Your management deck just became a source document.
In November 2023 the FASB issued Accounting Standards Update No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The summary states the reason plainly. Investors told the Board that although a segment revenue and a measure of profit or loss are disclosed, there is generally limited information about a segment expenses, so they supported enhanced expense disclosure. The Update answers that with what it calls the significant expense principle.
The mechanics are what make this an operating story rather than a technical accounting one. Paragraph 280-10-50-26A requires a public entity to disclose, for each reportable segment, the significant expense categories and amounts that are regularly provided to the chief operating decision maker and included in each reported measure of segment profit or loss. The disclosure is keyed to what the CODM already receives. The board deck, the monthly operating review, the management reporting package that has lived outside the statutory close and its controls, is now the source document for an audited footnote.
The timing is why this is worth writing about now. The amendments took effect for fiscal years beginning after 15 December 2023, and the interim requirement for interim periods within fiscal years beginning after 15 December 2024. So 2025 was the first year the significant expense disclosure appeared in quarterly filings, and 2026 is the first year it appears with prior year comparatives on every quarter. This is not a future project. It is a live process that most teams are running for the first or second full cycle, and the ones who wired it to a single governed source are finding it a great deal calmer than the ones who rebuild it each period.
The constructive point is that almost none of this is new information. The company already produces a segment measure for the CODM, already records expenses in the ledger, and already knows how one maps to the other, at least in somebody head. The Update asks you to make that mapping explicit, keep it, and run it every quarter. Build it once and the segment note reads from the same numbers the CODM reads, which is a cleaner outcome than most disclosures ever get.
What the Update actually asks for.
The summary lists six changes. They are worth reading together, because the significant expense principle gets the attention while the other five are what make it a repeatable process rather than a one time footnote. The interim requirement, the single reportable segment scope, and the recasting rule are the parts that turn a disclosure into a system.
| The change | Where it lives | What it asks for |
|---|---|---|
| Significant segment expenses | 280-10-50-26A | Disclose, annually and now in interim periods, the significant expense categories and amounts that are regularly provided to the CODM and included in each reported measure of segment profit or loss. First identify the expenses in the segment level information the CODM sees, then disclose the categories that are significant on qualitative and quantitative grounds. |
| Other segment items | 280-10-50-26B and 50-26C | Disclose an amount for other segment items by segment, with a description of its composition. The amount is segment revenue less the significant expenses disclosed under 50-26A less each reported measure of profit or loss. It is required even where an entity does not separately report significant expense categories for a segment. |
| Annual items, now interim | 280-10-50-32 and 50-33 | Provide the annual disclosures about a reportable segment profit or loss and assets in condensed interim statements too. Interim information is furnished for the current quarter and year to date, with comparable data for the preceding year. |
| Multiple measures allowed | 280-10-50-28A | Where the CODM uses more than one measure of a segment profit or loss, an entity may report more than one. At least one reported measure must be the one most consistent with the measurement principles used in the consolidated financial statements. |
| The CODM, named and explained | Summary provision 5, 280-10-50-29(f) | Disclose the title and position of the CODM, and an explanation of how the CODM uses each reported measure of segment profit or loss in assessing performance and deciding how to allocate resources. |
| Single reportable segment | Summary provision 6 | An entity with one reportable segment provides all of the new disclosures and all existing Topic 280 disclosures. A large population that never thought of itself as having segment reporting is now inside the requirement. |
One line in that table is easy to underestimate. An entity with a single reportable segment provides the full package. A company that has always said it operates in one segment, and has therefore never built segment machinery, now has to name its CODM, state the measure that person uses, and disclose the significant expense categories inside it. The population caught by that provision is large, and it is the population least ready for it.
The significant expense principle, one question at a time.
