December 31, 2024
Highlights
In Q4 2024, the FASB issued final guidance on disaggregation of income statement expenses and induced conversions of convertible debt instruments. In addition, the FASB released several exposure drafts for comment. Public calendar year-end companies will need to adopt the new segment reporting disclosures for the annual period 2024 in their Form 10-K. Looking forward, several ASUs will become effective in Q1 2025, including the accounting for crypto assets and joint ventures. Companies affected by these will need to assess the accounting impact of adoption.
Final Accounting Standards Issued
- In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40) Disaggregation of Income Statement Expenses. The new standard requires new tabular disclosures disaggregating prescribed expense categories within relevant income statement captions. ASU 2024-03 is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027, with early adoption permitted. The new standard will be applied either (1) prospectively to financial statements issued for reporting periods after the effective date of this Update or (2) retrospectively to any or all prior periods presented in the financial statements.
- In November 2024, the FASB issued 2024-04, Debt—Debt with Conversion and Other Options (Subtopic 470-20) No. 2024-04 November 2024 Induced Conversions of Convertible Debt Instruments. The new standard clarifies the assessment of whether a transaction should be accounted for as an induced conversion or extinguishment of convertible debt when changes are made to conversion features as part of an offer to settle the instrument. ASU 2024-04 is effective for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those reporting periods, with early adoption permitted for all entities that have adopted the amendments in ASU 2020-06.
Exposure Drafts
The following exposure drafts are open for comment:
| Exposure Draft | Summary | Comment Deadline |
Invitation to Comment—Recognition of Intangibles
| The purpose of this Invitation to Comment (ITC) is to solicit stakeholder feedback on whether the Board should pursue standard setting on intangibles. This ITC is focused on the initial recognition of intangibles. Specifically, the FASB would like to understand: 1. Whether there is a pervasive need to improve generally accepted accounting principles (GAAP) related to the accounting for and disclosure of intangibles (that is, is there a case for change) 2. What intangibles, or groups of intangibles, the FASB should consider addressing 3. What potential solution(s) the FASB should consider—including whether the potential solution or solutions are narrow for a specific intangible or could be applied broadly to a group of intangibles—and the expected benefits and expected costs of the potential solution(s) 4. Whether different accounting for intangibles should exist depending on how the asset is obtained (internally developed, acquired in a business combination, or acquired in an asset acquisition) 5. What information about intangibles an investor utilizes (or would utilize) for its analysis and how that information influences the investor’s capital allocation decisions.
| 5/30/25
|
Invitation to Comment—Financial Key Performance Indicators for Business Entities
| This Invitation to Comment (ITC) is being issued as part of the Financial Accounting Standards Board’s (FASB or Board) research project on financial key performance indicators (Financial KPIs) for business entities. The FASB staff is issuing this ITC to solicit additional feedback on potential standard setting for Financial KPIs, including the following: 1. Should Financial KPIs be standardized and, if so, which ones? 2. Should Financial KPIs be required or permitted to be disclosed in an entity’s generally accepted accounting principles (GAAP) financial statements and, if so, when and for what types of entities? | 4/30/25
|
Proposed Accounting Standards Update—Environmental Credits and Environmental Credit Obligations (Topic 818)
| The amendments in this proposed Update would improve GAAP by providing specific authoritative guidance for environmental credits and environmental credit obligations. An entity would be required to present its compliance environmental credit assets separately from its environmental credit obligation liabilities on the consolidated balance sheet. Environmental Credits An entity would be required to recognize an environmental credit as an asset when it is probable that the environmental credit will be (1) used to settle an environmental credit obligation or (2) transferred to another party in an exchange transaction. Environmental credits recognized as assets would be initially measured at cost unless received through a grant, which would be measured at the amount of transaction costs incurred. An entity would be required to recognize costs to obtain all other environmental credits as an expense when incurred. Environmental Credit Obligations An entity would be required to recognize an environmental credit obligation liability when events occurring on or before the reporting date result in an environmental credit obligation. An entity would be required to initially and subsequently measure an environmental credit obligation liability using the carrying amount of the compliance environmental credits that the entity holds and expects to use to settle that obligation at the reporting date.
