Key Takeaways
- Several new FASB accounting standards updates (ASUs) have been issued or are becoming effective in 2025. These updates include guidance on joint ventures, crypto assets, insurance contracts, equity securities, variable interest entities, and share-based considerations.
- ASU 2023-05 addresses the recognition and initial measurement of contributions to joint ventures, while ASU 2023-08 provides comprehensive accounting and disclosure guidance for crypto assets.
- The amendments in ASU 2025-05 simplify accounting for credit losses through a practical expedient and an accounting policy election.
With 2024 reporting behind us, it’s time to look ahead at what is coming for December 31, 2025, year-end reports (and beyond).
Standards Effective Now
The most significant updates effective now are:
- ASU 2023-05 Business Combinations – Joint Venture Formations (Subtopic 805-60): Recognition and Initial Measurement
- ASU 2023-08 Intangibles – Goodwill and Other – Crypto Assets (Subtopic 350-60): Accounting for and Disclosure of Crypto Assets
ASU 2023-05 addresses the accounting for contributions made to a joint venture, upon formation, in a joint venture’s separate financial statements, including the determination of goodwill.
2023-08 provides accounting and disclosure guidance for crypto assets meeting certain criteria. Qualifying crypto assets will be subsequently measured at fair value with changes recognized in income each reporting period.
New Accounting Standards Issued in 2025
| 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 | |
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| Summary: The amendments in this ASU address two issues: 1) Derivative Scope Refinements and 2) Scope clarifications for Share-Based Noncash Consideration from a Customer in a Revenue Contract. Issue 1 – Derivative Scope Refinements: This amendment excludes from derivative accounting non-exchange-traded contracts with underlyings that are based on operations or activities specific to one of the parties to the contract. This expands upon the scope exception provided by current GAAP. This improvement is expected to result in more contracts and embedded features being excluded from the scope of Topic 815. Examples of contracts included in the standard that would meet the criteria for the scope exception include bonds in which interest payments vary based on environmental, social, and governance linked metrics, research and development funding arrangements, and litigation funding arrangements. The amendments of the issue may be applied either prospectively to new contracts entered into on or after the date of adoption or on a modified retrospective basis with instrument-by-instrument considerations if the modified retrospective basis is elected. Issue 2 – Scope Clarification for Share-Based Noncash Consideration from a Customer in a Revenue Contract: This provides clarification on accounting for share-based noncash consideration, such as warrants or shares, received from a customer that is consideration for the transfer of goods or services. The standard clarifies that an entity should apply the guidance in topic 606-10-31-21 through 32-24 to a contract with share-based noncash consideration. The guidance in other topics (Topic 815 on derivatives and hedging and Topic 321 on equity securities) does not apply to share-based noncash consideration from a customer for the transfer of goods or services unless and until the entity’s right to receive or retain the share-based noncash consideration is unconditional under Topic 606. The amendments of the issue may be applied either prospectively to new contracts entered into on or after the date of adoption or on a modified retrospective basis. |
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| Effective date for PBEs | Fiscal years beginning after December 15, 2026 |
| Effective date for non-PBEs | Fiscal years beginning after December 15, 2026 |
| Early adoption | Permitted |
| 2025-06 — Intangibles — Goodwill and Other — Internal Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software | |
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| Summary: This standard modernizes the accounting for internal-use software by eliminating the outdated project stage model and introducing a more flexible capitalization threshold based on management’s commitment and the likelihood of project completion, referred to as the “probable-to-complete" threshold. It also introduces the concept of “significant development uncertainty,” requiring entities to assess (1) whether uncertainty exists relating to technological innovations or novel, unique, or unproven functions or features which have not been resolved through coding and testing, and (2) whether there are unresolved performance requirements, including whether the entity expects to make substantial revisions to the performance requirements. Either scenario will prevent capitalization until the uncertainties are resolved. Additionally, the ASU consolidates the website development guidance into accounting standard codification (ASC) section 350-40 and aligns disclosure requirements for capitalized software costs with those for property, plant, and equipment. The amendments of the ASU may be applied on either: 1) A prospective transition approach, 2) a modified transition approach that is based on the status of the project and whether software costs were capitalized before the date of adoption, or 3) A retrospective transition approach. |
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| Effective date for PBEs | Fiscal years beginning after December 15, 2027 |
| Effective date for non-PBEs | Fiscal years beginning after December 15, 2027 |
| Early adoption | Permitted |
| 2025-05 — Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets | |
