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Is Your Finance Team Ready for FASB’s New Segment Expense Disclosure?

Chief Operating Decision Makers (“CODM”): Have you discussed with your finance team the significant expenses you focus on when determining how to allocate resources for your company? The new ASU 2023-07 FASB update is applicable for years beginning after December 15, 2023. Therefore, companies with year-ends of December 31, 2024, must disclose in their annual financial statements the key significant expenses that are reviewed on a recurring basis. Companies are required to disclose such significant expenses on a segment-by-segment basis. Therefore, significant expenses could be different from segment to segment. 

Auditors will want to ensure the disclosure’s completeness and accuracy, provided the company has appropriate internal controls surrounding how the CODM report is compiled. The source of the information will be critical. Further, the guidance requires retrospective application. Therefore, these disclosures will be required to be comparative, thus including significant expense information on December 31, 2023.

Most companies revisit their segment disclosures during the fourth quarter of their fiscal year.  With the adoption of the new accounting update, there is no better time than the present to get started. Not only are these disclosures required for annual reporting periods, beginning with the first quarter of 2025, but companies will also be required to include them in their quarterly financial statements on a retrospective basis.

How Centri Can Help

Centri can assist companies with these disclosures through collaboration with the finance team, auditors, and other key management members to ensure a smooth transition and expectations are aligned and met, including:

• Serving as the central point of contact for the working group, ensuring that responsibilities are clearly defined and critical deadlines are met.
• Reviewing your current system and its capabilities to identify the significant segment expenses to be reported within the appropriate timeframe.
• Developing/enhancing internal controls over the identification and reporting of the significant segment expenses to be reported in the footnote, as well as developing control activities over how the CODM is using these reported expenses to measure segments’ profit/loss. 
• Enhancing existing segment documentation in a memorandum to align with the new ASU, or if one has not been previously prepared, preparing a memorandum of how the Company complies with ASC 280, including the adoption of this Update.
• Assisting with the preparation of the segment footnote and its related required disclosures in the financial statements.

At Centri, our team of technical accounting experts has the knowledge and expertise to help your business navigate the new requirements. Contact us to learn more.

Blake Roberts

Partner | Technical Accounting Practice Leader | CPA

Blake is a Partner at Centri Business Consulting and the leader of the firm’s Technical Accounting Practice. He has more than 18 years of public accounting experience. View Blake Roberts's Full Bio

Michael Kirchner

Managing Director | CPA, MBA

Mike is a Managing Director at Centri Business Consulting. He has more than 16 years of accounting, advisory, and audit experience. View Michael Kirchner's Full Bio