| 4/15/25
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Proposed Accounting Standards Update—Government Grants (Topic 832): Accounting for Government Grants by Business Entities
| The amendments would establish guidance for a government grant including (1) a grant related to an asset and (2) a grant related to income. The amendments would require a consistent initial recognition threshold for all government grants. A government grant would be initially recognized when it is probable that (1) a business entity will comply with the conditions attached to the grant and (2) the grant will be received. A grant related to an asset is recognized in the balance sheet as either: 1) Deferred income 2) A part of the cost basis in determining the carrying amount of the asset. A grant related to income and a grant related to an asset in which the deferred income approach is elected would be recognized in earnings on a systematic and rational basis over the periods in which a business entity recognizes as expenses the costs the grant is intended to compensate. The amendments would require a business entity to present a grant related to income within earnings either (1) separately under a general heading such as other income or (2) deducted from the related expense.
| 3/31/2025
|
Proposed Accounting Standards Update—Interim Reporting (Topic 270): Narrow-Scope Improvements
| The amendments would clarify interim disclosure requirements and the applicability of Topic 270, which would result in a comprehensive list of interim disclosures that are required by GAAP. The amendments also include a disclosure principle that would require entities to disclose events and changes since the end of the last annual reporting period that have a material impact on the entity. The amendments also would clarify the applicability of Topic 270, the types of interim reporting, and the form and content of interim financial statements in accordance with GAAP.
| 3/31/2025
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Proposed Accounting Standards Update—Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software
| The amendments would remove all references to a prescriptive and sequential software development method (referred to as “project stages”) throughout Subtopic 350-40. The proposed amendments would specify that an entity would be required to start capitalizing software costs when both of the following occur: 1. Management has authorized and committed to funding the software project. 2. It is probable that the project will be completed and the software will be used to perform the function intended (referred to as the “probable-to complete recognition threshold”). In evaluating the probable-to-complete recognition threshold, an entity may have to consider whether there is significant uncertainty associated with the development activities of the software (referred to as “significant development uncertainty”). The proposed amendments would require an entity to separately present cash paid for capitalized internal-use software costs as investing cash outflows in the statement of cash flows. Additionally, the proposed amendments would supersede the website development costs guidance and incorporate the recognition requirements for website-specific development costs from Subtopic 350-50 into Subtopic 350- 40.
| 1/27/25
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Proposed Accounting Standards Update—Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets for Private Companies and Certain Not-for-Profit Entities | The amendments would provide private companies and certain not-for-profit entities with a practical expedient and 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.
| 1/17/25
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Taxonomy Updates
The FASB issued for comment proposed GAAP Taxonomy Improvements for proposed Accounting Standards Updates on Interim Reporting (Topic 270): Narrow-Scope Improvements, and on Government Grants (Topic 832): Accounting for Government Grants by Business Entities. The comment periods on the proposed GAAP Taxonomy Improvements for the proposed Updates on interim reporting and government grants both end on March 31, 2025.
The FASB Taxonomy staff recently issued for comment proposed GAAP Taxonomy Improvements for the proposed Accounting Standards Update on Topic 326: Measurement of Credit Losses for Accounts Receivable and Contract Assets for Private Companies and Certain Not-for-Profit Entities. The comment period on the proposed GAAP Taxonomy Improvements for the proposed Update on credit losses ends on January 17, 2025.
The FASB staff recently issued for comment proposed GAAP Taxonomy Improvements for the following proposed Accounting Standards Update on Topic 818: Environmental Credits and Environmental Credit Obligations. The comment period on the proposed GAAP Taxonomy Improvements for the proposed Update on environmental credits ends on April 15, 2025.
The FASB announced the availability of the 2025 GAAP Financial Reporting Taxonomy (GRT), the 2025 SEC Reporting Taxonomy (SRT), and the 2025 GAAP Employee Benefit Plan Taxonomy (EBPT). The FASB also announced the availability of the 2025 DQC Rules Taxonomy (DQCRT) and 2025 GAAP Meta Model Relationships Taxonomy (MMT).