The principle sounds like a disclosure rule and behaves like a data pipeline. It starts at the CODM, not at the chart of accounts, and it ends at a reconciliation that has to foot. Reading it as a sequence of questions makes the design fall out of it.
| The question | Where it is answered | What it means in practice |
|---|---|---|
| What does the CODM actually receive? | 280-10-50-26A | The test starts with the segment level information regularly provided to the CODM, not with the chart of accounts. Identify the expense lines in that package. If a category is in the reported measure of segment profit or loss and the CODM sees it, it is a candidate. |
| Which of those categories are significant? | 280-10-50-26A | Apply relevant qualitative and quantitative factors. This is a judgement, and the SEC staff has signalled it expects that judgement to be supportable, so the reasoning belongs in the file rather than in a head. |
| Is anything easily computable from what the CODM sees? | 280-10-55-15A through 55-15B | An entity evaluates not only a segment expense regularly provided to the CODM but also one that is easily computable from information that is. A category can be in scope even when it is not printed as its own line in the deck. |
| What is left over, and can you describe it? | 280-10-50-26B | Everything in the reported measure that is not a disclosed significant expense falls into other segment items. The amount is a residual by construction, and its composition has to be described qualitatively, so it cannot be a silent plug. |
| Which measure reconciles to the statements? | 280-10-50-27 and 50-28A | Amounts are reported as the CODM sees them, but at least one reported measure must be the one most consistent with GAAP measurement in the consolidated statements, and it reconciles to consolidated income before tax. |
The easily computable step at paragraphs 280-10-55-15A through 55-15B is the one that catches teams out. It is not enough to disclose only the expense lines printed in the deck. If a category is easily computable from the information the CODM is regularly given, it is evaluated too. That widens the net beyond the literal contents of the package, which is why the mapping has to know where each number comes from rather than just copying the deck.
Other segment items is a residual, so make it foot.
Paragraph 280-10-50-26B defines other segment items as the difference between reported segment revenues less the significant expenses disclosed under 50-26A and each reported measure of segment profit or loss. It is a residual by design, and it is required with a qualitative description of its composition. That last part is the control. A residual with a described composition is a reconciliation. A residual with no description is a plug, and a large unexplained plug is exactly what invites a question.
Paragraph 280-10-50-26C goes further. Even where an entity does not separately report significant expense categories for one or more of its segments, it still discloses the other segment items amount and describes what is in it, and it explains the nature of the expense information the CODM uses to manage operations. There is no version of this where a segment expense picture is simply absent. Either you disclose the significant categories, or you describe why you cannot and what the CODM sees instead.
The practical design follows directly. Compute other segment items from the same numbers that produce segment revenue, the disclosed expenses and the reported measure, so it foots automatically. Hold its composition as a described list rather than a single figure. When the SEC staff has commented in this area, the recurring theme has been the size and the opacity of that line, so a small, well described residual is the version that does not generate a letter.
One governed source for the deck and the footnote.
The object worth building is a segment disclosure mapping, one per reportable segment, that sits between the CODM package and the ledger. It names the significant expense categories, ties each to the accounts and cost centers behind it, records the allocation basis where the number is not direct, computes the other segment items residual, and carries the reconciliation to the reported measure. Store it as data, version it, and both the interim note and the annual note read from it.
A segment disclosure mapping, expressed as data
# Segment disclosure model: one mapping per reportable segment
# Amounts are placeholders for shape, not real figures
reporting:
standard: "FASB ASC 280, as amended by ASU 2023-07"
basis: "Amounts as reported to the CODM, per 280-10-50-27"
codm:
title: "Chief Executive Officer" # disclosed, summary provision 5
position: "Principal executive officer"
uses_measure_to: "assess segment performance and allocate resources" # 280-10-50-29(f)
reported_measure:
name: "Segment operating profit"
gaap_consistent: true # at least one measure must be, 280-10-50-28A
reconciles_to: "Consolidated income before income taxes"
segment:
id: SEG-CLOUD
name: "Cloud Platform (placeholder)"
regularly_provided_to_codm: true
significant_expenses: # 280-10-50-26A, categories the CODM sees
- category: "Data center and hosting"
source_accounts: [6100, 6110, 6120]
allocation: direct
period_amount: 4200000.00
easily_computable: false
- category: "Employee compensation, engineering"
source_accounts: [7000, 7010]
allocation: "headcount driver HC-ENG"
period_amount: 3100000.00
easily_computable: false
- category: "Depreciation and amortization"
source_accounts: [8000, 8010]
allocation: "asset register, by segment tag"
period_amount: 900000.00
easily_computable: true # derivable from CODM information, 55-15A
other_segment_items: # 280-10-50-26B, the designed residual
amount: 700000.00
composition: "Costs in the measure but not regularly provided to the CODM, and small categories not separately disclosed"
reported_segment_profit: 5900000.00
reconciliation: # this block must foot, every period
segment_revenue: 14800000.00
less_significant_expenses: 8200000.00 # 4.20 + 3.10 + 0.90
less_other_segment_items: 700000.00
equals_reported_profit: 5900000.00
change_control:
codm_package_version: "2026-Q2-r3"
change_since_prior: none # a change here can trigger a recast, 280-10-50-34
last_reviewed: 2026-07-31The change control block at the bottom is not decoration. Paragraph 280-10-50-34 turns a change in what the CODM is regularly provided, where it changes the identification of significant segment expenses, into a recast of earlier periods, including interim periods, unless it is impracticable. A reorganisation, a new segment measure, or a redesigned board deck can all trip that wire. Versioning the CODM package is what lets you see the trigger when it happens, evidence the decision, and recast deliberately rather than discover the need during a close.