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| Summary: This update introduces a practical expedient for all entities and an accounting policy election for non-public business entities to simplify estimating credit losses related to current accounts receivable and current contract assets arising from revenue transactions under ASC 606. Practical Expedient: Under the practical expedient, entities may assume that conditions at the financial statement date persist through the forecast period, reducing the complexity of evaluating and documenting the impact of forecasts on the allowance for credit loss. Accounting Policy Election: Non-public entities may also make an accounting policy election to consider post-balance sheet collections of receivables when estimating credit losses by considering collections through the date the financial statements are available to be issued, or using an alternative date selected by the entity. A change in the date through which an entity considers subsequent collection activity from year to year is not considered a change in accounting principle. Entities that make the accounting policy election must disclose the date through which collections were considered. The amendments of the ASU should be applied prospectively. |
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| Effective date for PBEs | Fiscal years beginning after December 15, 2025 |
| Effective date for non-PBEs | Fiscal years beginning after December 15, 2025 |
| Early adoption | Permitted |
| 2025-04 — Compensation — Stock Compensation (Topic 718) and Revenue from Contracts with Customers (Topic 606): Clarifications to Share-Based Consideration Payable to a Customer | |
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Summary: The amendments in this ASU are expected to improve the operability of accounting guidance for share-based consideration payable to a customer and reduce diversity in practice by making the following key changes:
The amendments of the ASU may be applied on either a modified retrospective or a retrospective basis. |
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| Effective date for PBEs | Fiscal years beginning after December 15, 2026 |
| Effective date for non-PBEs | Fiscal years beginning after December 15, 2026 |
| Early adoption | Permitted |
| 2025-03 — Business Combinations (Topic 805) and Consolidation (Topic 810): Determining the Accounting Acquirer in the Acquisition of a Variable Interest Entity | |
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| Summary: This ASU was issued to revise current guidance for determining the accounting acquirer for a transaction effected primarily by exchanging equity interests in which the legal acquiree is a variable interest entity (VIE) that meets the definition of a business. The amendments of the ASU require that an entity involved in this type of transaction consider the same factors currently required for determining which entity is the accounting acquirer in other acquisition transactions, as provided in ASC 805-10-55-12 through 55-15. Under these amendments, it is anticipated that more acquisition transactions effected primarily by exchanging equity interests in which the legal acquiree is a VIE will result in the same accounting outcomes as economically similar transactions in which the legal acquiree is a voting interest entity. The amendments of this ASU will be applied on a prospective basis to all business combinations that have an acquisition date that occurs on or after the date of initial application of the ASU. |
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| Effective date for PBEs | Fiscal years beginning after December 15, 2026 |
| Effective date for non-PBEs | Fiscal years beginning after December 15, 2026 |
| Early adoption | Permitted |
| 2025-02 — Liabilities (405): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 122 | |
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| Summary: This ASU was issued pursuant to SEC Staff Accounting Bulletin No. 122, which rescinds the interpretive guidance included in Section FF of Topic 5 in the Staff Accounting Bulletin Series entitled Accounting for Obligations to Safeguard Crypto-Assets an Entity Holds for its Platform Users. This ASU has no impact on non-PBEs. | |
| Effective date for PBEs | Fiscal years beginning after December 15, 2024 |
| Effective date for non-PBEs | Not applicable |
| Early adoption | Not applicable |
| 2025-01 — Income Statement — Reporting Comprehensive Income — Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date | |
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| Summary: This ASU was issued to clarify the effective date of ASU 2024-03 Income statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. ASU 2025-01 requires PBEs to adopt the amendments of ASU 2024-03 in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. Early adoption of ASU 2024-03 is permitted. | |
| Effective date for PBEs | Fiscal years beginning after December 15, 2026 |
| Effective date for non-PBEs | Not applicable |
| Early adoption | Not applicable |
What's effective for non-public December 31, 2025, financial statements?
The following ASUs are effective for December 31, 2025* financial statements (applicable to all entities, unless otherwise noted).
* Generally, FASB sets effective dates by segregating public business entities (PBE) from all other entities. Occasionally, FASB will additionally segregate smaller reporting companies (SRCs), not-for-profit entities (NFPs) that have issued or are conduit bond obligors for securities that are traded, listed, or quoted on an exchange or an over-the-counter market, or employee benefit plans that file or furnish financial statements with or to the SEC. The effective dates included below are the dates applicable to both PBE and non-PBE entities. However, the non-PBE effective dates are used in determining if they are applicable for 2025.
