IFRS 18 vs ASU 2024-03: The Definitive Expense Disaggregation Comparison

Two standards, one investor demand, completely different mechanisms. If your team is navigating both IFRS 18 and ASU 2024-03 simultaneously, the surface similarity, both push toward nature-of-expense transparency, masks divergences that will drive real differences in systems, disclosures, and audit scope. This comparison cuts through the noise and gives you the verdict.

Key takeaway: IFRS 18 restructures the face of your profit and loss statement and introduces a mandatory non-GAAP disclosure regime. ASU 2024-03 only adds a tabular footnote. They are not the same reform. Treating them as equivalent will cost you time and money.

What Does Each Standard Actually Require?

IFRS 18 was issued by the IASB on 9 April 2024, replacing IAS 1 entirely. IASB Chair Andreas Barckow called it "the most significant change to companies' presentation of financial performance since IFRS Accounting Standards were introduced more than 20 years ago." It is effective for annual periods beginning on or after 1 January 2027, with retrospective application required and early adoption permitted.

ASU 2024-03 (Disaggregation of Income Statement Expenses, or DISE) was issued by the FASB on 4 November 2024, adding ASC Subtopic 220-40. It is effective for public business entities (PBEs) for annual periods beginning after 15 December 2026 and for interim periods within fiscal years beginning after 15 December 2027. Transition is prospective by default, with an option for retrospective application. Early adoption is permitted.

For a deeper look at IFRS 18's income statement subtotals, see the IFRS 18 subtotals practitioner walkthrough. For ASU 2024-03 effective dates and the ASU 2025-01 clarification, see the ASU 2024-03 compliance calendar.

IFRS 18 vs ASU 2024-03: Side-by-Side Comparison

The Biggest Divergence: Face of Statement vs. Footnote

This is the operational divide that most comparisons understate.

IFRS 18 changes what appears on the primary financial statement. Every income and expense item must be classified into one of five mandatory categories at the transaction level. That means chart-of-accounts changes, ERP reclassifications, and in many cases a rebuild of how the general ledger maps to the P&L. Analysts will see a standardised "operating profit" line for every IFRS reporter for the first time, directly addressing what the IASB's research found: many companies already report an operating profit subtotal, but they calculate it differently, making cross-company comparison unreliable.

ASU 2024-03 changes only the footnotes. The income statement face looks identical after adoption. The work is aggregating natural expense data within each "relevant expense caption", defined as any expense caption on the face of the income statement within continuing operations that contains any of the five specified categories. As PwC notes, "depending on an entity's specific facts and circumstances, new system and process changes may be required as well as coordination across geographies, business segments, and multiple reporting systems." That is not a trivial lift, but it is a different kind of lift.

For analysts, the two standards serve complementary purposes. IFRS 18's mandatory operating profit subtotal gives a standardised EBIT-like figure for IFRS reporters. ASU 2024-03's natural expense footnotes let analysts decompose functional cost lines for US GAAP reporters. Neither substitutes for the other.

Nature-of-Expense Requirements: Where They Overlap and Where They Don't

Both standards push toward nature-of-expense transparency, but the mechanics differ.

Under IFRS 18, entities may still choose to present operating expenses by nature or by function. If they choose function (the more common approach for manufacturers, per an IASB staff paper from September 2017), they must provide a supplementary note breaking all operating expenses down by nature. The required categories are not prescribed to a fixed list; the entity discloses raw materials, salaries, depreciation, and other natural categories as applicable. This is broader than ASU 2024-03: it covers all operating expenses by function, not just those within specific captions containing the five enumerated categories.

Under ASU 2024-03, the tabular footnote is narrower in one sense and more prescriptive in another. It applies only to relevant expense captions, but it specifies exactly five natural categories to break out:

1. Purchases of inventory
2. Employee compensation
3. Depreciation
4. Intangible asset amortisation
5. DD&A recognised as part of oil-and-gas-producing activities, or other depletion

Amounts not separately disaggregated must be described qualitatively in the same table. There is no requirement to separately quantify these "other items," per Deloitte's DART FAQ on ASU 2024-03.

One practical wrinkle: ASU 2024-03 also requires disclosure of certain expense, gain, or loss amounts already required under existing US GAAP within the same tabular disclosure. This creates a consolidation opportunity for some entities whose existing footnotes already contain some of this data.

The MPM Gap: IFRS 18's Biggest Divergence from US GAAP

Management-Defined Performance Measures (MPMs) are the single largest divergence between the two standards, and the one most underestimated by finance teams.