An implementation checklist.
- 1.Start from the CODM package, not the chart of accounts. The significant expense principle at 280-10-50-26A is anchored on the segment level information regularly provided to the CODM, so the first artefact is a clear, current copy of what that person actually receives, by segment, with the expense lines on it named.
- 2.Name the CODM and write down how the measure is used. Summary provision 5 and paragraph 280-10-50-29(f) require the title and position of the CODM and an explanation of how each reported measure is used to assess performance and allocate resources. This is a short paragraph, and it is easier to write while the decision is fresh than to reconstruct at year end.
- 3.Map each significant expense category back to ledger detail. For every category you disclose, record the accounts and cost or profit centers that roll into it and the allocation basis where the number is not direct. This mapping is what makes the disclosure repeatable each quarter and what an auditor will trace.
- 4.Treat other segment items as a reconciliation, not a plug. Paragraph 280-10-50-26B defines it as segment revenue less disclosed significant expenses less reported profit, and paragraph 280-10-50-26C wants its composition described. Build it so the block foots automatically and so its contents are a described list rather than an unexplained difference.
- 5.Decide significance with factors you can show. The standard asks for qualitative and quantitative judgement. Fix a working approach, apply it consistently across segments and periods, and keep the reasoning so a later question has an answer that already exists.
- 6.Check the single reportable segment case explicitly. If the company has one reportable segment, it still owes the full package. Confirm who the CODM is, what measure that person uses, and which expense categories sit inside it, because none of that machinery may exist yet.
- 7.Wire the interim path before the next quarter, not the next year. Paragraphs 280-10-50-32 and 50-33 put the disclosures into condensed interim statements with prior year comparatives. A process that only runs at year end will not survive a fast close, so build it to run every quarter from the same source.
- 8.Put change control on the CODM package. Paragraphs 280-10-50-34 and 50-35 require recasting earlier periods, including interim periods, when a change in the information regularly provided to the CODM changes the identification of significant segment expenses. Versioning the package is what lets you see, and evidence, when a recast is triggered.
Failure modes, framed so you can avoid them.
- Building the disclosure from the general ledger instead of the CODM package. The ledger records expenses by account and cost center, usually along functional lines. The standard keys the disclosure to what the CODM sees, which is often a different cut. Start from the wrong source and the categories will not match the ones the standard actually asks for.
- Letting other segment items become a large, undescribed number. It is defined as a residual, so anything the mapping fails to capture flows into it. A big, vague other line is exactly what draws a comment, because paragraph 280-10-50-26C asks for its composition to be described.
- Missing an easily computable category. Paragraph 280-10-50-26A and the guidance at 280-10-55-15A direct an entity to consider expenses that are easily computable from CODM information, not only the ones printed as their own line. A category left out on the grounds that it is not a separate line in the deck can still be in scope.
- Changing the management reporting package without checking for a recast. A reorganisation, a new segment measure, or a redesigned board deck can change which expenses are identified as significant. Paragraph 280-10-50-34 then requires prior periods to be recast unless it is impracticable. Making that change without tracing the disclosure consequence is how an unplanned restatement of comparatives appears.
