Expense Disaggregation Disclosures Under ASC 220-40

Preparing the new expense disaggregation disclosures can be challenging. Make sure you get it right using BDO's "Blueprint".

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Overview

In response to stakeholder requests for more information about expenses, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2024-03: Income Statement — Reporting Comprehensive Income — Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (often referred to as DISE). The effective dates of ASU 2024-03 were later clarified by ASU 2025-01, Income Statement — Reporting Comprehensive Income — Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date. These ASUs were codified in Accounting Standards Codification (ASC) 220-40.

This Blueprint explains how a public business entity (PBE) applies the requirements in ASC 220-40 to identify relevant income statement expense captions and disclose information about required expense categories. It also provides graphics and examples to help readers understand the disclosure guidance. The graphics and examples in this Blueprint are intended to be illustrative only; individual PBEs’ disclosures may vary based on the facts and circumstances and therefore may differ from the illustrations provided in this Blueprint.

ASC 220-40 in a Nutshell

For each relevant expense caption, ASC 220-40 requires PBEs to provide expense disaggregation disclosures in both interim and annual reporting periods. Specifically, ASC 220-40 requires PBEs to disaggregate relevant expense captions into the following natural expense categories:

Purchases of inventory
Employee compensation
Depreciation
Intangible asset amortization
Depreciation, depletion, and amortization (DD&A)

ASC 220-40 also requires PBEs to separately disclose selling expenses and integrate specific disclosures required by other U.S. GAAP.

Objectives and Scope

The objective of ASC 220-40 is to provide transparency about the components of specific expense captions in the income statement. ASC 220-40 applies to PBEs as defined in the ASC Master Glossary. ASC 220-40 does not apply to private companies, not-for-profit entities, or employee benefit plans.

For more information on the objectives and scope of ASC 220-40, see Chapter 1.

Expense Disaggregation and Other Required Disclosures

ASC 220-40 requires PBEs to provide the following disclosures in both interim and annual reporting periods:

DISCLOSURE	REQUIREMENTS (FOR INTERIM AND ANNUAL REPORTING PERIODS)
Expanded expense disclosures	Identify relevant expense captions presented on the face of the income statement in continuing operations. Disaggregate each relevant expense caption into the following required expense categories in a tabular format in the notes to the financial statements: Purchases of inventory Employee compensation Depreciation Intangible asset amortization DD&A recognized as part of oil and gas-producing and other extractive activities Disclose expenses exempt from disaggregation in other items or elsewhere.
Disclosures required by other U.S. GAAP	Include disclosures of specific expenses, gains, and losses required by other U.S. GAAP, as applicable, for each relevant expense caption. Present the amount required by other U.S. GAAP in the table as a separate line item.
Expense reimbursements and cost sharing arrangements	Disclose expense reimbursements related to cost sharing or expense reimbursement arrangements with another entity, as applicable, for each relevant expense caption. Present reimbursements to another entity as a separate line item in the table. Present reimbursements from another entity either as a separate line item in the table or on a net basis within the relevant expense category, with a separate disclosure of the policy applied.
Other items remaining in relevant expense captions	Include an amount for other items, which represents the difference between the total relevant expense caption and the aggregate of all separately disclosed expense categories. Describe qualitatively what is included in other items.
Selling expenses	Disclose how the entity defines selling expenses. (This requirement only applies annually, unless the definition changes in an interim period.) Disclose the total selling expenses recognized in continuing operations in the notes to the financial statements.
Changes in presentation	Disclose any changes in definition or election that result in disclosure presentation changes. Recast prior periods to conform with changes in definition or election (unless impracticable).

For more information on expense disaggregation and other required disclosures, see Chapter 2.

Illustrative Examples

ASC 220-40 includes three examples to illustrate the disaggregation of relevant expense captions, which are reproduced in this Blueprint.

For more information, see Chapter 3.

Effective Date and Transition

ASC 220-40 is effective for annual reporting periods beginning after December 15, 2026, and for interim reporting periods within annual reporting periods beginning after December 15, 2027. In other words, a calendar-year PBE must apply ASC 220-40 to annual reports beginning January 1, 2027 for the year ended December 31, 2027, and to interim reports thereafter (beginning the quarter ending March 31, 2028). Early adoption is permitted.

For more information on the effective date and transition, see Chapter 4.

BDO’s Accounting Advisory practice can help navigate the complexities of applying U.S. GAAP and adopting new accounting guidance.

Blueprints Accounting Presentation & Disclosure

November 05, 2026

Jennifer Kimmel Professional Practice Principal, Accounting, Assurance
Meghan Depp Professional Practice Principal, SEC Services, Assurance
Angela Newell Principal Deputy Chief Accountant, Professional Practice, Accounting, Assurance