IFRS 18 introduces a mandatory disclosure regime for MPMs. When an entity uses a non-IFRS subtotal of income or expenses in public communications outside the financial statements, such as adjusted EBITDA in an earnings release or investor presentation, that subtotal must be disclosed within the financial statements with:

• A reconciliation to the most directly comparable IFRS-required subtotal
• An explanation of why it provides useful information to investors

ASU 2024-03 is entirely silent on non-GAAP measures. US GAAP reporters are subject to SEC Regulation G and Item 10(e) of Regulation S-K for non-GAAP disclosures, but those are SEC rules, not FASB standards, and they operate differently from IFRS 18's MPM regime.

For multinationals that communicate adjusted EBITDA, adjusted operating income, or similar metrics in investor materials, IFRS 18's MPM rules bring those metrics into audit scope for the first time. This has no US GAAP parallel. For a step-by-step guide to building a compliant MPM reconciliation, see the IFRS 18 MPM reconciliation practitioner guide.

The Selling Expenses Disclosure: ASU 2024-03's Unique Requirement

IFRS 18 has no equivalent to ASU 2024-03's selling expenses disclosure.

ASU 2024-03 requires every PBE to disclose:

• The total amount of selling expenses in each reporting period
• In annual periods, the entity's own definition of selling expenses

The definition is entity-specific. There is no prescribed list of what counts as a selling expense. This means companies must make a policy decision, document it, and disclose it annually. If a company changes its method of presenting the tabular disclosure, it must disclose the reason for the change in the period of change and recast prior periods for comparative purposes unless impracticable, per Deloitte's DART FAQ.

This selling expenses requirement also interacts with existing segment reporting under ASC 280. Companies with multiple reportable segments may face complexity in allocating selling expenses across segments for the tabular disclosure, particularly where selling functions are shared or centralised.

Who Does Each Standard Apply To?

IFRS 18 scope

IFRS 18 applies to all entities that prepare financial statements under IFRS Accounting Standards. There is no private company exemption, no size threshold, and no carve-out for specific industries (though financial services and real estate companies have modified application rules for the five categories).

ASU 2024-03 scope

ASU 2024-03 applies to all PBEs as defined in the ASC Master Glossary. This is broader than "SEC registrants." It includes entities whose financial statements must be included in another SEC registrant's filing, for example under Reg S-X Rules 3-05, 3-09, or 3-14.

Excluded from ASU 2024-03:

• Private companies
• Not-for-profit entities
• Employee benefit plans under ASC 960, 962, and 965
• Broker-dealers under ASC 940
• Investment companies under ASC 946
• Registered insurance separate accounts under ASC 944

Two private-company scenarios that practitioners often miss:

1. A private company preparing for an IPO must apply ASU 2024-03 when filing its registration statement (e.g., Form S-1), even though the standard does not apply to it as a private company.
2. A private company acquired and required to file financial statements under Reg S-X Rule 3-05 must apply the standard for those filed statements.

The NAIC's Statutory Accounting Principles Working Group formally rejected ASU 2024-03 as not applicable to statutory accounting in August 2025, so insurance companies reporting on a statutory basis are not affected.

The Dual-Reporter Problem: When Both Standards Land on Your Desk

This is the scenario the top-ranking content does not address directly. Consider a multinational group with an IFRS-reporting parent listed in Europe and US GAAP subsidiaries whose financials are included in SEC filings under Reg S-X Rule 3-05.

• The parent must comply with IFRS 18: restructure the P&L into five categories, compute the two mandatory subtotals, implement the MPM disclosure regime, and provide the nature-of-expense supplementary note for any function-presented operating expenses.
• The US subsidiaries, as PBEs by virtue of their Reg S-X 3-05 inclusion, must comply with ASU 2024-03: produce the tabular footnote breaking out the five natural expense categories within each relevant expense caption, disclose total selling expenses, and define selling expenses annually.

The overlap is partial. Both regimes require nature-of-expense data, so a well-structured ERP that captures transactions at the natural expense level will serve both. But the specific categories differ, the disclosure locations differ (face of statement vs. footnote), and the MPM regime under IFRS 18 has no ASU 2024-03 counterpart. Dual reporters who try to satisfy both with a single disclosure architecture will need to map carefully where the requirements align and where they create additive burden.

For the non-GAAP dimension of this overlap, including how ASU 2024-03's five required categories create a GAAP baseline that affects SEC non-GAAP scrutiny, see the ASU 2024-03 non-GAAP disclosure overlap guide.

Effective Dates and Transition: What You Need to Do Now

The data collection urgency for ASU 2024-03 is real. Calendar-year PBEs that want retrospective comparatives for their fiscal year 2027 annual filing must have been capturing natural expense data since 2025, per PwC's In Depth guidance. Companies that have not started should assess now whether retrospective application is feasible or whether prospective adoption is the more practical path.

