Staying ahead of FASB changes
The Financial Accounting Standards Board (FASB) sets the rules for US GAAP, and its updates ripple through every aspect of financial reporting -- including how FP&A teams build budgets and forecasts. When a new Accounting Standards Update (ASU) changes how transactions are recognized or disclosed, FP&A models need to adapt.
Here are the most impactful recent and upcoming FASB changes that FP&A teams should have on their radar for 2026.
ASU 2023-07: Segment reporting improvements
Effective for fiscal years beginning after December 15, 2023, ASU 2023-07 requires enhanced disclosures about reportable segments, including significant segment expenses. For FP&A, this means:
- Budget at the segment level: If your company has reportable segments, your budget should capture revenue and expenses by segment with enough granularity to support the new disclosure requirements
- Significant expense categories: Identify the expense categories that will be disclosed by segment and ensure your planning model tracks them consistently
- Chief Operating Decision Maker (CODM) alignment: The new standard focuses on information regularly provided to the CODM. FP&A should ensure internal reporting aligns with the segment structure used in external filings
ASU 2023-09: Income tax disclosure improvements
Effective for fiscal years beginning after December 15, 2024, this update requires more granular rate reconciliation disclosures and disaggregated information about income taxes paid by jurisdiction. FP&A implications include:
- Jurisdictional tax detail: Your tax provision model needs to capture federal, state, and foreign tax at a level that supports the new disclosures
- Rate reconciliation items: Budget for specific reconciling items (state taxes, R&D credits, stock compensation windfalls) rather than using a single blended rate
- Cash tax forecasting: The requirement to disclose taxes paid by jurisdiction means FP&A should be forecasting cash taxes with geographic detail
Ongoing FASB projects to watch
### Disaggregation of income statement expenses
FASB has a project to require public companies to disaggregate certain expense line items on the income statement, such as breaking out employee compensation, depreciation, and amortization from within cost of goods sold and SG&A. If finalized, this would require FP&A teams to:
- Budget expenses at a more granular natural-account level
- Ensure the chart of accounts supports the required disaggregation
- Update reporting templates to present expenses in the new format
### Software costs
FASB is re-evaluating the accounting for internal-use software costs and costs to develop software for sale. Changes could affect how R&D and capitalized software costs flow through the P&L, requiring FP&A teams to adjust their technology cost models.
How FP&A teams should prepare
### 1. Monitor the FASB pipeline
Assign someone on the team to track active FASB projects and exposure drafts. The FASB website publishes a technical agenda quarterly. Understanding what is coming 12-18 months out gives you time to adjust models before the standard takes effect.
### 2. Align with your technical accounting team
When a new ASU is issued, schedule a working session with your technical accounting or financial reporting team to understand the specific impact on your company. FP&A should not interpret GAAP standards independently -- rely on the experts, then translate their guidance into model changes.
### 3. Build flexibility into your chart of accounts
The common thread across recent FASB updates is more granular disclosure. FP&A teams that budget at a high level (e.g., "total SG&A") will struggle to support new disclosure requirements. Build your chart of accounts with enough detail to accommodate future disaggregation, even if you do not need it today.
### 4. Update budget templates proactively
Do not wait until the first reporting period under a new standard to update your budget templates. Adjust them in advance so that the budget-to-actual comparison is apples-to-apples from day one.