New Guidance on Segment Disclosures: FASB ASU 2023-07

The Financial Accounting Standards Board (FASB) recently issued ASU 2023-07, Improvements to Reportable Segment Disclosures, which introduces significant changes to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses and new segment disclosure requirements for single reportable segment entities.  

This update aims to enhance transparency and give investors more meaningful information about a company’s operations.  

Key Provisions of ASU 2023-07 

The main provisions of ASU 2023-07 include:  

• Single Reportable Segment Entities - Public entities with a single reportable segment must apply all of the ASU’s disclosure requirements and the existing segment disclosure and reconciliation requirements in ASC 280 on an annual and interim basis. 
• Significant Segment Expenses - Significant segment expenses are required to be disclosed by the reportable segment if they are regularly provided to the Chief Operating Decision Maker (“CODM”) and included in each reported measure of segment profit or loss. 
• Other Segment Items - Entities are required to disclose other segment items by reportable segment, which are the difference between segment revenues, less significant segment expenses, and less segment profit or loss, along with a description of its composition. 
• Multiple Measures of Segment Profit or Loss - Entities may disclose more than one measure of segment profit or loss used by the CODM as long as one of those measures is consistent with the measurement principles in U.S. GAAP. The SEC has issued guidance on the use and disclosure of non-GAAP measures and will not object to additional non-GAAP measures being included if they are regularly reviewed and used by the CODM to allocate resources and assess segment performance and comply with the requirements of ASC 280 and the SEC’s Regulation G and Regulation S-K item 10(e).  
• CODM’s Title and Position - Required to disclose the CODM’s title and position and explain how the CODM uses the reported measures annually. 
• Interim Disclosures - All existing annual disclosures must be disclosed on an interim basis. 
• Recasting Prior-Period Segment Information - Recasting of prior-period segment information to conform to current-period segment information is required if segment information regularly provided to the CODM is changed, which causes the identification of significant segment expenses to change.  

ASU 2023-07 did not change how a public entity identifies its operating segments, aggregates those operating segments, or applies the quantitative thresholds to determine its reportable segments. 

When Does ASU 2023-07 Go into Effect?  

The amendments in ASU 2023-07 are effective for all public entities for fiscal years beginning after December 15, 2023 (calendar year-end companies for FY2024) and interim periods within fiscal years beginning after December 15, 2024.  

How Should Organizations Prepare for ASU 2023-07?  

The amendments should be applied retrospectively to all periods presented unless impracticable. The amendments will impact all registrants, including those with only one reportable segment.  

To effectively implement ASU 2023-07, organizations should:  

• Evaluate existing segment disclosure practices and identify areas that need to be adjusted to comply with new standards and  
• Strengthen internal controls to maintain accurate and reliable segment data collection and reporting.  

For additional information on how to implement ASU 2023-07 and other recent FASB guidance, please use the form below to contact an EisnerAmper Assurance professional.