October 1, 2025
Highlights
In the third quarter of 2025, the FASB issued three final accounting standard updates: 1) ASU 2025-05 for simplifying the estimation of expected credit losses, 2) ASU 2025-06 for revamping the accounting for costs related to internal-use software, and 3) ASU 2025-07 for excluding nonexchange-traded contracts with underlyings that are based on operations or activities of one of the parties from derivative accounting. The FASB also issued their fifth annual 2025 Investor Outreach Report, which highlights their investor outreach activities for the year ended June 30, 2025. Looking ahead, we can expect a final accounting standard update related to accounting for debt exchanges, government grants, environmental credit programs, credit losses for purchased financial assets, hedge accounting improvements, and interim reporting scope improvements in the last quarter of 2025.
Final Accounting Standards Issued
- In July 2025, the FASB issued ASU 2025-05— Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets. This Update provides all entities with a practical expedient and entities other than public business entities with an accounting policy election when estimating expected credit losses for current accounts receivable and current contract assets arising from transactions accounted for under Topic 606. The new standard is to be applied prospectively. It is effective for all entities for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods. Early adoption is permitted in both interim or annual reporting periods.
- In September 2025, the FASB issued ASU 2025-06— Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. This Update clarifies and modernizes the accounting for costs related to internal-use software. It removes all references to project stages throughout ASC 350-40 and requires entities to begin capitalizing software costs when both management authorizes and commits to funding a software project and it is probable that the project will be completed. The new standard will be effective for annual reporting periods beginning after December 15, 2027, and interim reporting periods within those annual reporting periods, for all entities. Early adoption is permitted. Entities may choose to apply the new guidance using a prospective transition approach, a modified transition approach, or a retrospective transition approach.
- In September 2025, the FASB issued ASU 2025-07—Derivatives and Hedging (Topic 815) and Revenue from Contracts with Customers (Topic 606): Derivatives Scope Refinements and Scope Clarification for Share-Based Noncash Consideration from a Customer in a Revenue Contract. This Update expands the scope exception for certain contracts not traded on an exchange to include contracts for which settlement is based on operations or activities specific to one of the parties to the contract. The new standard is to be applied prospectively. It is effective for all entities for annual reporting periods beginning after December 15, 2026, and interim reporting periods within those annual reporting periods. Early adoption is permitted. Entities are permitted to apply the amendments in this Update either (1) prospectively to new contracts entered into on or after the date of adoption or (2) on a modified retrospective basis through a cumulative-effect adjustment to the opening balance of retained earnings as of the beginning of the annual reporting period of adoption for contracts existing as of the beginning of the annual reporting period of adoption.
Exposure Drafts
The following exposure drafts are currently open for comment:
Exposure Draft | Summary | Comment Deadline |
Proposed Accounting Standards Update—Equity (Topic 505): Initial Measurement of Paid-in-Kind Dividends on Equity-Classified Preferred Stock | The proposed Update was issued to provide authoritative guidance on how an issuer should initially measure paid-in-kind (PIK) dividends on equity-classified preferred stock. The amendments in this proposed Update would require that PIK dividends on equity-classified preferred stock be initially measured on the basis of the PIK dividend rate stated in the preferred stock agreement.
| 10/27/25 |
Taxonomy Updates
- The FASB issued a proposed Taxonomy Implementation Guide, Expense Disaggregation Disclosure (Subtopic 220-40): Disaggregation of Income Statement Expenses, based on the 2025 GAAP Financial Reporting Taxonomy. The comment period ended on September 19, 2025.
- The FASB issued proposed technical and other conforming improvements for the 2026 SEC Reporting Taxonomy (SRT). The comment period ended on November 4, 2025.
Meetings
The following summarizes the various meetings with the FASB. Full recaps and more details can be found at FASB.org.
- The FASB met on July 23, 2025 to discuss Codification Improvements.
- The FASB met on August 13, 2025 to discuss the accounting for environmental credit programs and also added a project on digital assets to the agenda.
- The FASB met on September 3, 2025 to discuss the accounting for debt exchanges and the post-implementation review activities for leases.
- The Emerging Issues Task Force (EITF) met on September 9, 2025 to recommend that the FASB add a project to its agenda to address the application of Topic 715 to market-return cash balance plans.
- The FASB hosted a public roundtable meeting on September 12, 2025 to discuss the post-implementation review of leases.
- The Financial Accounting Standards Advisory Council (FASAC) met on September 18, 2025 to discuss current hot topics, agenda consultation, effects of the use of technology on standard setting, and post-implementation review of current expected credit losses.
- The FASB met on September 24, 2025 to discuss the accounting for and disclosure of intangibles and financial key performance indicators for business entities.
- The Private Company Council (PCC) and the AICPA Private Companies Practice Section Technical Issues Committee (TIC) met on September 25, 2025 to discuss leases, interest method and determining the effective interest rate, debt modifications and extinguishments, subjective acceleration clauses, and embedded derivatives.
- The PCC met on Friday September 26, 2025 to discuss agenda priorities, subjective acceleration clauses, interest method and determining the effective interest rate, accounting for debt exchanges, leases post-implementation review, FASB agenda consultation, financial key performance indicators for business entities, accounting for and disclosure of intangibles, and clarifying guidance for newly formed entities that are not joint ventures.