- Treating the interim disclosure as a lighter version of the annual one. The interim requirement covers the segment profit or loss and asset disclosures and the significant expense information, with comparatives. A quarter that quietly drops the expense detail is not compliant.
- Assuming a single reportable segment company is exempt. It is not. Summary provision 6 pulls it fully into the new disclosures, and this is the population most likely to have no CODM package discipline, no segment measure defined in writing, and no expense mapping at all.
- Reporting only a non GAAP segment measure. An entity may report more than one measure, but paragraph 280-10-50-28A requires that at least one reported measure be the one most consistent with GAAP measurement in the consolidated statements. A single adjusted measure with no GAAP consistent anchor does not meet the requirement.
- Keeping the significance judgement and the CODM explanation only in a person memory. Both are the kind of qualitative content an auditor and the SEC staff ask about first, and both evaporate when the person who held them moves on. Written once, they serve every period.
What this asks of the data model.
- The missing object is a segment expense mapping, sitting between the CODM package and the ledger. Most finance architectures can produce a trial balance by account and a segment measure for the deck, and have nothing in between that ties a disclosed expense category to the accounts that make it up. Everything the significant expense principle asks for keys off that mapping.
- Segment tags belong on transactions, not only on summary reports. If the segment attribution lives only in a reporting layer, every disclosure is a rebuild. Attribution captured at the point a cost is recorded is what lets the significant expense categories and the reconciliation come out of the same query each period.
- Allocations need a stored basis, not a spreadsheet memory. Where a category is built by allocating centrally incurred costs, the driver and the version of it used belong on the mapping. Paragraph 280-10-50-29 asks for the nature of centrally incurred cost allocations, and a stored basis is what makes that description true and repeatable.
- Other segment items is a computed field with a described composition. Model it as segment revenue less disclosed significant expenses less reported profit, computed from the same numbers, with a list of what it contains. A described residual is defensible, and a bare number is not.
- The CODM measure needs an explicit reconciliation to consolidated results. At least one reported measure reconciles to consolidated income before income taxes, and significant reconciling items are separately identified. Storing that reconciliation as structured rows rather than as a static schedule is what makes it survive a change in the underlying numbers.
- Version the CODM package as data. The recasting rule at 280-10-50-34 turns a change in what the CODM sees into a financial reporting event. A package with a version, an effective date and a change note gives you the trigger, the evidence and the date, rather than a discovery at the next close.
- Interim and annual should read from one definition. The categories, the mapping and the reconciliation are the same object at Q1 and at year end. Two definitions drift, and drift between the interim note and the annual note is its own kind of finding.
- Keep the significance decision as a stored attribute. For each candidate category, record whether it was disclosed, and the qualitative and quantitative basis for that call. The judgement is part of the audit trail, and it is cheap to keep and expensive to rebuild.
The audit evidence to keep.
- The CODM package as it was actually provided, by period, with the expense lines it contained. This is the source document the significant expense principle points at, so the file should show what the CODM received rather than a later reconstruction of it.
- The mapping from each disclosed significant expense category to the accounts and cost centers behind it, with the allocation basis where the number is not direct. This is what supports tracing a footnote line back to the ledger.
- The reconciliation of segment revenue, disclosed significant expenses, other segment items and reported segment profit, showing that it foots for each segment and each period.
- The reconciliation of the reported segment measures to consolidated income before income taxes, with significant reconciling items separately identified per 280-10-50-31.
- The significance assessment for each candidate expense category, with the qualitative and quantitative basis for disclosing it or folding it into other segment items.
- The written explanation of how the CODM uses each reported measure, and the title and position of the CODM, matching the disclosure required by summary provision 5 and 280-10-50-29(f).
- The change log for the CODM package, showing whether any change altered the identification of significant segment expenses, and the recasting decision that followed under 280-10-50-34 and 50-35.
- The interim disclosures alongside the annual ones, demonstrating that the same categories, mapping and reconciliation produced both, with comparatives.
Questions worth asking in your own review.
- Who is our CODM, in writing, and can we state the measure that person uses and how they use it without a meeting to decide it?
- Does our segment note read from the same numbers the CODM package does, or are they assembled separately and reconciled at the end?
- For each significant expense category we disclose, can we trace it back to the accounts and cost centers that make it up?
