Why expense transparency is becoming a competitive advantage
The FASB recently issued ASU 2024-03, requiring public companies to break down their expense reporting into granular categories such as purchases of inventory, employee compensation, depreciation, and other specific line items rather than broad buckets. The standard will be effective for annual reporting periods beginning after December 15, 2026. While nonpublic entities are currently scoped out of adoption, dismissing it altogether may be shortsighted. For real estate and construction companies, this guidance offers a useful lens into where financial reporting and market expectations are heading.
Here is why the standard matters for your business: If you are pursuing funding through Virginia Housing or HUD programs for affordable housing or multifamily developments, you are likely to face this level of expense reporting already. Lenders and capital partners are moving toward more rigorous and consistent financial reporting requirements, and granular expense reporting helps them assess project viability, operational efficiency, and cost segregation. Companies that can readily provide this information will have a competitive advantage when capital is on the table.
Preparing your financial reporting for what comes next
The transition does not have to be disruptive. These details already exist in your job costing system; it is a matter of identifying and organizing these expenses in a way that provides you (and potential investors) with clarity and compliant expense details. Start by evaluating your current chart of accounts and general ledger structure. Can you already distinguish between major expense categories, or would your team benefit from separating existing buckets into more specific line items, aligning with this new standard? Consider this as an opportunity to align your internal reporting with what investors, lenders, and agencies increasingly expect to see.
The implementation of expense disaggregation does not have to be only a compliance exercise. It is about positioning your company’s deal readiness in an environment where capital providers demand greater transparency and operational insight. Whether you are planning your next development, seeking financing for an affordable housing project, or want better visibility into where your costs are allocated, now is the time to evaluate whether your financial reporting is ready for where your business is headed.
If you would like to discuss how evolving expense reporting expectations may affect your real estate or construction business, contact your Opportunity Advisor or Email | Call: 804.747.0000
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The information contained within this article is provided for informational purposes only and is current as of the date published. Online readers are advised not to act upon this information without seeking the service of a professional accountant, as this article is not a substitute for obtaining accounting, tax, or financial advice from a professional accountant.
