost structures from scattered disclosures, earnings call transcripts, and segment data.

Manufacturing companies, which typically present cost of goods sold as a single functional line, may have depreciation on production equipment buried inside it alongside raw materials and labor. A technology company's R&D line might be almost entirely employee compensation, or it might include significant amortization of acquired intangibles. Without disaggregation, neither comparison across companies nor trend analysis over time is reliable.

FASB's stated objective for ASU 2024-03 is to help investors better understand entity performance, better assess prospects for future cash flows, and compare performance over time and with other entities. DISE is the FASB's direct response to longstanding investor requests, and it is purely additive: PwC confirms that the new standard "does not change or remove any existing presentation or disclosure requirements within US GAAP or SEC guidance."

What Does DISE Mean in Accounting? The Core Concepts

Relevant Expense Captions

Not every line on the income statement triggers DISE. A "relevant expense caption" is an expense caption presented on the face of the income statement within continuing operations that contains at least one of the five specified natural expense categories. If a caption contains none of them, it is out of scope.

In practice, for most companies, cost of sales, SG&A, and R&D will all qualify as relevant expense captions. That covers the majority of operating costs for nearly every public company.

The Five Required Natural Expense Categories

For each relevant expense caption, entities must disaggregate and disclose the amounts attributable to each of these five categories that are present within it:

1. Purchases of inventory (using either a cost-incurred or expense-incurred approach)
2. Employee compensation (salaries, bonuses, stock-based compensation, benefits, payroll taxes)
3. Depreciation
4. Intangible asset amortization
5. Depreciation, depletion, and amortization recognized as part of oil- and gas-producing activities (DD&A), or other depletion expense

If a natural expense category is not present within a given caption, there is nothing to disclose for that category in that column. The table only requires what is actually there.

What Else Goes in the Table

The new tabular disclosure is broader than just the five natural categories. Within the same table, entities must also include:

• Certain expense, gain, or loss amounts already required to be disclosed under US GAAP (for example, impairment losses on intangibles or long-lived assets, write-offs of in-process R&D from asset acquisitions, gains and losses on held-for-sale assets and derivative instruments). This does not create new disclosures; it consolidates existing ones into the new table.
• An "other" line representing the difference between the total relevant expense caption on the income statement and the sum of all separately disclosed categories, with a qualitative description of what that residual contains.
• Total selling expenses, plus, in annual periods only, the entity's definition of selling expenses.

The selling expenses requirement deserves attention. There is no prior US GAAP analog for a required definition of selling expenses. Each entity must determine what it considers selling expenses, disclose that definition annually, and apply it consistently. A change in definition requires disclosure of the reason and recasting of prior periods (unless impracticable).

What Does the New DISE Footnote Table Actually Look Like?

The ASU appendix includes an illustrative example. Here is a simplified version showing how a hypothetical company might present the table for two relevant expense captions:

The "Other" line reconciles back to the income statement total for each caption. The qualitative description of that residual is where companies explain what they have not separately quantified, and it is the one place where judgment and drafting matter most.

Key takeaway: The table must reconcile to the income statement. Every dollar in a relevant expense caption must appear somewhere in the table, either as a named natural category or in the "Other" residual with a qualitative explanation.

Does DISE Change the Face of the Income Statement?

No. This is the most common misconception about DISE, and it is worth being direct: the income statement itself does not change.

Companies that present expenses by function (cost of sales, SG&A, R&D) continue to do so. Companies that already present by nature are not exempt from the footnote disclosure. DISE is a disclosure standard, not a presentation standard. The new information lives entirely in the footnotes.

This also means DISE does not require companies to adopt a new income statement format, add new line items to the face of the statement, or reclassify expenses. The only change to the financial statements is the addition of the new tabular footnote disclosure.

Who Does DISE Apply To?

DISE applies to all public business entities (PBEs) as defined in the ASC Master Glossary. The PBE definition is broader than "SEC registrant," and that matters.

Entities in scope include:

• All SEC registrants (accelerated filers, large accelerated filers, non-accelerated filers)
• Entities whose financial statements must be included in another SEC registrant's filing under Regulation S-X Rules 3-05 or 3-09 (for example, a significant acquired business)
• Entities with securities traded on an over-the-counter market

Entities explicitly excluded:

• Private companies (unless they are preparing for an IPO or have been acquired and must file under Reg S-X)
• Not-for-profit entities
• Employee benefit plans

The IPO angle is a practical trap. PwC notes that a private company preparing a Form S-1 registration statement would need to apply DISE in that filing. If your company is on a 2027 or 2028 IPO timeline, DISE compliance is part of the registration statement work, not something to address post-listing.

As PwC summarizes: "It is expected that nearly all PBEs will be required to disclose more information about income statement expenses upon adoption of the new standard."

When Is DISE Effective?

Transition is prospective by default, with retrospective application permitted. Entities choosing retrospective adoption must collect data for comparative years, which for calendar-year companies means data going back to periods beginning January 1, 2025. As of September 2026, that data collection window is already open and, for retrospective adopters, should already be underway.

The effective dates were clarified by a subsequent update, ASU 2025-01, which confirmed the dates above. See the ASU 2024-03 compliance calendar for a full timeline.

How Does DISE Interact with IFRS 18?