Meetings
The following summarizes the various meetings with the FASB during the quarter. Full recaps and more details can be found at FASB.org.
- The FASB met on October 2, 2024 to discuss the post-implementation review (PIR) activities performed to date for Topic 606, Revenue from Contracts with Customers, and to discuss issues raised in feedback provided on the proposed Accounting Standards Update, Financial Instruments—Credit Losses (Topic 326): Purchased Financial Assets.
- The FASB and the IASB had a joint meeting on October 11, 2024 to discuss disaggregation of income statement expenses, statement of cash flows, intangibles, accounting for sustainability-related matters, post-implementation reviews, other projects and emerging issues.
- The FASB met on October 16, 2024 to present the Private Company Council’s (PCC) Presentation of Contract Assets and Contact Liabilities for Construction Contractors project for the Board’s endorsement. The FASB also met to present the PCC’s presentation related to the simplification of the application of Topic 326, Financial Instruments—Credit Losses, to current accounts receivable and contract assets arising from transactions accounted for under Topic 606, Revenue from Contracts with Customers.
- The EITF met on October 28, 2024 to discuss the issuance of new debt to repay old debt.
- The Investor Advisory Committee (IAC) met on November 7, 2024 to discuss business combinations, company spending, lending, deposits, insurance and reinsurance, financial key performance indicators, and disclosures by geography and product information.
- The FASB met on November 6, 2024 to discuss modifying the comment period for the proposed ASUs on interim reporting, accounting for government grants and accounting for environmental credit programs.
- The FASB met on November 20, 2024 to discuss the recommendation of EITF on issuance of new debt to repay old debt and whether to add it to its agenda. The FASB also discussed the effective date of disaggregation of income statement expenses for non-calendar year-end entities.
- The Small Business Advisory Committee (SBAC) met on November 21, 202r to discuss FASB updates, share-based consideration payable to a customer, financial KPIs for business entities, interim reporting, determining the acquirer in the acquisition of a VIE, issuance of new debt to repay old debt, and PCC credit losses.
- The Financial Accounting Standards Advisory Council (FASAC) met on December 5, 2024 to discuss highlights on current hot topics, FASB interpretive process and the EITF, financial key performance indicators for business entities, and post implementation review process.
- The Private Company Council (PCC) met on December 16, 2024 to discuss accounting for government grants, accounting for and disclosure of intangibles, and financial key performance indicators for business entities.
- The PCC met on December 17, 2024 to discuss PCC agenda priorities, debt modifications and extinguishments, PCC lease research project, credit losses, and presentation of contract assets and contract liabilities for construction contractors.
- The FASB met on December 18, 2024 to discuss comment letter feedback for the effective date for income statement expense disaggregation, and LIFO inventory costing method agenda request.
Upcoming Effective Dates
Guidance effective as of January 1, 2025 for calendar year-end public business entities (PBEs):
Guidance | Effective Date |
ASU 2023-05, Business Combinations—Joint Venture Formations (Subtopic 805-60): Recognition and Initial Measurement | Effective prospectively for all joint venture formations with a formation date on or after January 1, 2025. |
ASU 2023-08, Intangibles—Goodwill and Other—Crypto Assets (Subtopic 350-60): Accounting for and Disclosure of Crypto Assets | Effective for fiscal years beginning after December 15, 2024, including interim periods within those fiscal years. |
ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures | Effective for fiscal years beginning after December 15, 2024. |
ASU 2024-01, Compensation—Stock Compensation (Topic 718): Scope Application of Profits Interest and Similar Awards | Effective for fiscal years beginning after December 15, 2024, including interim periods within those fiscal years |
ASU 2024-02, Codification Improvements—Amendments to Remove References to the Concepts Statements | Effective for fiscal years beginning after December 15, 2024, including interim periods within those fiscal years. |
