By Doug Rand; Audit & Assurance Managing Director, Deloitte & Touche LLP.

Talking points

• Financial reporting disclosures from 2024 highlight rising artificial intelligence (AI) usage, emerging global trade risks, and unique company insights through the lens of segment expenses.
• Our analysis also identified cybersecurity, global income tax (Pillar Two), and sustainability as key disclosure topics. 
• Deloitte can advise you on these and other SEC disclosure trends and requirements.

Financial reporting disclosures do more than just present financial results; they also serve as business bellwethers offering a glimpse into how macroeconomic trends, geopolitical shifts, global trade dynamics, and technological advances may affect a company and its investors.

With that in mind, Deloitte decided to take a closer look at Fortune 500 company annual report disclosures from the 2024 financial reporting cycle. The goal: to see how companies approached the current global business environment and regulatory landscape in their financial disclosures. The insights ahead shed light on key disclosure requirements, business trends and risks, and how companies are navigating and discussing them. 

Emerging issues

Let’s start with two topics that moved further to the forefront in 2024: AI and global trade. Both emerging issues led to a notable rise in the percentage of companies issuing disclosures during the year.

AI trends and risks

As AI technologies become more common in business, references to AI, including Generative AI (GenAI), are increasing in registrant risk factors and business sections. In these disclosures, companies focused on how they’ve integrated or plan to integrate AI and GenAI into their operations. They also detailed associated risks like data privacy and labor market effects. Discussions often cover:

• Legal and compliance requirements, including costs of adhering to policies like the EU Artificial Intelligence Act.
• Risks of regulatory penalties.
• Growth of AI-enabled cyberattacks.

The SEC staff warns against “AI washing,” or making unfounded AI claims, stressing that companies should substantiate any AI disclosures. They also encourage firms with significant AI risks to disclose their AI risk management and governance policies, promoting transparency and accountability in communicating AI strategies and managing risks.

Global trade challenges

Tariff uncertainty affected various industries and markets, leading to a significant increase in disclosures on the topic. Companies noted in their risk factors section that tariffs could affect their costs, profitability, and consumer demand, possibly requiring strategic adjustments to manage global supply chain issues. Many companies also mentioned that tariffs, along with retaliatory measures, could increase volatility in operating costs and sales margins. We anticipate that disclosures on this topic will evolve throughout 2025 as tariffs continue to impact the macroeconomic landscape.

Reportable segment disclosure requirements

Segment disclosures changed substantially in 2024 with the adoption of ASU 2023-07, which requires public entities to disclose significant segment expenses in the segment footnote. Footnote disclosures include the expense categories and amounts regularly provided to the chief operating decision maker (CODM), as well as segment measures of profit and loss.

Here are a few things to know about segment disclosures:

• Segment disclosures, including the new significant segment expenses, reflect management’s unique view of the business; so—not surprisingly—both the number and nature of significant expenses varied widely.
• The CODM’s title and position must now be disclosed, along with an explanation of how the CODM uses the reported segment measures. About 86% of Fortune 500 filers disclosed that the CODM is the CEO.
• ASU 2023-07 permits companies to disclose more than one measure of segment profit or loss used by the CODM; however, only about 7% of Fortune 500 filers did so.

These requirements aim to enhance transparency and provide a clearer understanding of how segment performance is evaluated and used by management.

Update on cybersecurity disclosures

The SEC’s final rule on cybersecurity disclosures, which took effect in December 2023, also figured prominently in our 2024 analysis. Now in its second year, the rule requires public companies to disclose material information about their cybersecurity risk management, strategy, and governance in their quarterly and annual reports. In 2024, more companies discussed certain common elements of their cybersecurity posture than the previous year, as shown in the following chart:

Pillar Two, sustainability, and other topics

Our analysis noted a modest increase in Pillar Two disclosures in 2024. Most registrants mentioned the uncertainty in timing, scope, and impact of the United States’ adoption of the framework. On the sustainability front, despite the rapidly evolving global policy landscape, most registrants continued to disclose sustainability matters in their annual reports under existing disclosure requirements, primarily as part of risk factors. For more on Pillar Two, sustainability, and other financial reporting insights, download Deloitte’s “Financial Reporting Spotlight.”

What role can Deloitte play?

Deloitte can advise you on SEC standards and leading practices for disclosing material risks, developments, and uncertainties related to rapidly changing business environments. For more information, visit our technical accounting and reporting services page. Don’t hesitate to reach out to me directly with any questions. For more information, visit our technical accounting and reporting services page.