DISE Readiness Checklist
Companion to: The Expense Footnote You Cannot Improvise
ZERO MATERIAL WEAKNESS
ASU 2024-03, Disaggregation of Income Statement Expenses (ASC 220-40). Effective for calendar-year public business entities in the FY2027 Form 10-K (annual periods beginning after December 15, 2026; interim periods beginning after December 15, 2027). Early adoption permitted.
CRITICAL Do these now to scope the effort and stay clean on disclosure.
☐ Run a relevant-caption analysis. Identify which face-of-income-statement captions contain the required natural categories (inventory purchases, employee compensation, depreciation, intangible amortization, and DD&A). This scopes the entire project.
Regulatory note: ASC 220-40-50-6 defines the natural categories. A caption containing none of them is not a relevant caption and is excluded.
☐ Assess system and chart-of-accounts capability. Determine whether your general ledger and consolidation tools can produce natural-category detail inside each functional caption, or whether sub-ledger or mapping changes are needed.
☐ Confirm and socialize the adoption timeline. Annual periods beginning after December 15, 2026; interim periods beginning after December 15, 2027. For calendar-year filers, the first annual table appears in the FY2027 Form 10-K filed in early 2028.
Regulatory note: Effective dates per ASU 2024-03, as clarified by ASU 2025-01.
☐ Draft your SAB 74 transition disclosure. Describe the expected impact of adoption in the filings leading up to the effective date, and replace boilerplate as your analysis matures. A sample is provided below.
Regulatory note: A vague SAB 74 disclosure close to the adoption date can itself draw an SEC staff comment.
IMPORTANT Build the process and the controls around it.
☐ Build and document the account-to-category mapping. Create a repeatable mapping from chart of accounts to DISE natural categories, with a named owner and version control.
☐ Set your estimation methodology. Where direct tracing is impractical, document the reasonable-approximation method you will use and apply it consistently across all periods presented.
Regulatory note: ASU 2024-03 permits estimates and reasonable approximation. Consistency and documentation are what the auditor will test.
☐ Design tie-out controls. Reconcile disaggregated totals to the face of the income statement and to your existing depreciation (ASC 360) and intangible amortization (ASC 350) footnotes.
☐ Update disclosure controls and SOX documentation. Add the DISE process to your Rule 13a-15 disclosure controls and your SOX 302 and 404 control set under COSO 2013, with control owners and review evidence.
☐ Govern any AI tooling. If you use AI for mapping, anomaly detection, or reconciliation, wrap a human-reviewed, auditable control around it with documented review evidence.
Regulatory note: A model that touches numbers flowing into a filing is a control subject to design and operating-effectiveness testing.
☐ Engage external auditors early. Align on their expectations for testing the disaggregation, the mapping, and the estimates before the first reporting period.
☐ Brief the audit committee. Put DISE on the agenda with a timeline, owners, and a systems-readiness status.
BEST PRACTICE Go further to reduce surprises and capture the upside.
☐ Pilot the table on a recent period. Produce a dry-run disaggregated footnote using prior-year data to expose data gaps while there is still time to fix them.
☐ Plan the XBRL tagging. Coordinate with your filing team on structured-data tagging of the new ASC 220-40 table, consistent with the broader machine-readability trend.
☐ Define selling expenses deliberately. Decide and document your definition of selling expenses now, since you disclose it annually and must apply it consistently.
☐ Private companies: build the view anyway. If an IPO, sale, or inclusion in another filer’s statements is possible, develop the disaggregated data architecture early as both deal-readiness and management information.
Sample language to adapt
Sample SAB 74 transition disclosure (adapt to your facts)
In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses, which requires public business entities to disclose, in the notes to the financial statements, disaggregated information about specified categories of expense within relevant income statement captions. The standard is effective for the Company for annual periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027, with early adoption permitted.
The Company is evaluating the effect of adoption and currently expects the standard to affect disclosures only, with no impact on its financial position, results of operations, or cash flows. The Company is assessing the changes to its data-collection processes and internal control over financial reporting necessary to produce the required disclosures.
Tip: as your analysis matures, replace the general impact language above with specifics, such as the captions you have identified as relevant and the natural categories you will disaggregate.
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