SEC registrants also face a pre-adoption disclosure obligation under ASU 2024-03: they must include in their filings a brief description of the standard, the planned adoption date, the expected transition method, and the anticipated impact on financial statements.

Implementation Readiness Checklist

Use this as a starting framework. Tailor it to your entity type and whether you face one standard or both.

For IFRS 18:

• Map all P&L line items to the five mandatory categories (operating, investing, financing, income taxes, discontinued operations)
• Identify which operating expenses are presented by function and scope the supplementary nature-of-expense note
• Identify all MPMs used in earnings releases, investor presentations, and other public communications
• Build reconciliations from each MPM to the most directly comparable IFRS subtotal
• Assess covenant and KPI implications of the new mandatory operating profit definition
• Update ERP chart of accounts to support category-level classification
• Communicate income statement restructuring to audit committee and board

For ASU 2024-03:

• Identify all relevant expense captions on the face of the income statement
• Confirm ERP can capture the five natural expense categories within each caption
• Define selling expenses and document the policy
• Decide prospective vs. retrospective transition; if retrospective, confirm 2025 data is being captured
• Assess expense reimbursement treatment: gross disclosure or net of reimbursement effects (both require disclosure of the elected method and a qualitative description)
• Coordinate across geographies, business segments, and reporting systems
• Prepare pre-adoption disclosure for SEC filings
• Brief audit committee on new tabular disclosure and audit procedures

For internal audit's role in covering DISE and IFRS 18 implementation risks, see the internal audit risk assessment guide for DISE and IFRS 18.

The Verdict: Convergence in Intent, Divergence in Mechanism

Both standards were driven by the same investor feedback: functional expense presentation obscures the nature of costs and makes it hard to assess future cash flows, compare performance across companies, and understand operating leverage. That shared origin creates surface-level similarity.

But the mechanisms are structurally different, and the differences matter:

• IFRS 18 is a primary-statement reform. It changes what investors see on the face of the P&L, mandates two new profit subtotals, and brings non-GAAP metrics into audit scope through the MPM regime. The implementation lift is substantial and the investor communication implications are significant.
• ASU 2024-03 is a footnote reform. It leaves the income statement face unchanged and requires a new tabular disclosure of five natural expense categories. The lift is real but contained, and the biggest risk is underestimating data collection lead time.
• The MPM gap is the most consequential divergence. IFRS 18's MPM regime has no US GAAP equivalent. Multinationals that communicate adjusted metrics in investor materials face a compliance area under IFRS 18 that ASU 2024-03 does not touch.
• Dual reporters face additive burden, not a unified regime. The two standards overlap on nature-of-expense data but diverge on structure, scope, and the MPM dimension. A single disclosure architecture will not satisfy both without careful mapping.

The practical question for most finance teams is not which standard is better, it is which applies to you, what each concretely requires, and whether your systems can produce the data. Both standards are live for fiscal year 2027 annual filings. The window to get ready is narrowing.

FAQ

Does ASU 2024-03 change the face of the income statement? No. ASU 2024-03 does not change the presentation of expenses on the face of the income statement. All new requirements are footnote disclosures only. This is a critical distinction from IFRS 18, which restructures the income statement itself.

Does ASU 2024-03 apply to private companies? No, with two important exceptions. A private company preparing for an IPO must apply ASU 2024-03 when filing its registration statement (e.g., Form S-1). A private company whose financial statements are required to be included in an SEC registrant's filing under Reg S-X Rules 3-05, 3-09, or 3-14 must also apply the standard for those filed statements.

What is a "relevant expense caption" under ASU 2024-03? Any expense caption presented on the face of the income statement within continuing operations that contains any of the five specified natural expense categories: purchases of inventory, employee compensation, depreciation, intangible asset amortisation, or DD&A/depletion. If a caption contains none of these, it is not a relevant expense caption and does not trigger the tabular disclosure.

What are IFRS 18's two mandatory profit subtotals? Operating profit (appearing after the operating section but before the investing section) and Profit before financing and income taxes (appearing after the investing section but before the financing section). ASU 2024-03 introduces no new required subtotals.

What is an MPM under IFRS 18, and does ASU 2024-03 have an equivalent? An MPM is any subtotal of income or expenses that an entity uses in public communications outside the financial statements and that is not required or specified by IFRS. IFRS 18 requires MPMs to be disclosed in the financial statements with a reconciliation to the most directly comparable IFRS subtotal. ASU 2024-03 is entirely silent on non-GAAP measures.

When must retrospective ASU 2024-03 adopters start collecting data? As early as fiscal year 2025 for calendar-year companies, given that retrospective application requires comparative data for the periods presented alongside the first-year adoption filing.