For multinational finance teams, DISE does not exist in isolation. The IASB issued IFRS 18, Presentation and Disclosure in Financial Statements, on April 9, 2024, replacing IAS 1. IASB Chair Andreas Barckow called it "the most significant change to companies' presentation of financial performance since IFRS Accounting Standards were introduced more than 20 years ago."

The two standards share the same investor-driven rationale but differ in mechanism:

Under IFRS 18, companies may aggregate operating expenses by nature or function on the face of the income statement, but must provide disaggregation disclosures regardless. DISE requires natural expense disaggregation in footnotes regardless of whether the income statement uses functional or natural presentation. The two standards push in the same direction but through different mechanisms, creating both convergence (more natural expense data available globally) and divergence (different formats, different line items, different definitions).

For a company preparing both US GAAP and IFRS financial statements, the two disclosure sets will not be identical. Finance teams should map the overlap early to avoid building two entirely separate data pipelines where one will do. For a deeper look at how IFRS 18 reshapes income statement structure, see IFRS 18 subtotals on the income statement: a practitioner walkthrough.

What Are the Key Implementation Challenges?

DISE is a disclosure standard with operational teeth. Deloitte's implementation guide is direct: entities may need to collect underlying data not currently available in existing systems, make IT system changes, use estimates where exact data is unavailable, and adjust processes and controls.

The two categories that create the most complexity in practice are:

Employee compensation. Compensation costs appear across multiple income statement captions. Salaries, bonuses, stock-based compensation, benefits, and payroll taxes may all need to be allocated by caption. Current ERP systems often do not store compensation data in a way that maps cleanly to functional expense lines.

Purchases of inventory. The standard allows two approaches: cost-incurred (costs incurred during the period, including amounts capitalized to inventory, with reconciliation items) or expense-incurred (amounts recognized in expense upon derecognition of inventory). Once a method is selected, it must be applied consistently. Switching requires disclosure of the reason and recasting of prior periods.

Deloitte recommends a four-phase implementation framework: (1) understanding, education, and planning; (2) assessment and gap analysis; (3) implementation; and (4) adoption and post-adoption monitoring. The assessment phase is where most entities discover that their existing chart of accounts and ERP configuration do not produce the required natural expense data without new mapping or allocation logic. For chart of accounts mapping specifics, see ASU 2024-03 chart of accounts mapping: tools and systems guide.

The cross-functional team requirement is real. Deloitte advises that accounting, finance, operations, IT, investor relations, and internal audit all need seats at the table before management agrees to an implementation plan. For decentralized or multinational entities, regional contacts are also needed where business models or IT systems vary.

On internal controls: new data flows mean new ICFR risks. Entities need to design controls over the new data collection, allocation, and reconciliation processes before the first DISE disclosure goes out. Auditors will assess those controls, and Deloitte recommends engaging external auditors early to align on policies, positions, and implementation plans.

What Is the FASB's Latest Guidance on DISE?

The standard is not fully settled. The FASB held a public roundtable on May 27, 2026, to discuss DISE implementation, covering both preparers' adoption efforts and investors' preparation efforts. Meeting minutes are available on the FASB website. The roundtable signals that interpretive questions remain active and that the FASB is monitoring how companies are approaching adoption.

PwC's In depth was also updated in November 2025 to clarify questions on purchases of inventory (Questions 2-5, 2-6, and 2-11) and to add guidance on interim reporting requirements (Question 5-2). Practitioners should use the most current version of Big Four guidance rather than relying on summaries from late 2024.

The practical implication: monitor FASB and SEC developments through the 2026 annual reporting cycle. SEC staff comment letters on early DISE disclosures, once they begin appearing in EDGAR, will be the clearest signal of what the regulator expects in practice.

FAQ

What is the main effect of DISE on financial statements? DISE adds a mandatory tabular footnote disclosure that disaggregates relevant income statement expense captions into five natural expense categories: purchases of inventory, employee compensation, depreciation, intangible asset amortization, and DD&A or depletion. The face of the income statement does not change.

What does DISE mean in accounting? DISE stands for Disaggregation of Income Statement Expenses. It is the informal name for ASU 2024-03, codified in ASC 220-40, which requires public business entities to break down functional expense lines into natural expense components within footnote disclosures.

Does DISE apply to private companies? No, with two exceptions. A private company preparing a Form S-1 for an IPO must apply DISE in the registration statement. A private company acquired and required to file financial statements under Regulation S-X Rules 3-05 or 3-09 must also apply it for those filed statements.

When is DISE effective for calendar-year companies? Annual DISE disclosures are first required in the December 31, 2027 annual report. Interim DISE disclosures are first required in quarterly periods within fiscal year 2028. Early adoption is permitted from November 2024 onward.

How does depreciation affect the DISE disclosure? Depreciation is one of the five required natural expense categories. If depreciation is embedded in any relevant expense caption (for example, cost of sales or SG&A), the entity must separately quantify and disclose the depreciation amount within that caption in the new tabular footnote. The income statement line itself does not change.

What are the key components of the DISE tabular disclosure? The table must show, for each relevant expense caption: the five natural expense categories present within it, certain existing GAAP-required disclosures (such as impairment losses), an "Other" residual line with a qualitative description, and total selling expenses with an annual definition of what the entity counts as selling expenses.