- How large is our other segment items line, and can we describe what is in it without saying it is the difference?
- Have we checked for expense categories that are easily computable from what the CODM sees, not only the ones printed as separate lines?
- If we have a single reportable segment, have we built any of this, or have we assumed it does not apply to us?
- When did the CODM package last change, and did anyone check whether that change triggered a recast of comparatives?
- Does our interim process produce the significant expense disclosure every quarter from the same source, or only at year end?
What this adds up to.
ASU 2023-07 does something unusual for a disclosure standard. It reaches into the management reporting the company already produces and asks it to carry the same weight as the audited numbers. That can read as a burden, and it can also read as an invitation to close a gap that has quietly cost teams for years, the gap between the numbers leadership uses to run the business and the numbers the outside world gets to see.
What lands on a finance systems team is a mapping, not a project. Significant expense categories tied to ledger detail. An allocation basis stored rather than remembered. A residual computed so it foots and described so it is defensible. A reconciliation to the GAAP consistent measure. A versioned CODM package so a change is a signal rather than a surprise. Those are ordinary things to build, and they are the same object at Q1 and at year end.
If there is one place to start, start by asking whether your segment note and your CODM package read from the same numbers today. If they do, you are most of the way there. If they do not, that is the whole job, and the good news is that closing it makes the close faster, the audit cleaner and the deck and the footnote agree without anyone having to reconcile them by hand.
Sources.
- Financial Accounting Standards Board, Accounting Standards Update No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, November 2023. Downloaded as a PDF and read directly rather than through a summariser. Source for the six main provisions in the summary, the significant expense principle at 280-10-50-26A, the other segment items requirement at 280-10-50-26B and 50-26C, the measurement guidance at 280-10-50-27 through 50-28A, the requirement to explain how the CODM uses the reported measures at 280-10-50-29(f), the interim requirements at 280-10-50-32 and 50-33, the recasting requirements at 280-10-50-34 through 50-36, the easily computable guidance referenced at 280-10-55-15A through 55-15B, and the effective dates and retrospective transition
- Deloitte, Heads Up: FASB Issues Final Standard on Improvements to Reportable Segment Disclosures, first published 30 November 2023 and last updated 10 September 2024. A practitioner reading used to cross check the significant expense principle, the single reportable segment scope and the transition mechanics against the primary text
- KPMG, Handbook: Segment reporting, 2025 edition. Used as a cross check on how the significant expense principle interacts with the measure of segment profit or loss and on the interim disclosure requirements
- Grant Thornton, Snapshot 2023-13 (revised): FASB expands segment disclosure requirements, SEC staff shares additional views on the amendments in ASU 2023-07, updated September 2024. Used for the SEC staff observations on applying the significant expense principle and on the other segment items amount
- PwC, Viewpoint, Financial statement presentation guide, 25.7 Segment reporting disclosures. A second independent reference on the disclosure package and reconciliations
- CohnReznick, ASU update: New segment reporting requirements will apply to public entities. Used only as a cross check on the effective dates and the retrospective application requirement
Every paragraph reference, provision and date above was read from the primary document rather than from a summary of it. ASU 2023-07 was downloaded as a PDF and read directly, which is the source for the six main provisions, the significant expense principle at 280-10-50-26A, the other segment items requirement at 280-10-50-26B and 50-26C, the measurement and multiple measure guidance at 280-10-50-27 through 50-28A, the requirement to explain how the CODM uses the reported measures at 280-10-50-29(f), the interim requirements at 280-10-50-32 and 50-33, the recasting requirements at 280-10-50-34 through 50-36, the reference to the easily computable guidance at 280-10-55-15A through 55-15B, and the effective dates and retrospective transition. The Deloitte Heads Up, the KPMG handbook, the Grant Thornton snapshot recording SEC staff views, the PwC Viewpoint chapter and the CohnReznick note were used only to cross check scope, effective dates and the shape of the disclosure package, and no fact here rests on them alone. No embedded posts from X appear in this article, because no public post on this standard could be verified as current, relevant and authentic at the time of writing, and an unverified embed is worse than none. Nothing here is accounting, legal or tax advice for a specific company, and the treatment of any particular segment turns on the facts of that entity and the information its CODM actually receives.