December 8, 2023
Financial Reporting: FASB Finalizes Segment Disclosure Changes
Late last month, FASB announced that it issued final ASU 2023-07 intended to improve segment reporting, which had been proposed in October of last year. The new guidance applies to annual periods ending after December 15, 2023, which means that calendar-year companies will first need to follow the new guidance for their Form 10-K filed in 2025, for the 2024 fiscal year. FASB’s press release lists the key amendments, which are generally consistent with the proposed ASU, apart from one transition disclosure requirement that FASB removed.
This Deloitte Heads Up reviews the new requirements in detail with illustrative examples. Entities with a single reportable segment should take particular note of this point from the alert:
Before adopting this ASU, entities with a single reportable segment were not explicitly required to provide segment disclosures beyond those provided on an entity-wide basis. Such entities will now be required to expand their segment footnote disclosures by providing all the disclosures currently required for multiple-segment entities as well as those required by the ASU. As part of this requirement, the entity’s segment revenue and profit or loss measure should be clearly disclosed and the entity must review information regularly provided to the [chief operating decision maker (CODM)] for significant segment expenses and other segment items.
Based on the alert and the spirited conversation during the Securities Registration Subcommittee Meeting at the Winter Meeting for the ABA Federal Regulation of Securities Committee, I think we’ll hear much more about this ASU as the accountants and auditors work through the changes. The issue that seems to be creating the most confusion is the following change and the interplay with MD&A disclosure and non-GAAP compliance.
Clarify that if the CODM uses more than one measure of a segment’s profit or loss in assessing segment performance and deciding how to allocate resources, a public entity may report one or more of those additional measures of segment profit. However, at least one of the reported segment profit or loss measures (or the single reported measure, if only one is disclosed) should be the measure that is most consistent with the measurement principles used in measuring the corresponding amounts in the public entity’s consolidated financial statements.
– Meredith Ervine