At a Glance

  • The Financial Accounting Standards Board (FASB) on Monday issued an update clarifying that all public companies, includingnon-calendar-year companies, must comply with its newly issued Disclosure of Income Tax Expenses standard (DISE) in their first annual reporting period beginning after December 15, 2026. Companies are also required to adopt the guidance in interim or quarterly reporting periods beginning after December 15, 2027.
  • The move clarifies the compliance date but does not change it. "At the December 18 Board meeting, FASB members determined it was important to update the effective date language as soon as possible to address potential confusion. The FASB did not delay the effective date—rather, it clarified the language to more accurately reflect the Board's prior decision," a FASB spokesperson said in an email.
  • The tweak to the guidance comes about two months after the release of the long-awaited standard, which requires companies to disclose andbreak down certain expense itemsin tabular form in the notes to financial statements, such as inventory purchases, employee compensation, depreciation, and amortization of intangible assets.

Deep Dive

The clarification is relatively minor but noteworthy because the update is one of the most closely watched accounting guidance changes recently issued by the FASB. Board member Fred Cannon previously told CFO Dive that complying with DISE "won't be cheap" for many companies, but the FASB has taken steps to reduce costs for preparers.

According to the update, after the DISE update was issued in November, the Board received requests for clarification because the effective date in the original guidance could be misinterpreted as requiring non-calendar-year reporting companies to first comply in quarterly or interim reports.

The update states: "The Board's intent in the basis for conclusions of Update 2024-03 was clear: all public business entities should initially adopt the disclosure requirements in their first annual reporting period beginning after December 15, 2026, and in interim reporting periods within annual reporting periods beginning after December 15, 2027. However, the Board acknowledges that at the time Update 2024-03 was issued, there was ambiguity between the intent in its basis for conclusions and the transition guidance included in the Codification."

Jack Castonguay, an associate professor of public accounting at Hofstra University, said in an email that the FASB almost always requires companies to first comply with new standards in more comprehensive annual reports before complying in less comprehensive, unaudited quarterly reports. "The original language of ASU 2024-03 ... ran counter to the FASB's usual practice," but the new language eliminates that ambiguity, he said.