| 2023-08 — Intangibles — Goodwill and Other — Crypto Assets (Subtopic 350-60): Accounting for and Disclosure of Crypto Assets | |
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| Summary: This standard provides guidance for accounting for crypto assets, including six criteria that assets must meet to qualify as crypto assets under this guidance. For qualifying assets, the updated guidance requires that crypto assets are measured at fair value with changes recognized in net income each reporting period. It also provides guidance for balance sheet, income statement, and cash flow presentation, as well as guidance related to required disclosures for entities holding these assets. This is a significant change from current GAAP in which crypto assets were carried at cost and measured for impairment annually. The amendments will require a cumulative-effect adjustment to the opening balance of equity or net assets as of the beginning of the annual reporting period in which an entity adopts the amendments. |
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| Effective date for PBEs | Fiscal years beginning after December 15, 2024 |
| Effective date for non-PBEs | Fiscal years beginning after December 15, 2024 |
| Early adoption | Permitted |
| 2023-05 — Business Combinations — Joint Venture Formations (Subtopic 805-60): Recognition and Initial Measurement | |
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| Summary: This standard addresses the accounting for contributions made to a joint venture, upon formation, in a joint venture’s separate financial statements. Previous GAAP excluded guidance related to this topic and as such there was diversity in practice in regard to accounting for these transactions/formations. Under the new guidance, a newly formed joint venture will initially measure its assets and liabilities at fair value (with exceptions to fair value measurement that are consistent with the business combination guidance). This approach is generally consistent with other new basis of accounting models, such as fresh start reporting in accordance with Topic 852. The key points in this standard include: (1) A joint venture is the formation of a new entity without an accounting acquirer, (2) A joint venture measures its identifiable net assets and goodwill, if any, at the formation date, (3) Initial measurement of a joint ventures total net assets is equal to the fair value of 100% of the joint venture’s equity and (4) A joint venture provides relevant disclosures. The amendments in this ASU will be applied on a prospective basis and affect all joint venture formations on or after January 1, 2025. Additionally, a joint venture that was formed before January 1, 2025 may elect to apply the amendments retrospectively if it has sufficient information. |
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| Effective date for PBEs | All joint venture formations with a formation date on or after January 1, 2025 |
| Effective date for non-PBEs | All joint venture formations with a formation date on or after January 1, 2025 |
| Early adoption | Permitted |
| 2023-02 — Investments — Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method (a consensus of the Emerging Issues Task Force) | |
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| Summary: FASB issued this ASU with the intent of improving the accounting and disclosures for investments in tax credit structures. The ASU allows reporting entities to elect to account for qualifying tax equity investments using the proportional amortization method, regardless of the program giving rise to the related income tax credits. Reporting entities were previously permitted to apply the proportional amortization method only to qualifying tax equity investments in low-income housing tax credit (LIHTC) structures. In addition, LIHTC investments not accounted for using the proportional amortization method will no longer be permitted to use the delayed equity contribution guidance. The amendments in this ASU must be applied on either a modified retrospective or a retrospective basis, except for LIHTC investments not accounted for using the proportional amortization method which have modified transition methods. |
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| Effective date for PBEs | Fiscal years beginning after December 15, 2023 (interim periods within those fiscal years) |
| Effective date for non-PBEs | Fiscal years beginning after December 15, 2024 (interim periods within those fiscal years) |
| Early adoption | Permitted |
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2022-05 Financial Services — Insurance (Topic 944): Transition for Sold Contracts 2020-11 Financial Services — Insurance (Topic 944): Effective Date and Early Adoption 2019-09 Financial Services — Insurance (Topic 944): Effective Date 2018-12 Financial Services — Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts |
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| Summary: ASU 2018-12 applies to all insurance entities that issue long-duration contracts as defined in Topic 944, Financial Services – Insurance. The amendments of the ASU provide targeted improvements to the existing recognition, measurement, presentation, and disclosure requirement for long-duration contracts issued by an insurance entity. The amendments (1) improve the timeliness of recognizing changes in the liability for future policy benefits and modify the rate used to discount future cash flows (2) Simplify and improve the accounting for certain market-based options or guarantees associated with deposit (or account balance) contracts, (3) Simplify the amortization of deferred acquisition costs (4) Improve the effectiveness of the required disclosures. Effective date and transition guidance with respect to ASU 2018-12 was amended through the issuance of ASUs 2019-09, 2020-11, and 2022-05. Early adoption is permitted. The amendments are to be applied retrospectively to the earliest period presented or as of the beginning of the prior fiscal year if early application is elected. However, due to ASU 2022-05, an entity may make an accounting policy election on a transaction-by-transaction basis to exclude contracts that meet the following criteria as of the effective date (1) The insurance contracts must have been derecognized because of a sale or disposal of individual or a group of contracts or legal entities and (2) The entity has no significant continuing involvement with the derecognized contracts. |
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| Effective date for PBEs that meet the definition of an SEC filer | Fiscal years beginning after December 15, 2022 |
| Effective date for all other entities | Fiscal years beginning after December 15, 2024 |
| Early adoption | Permitted |
| 2022-03 — Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions | |
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| Summary: This ASU clarifies that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value, nor can the contractual sale restriction be separately recognized and measured. The ASU also requires disclosure of (1) the fair value of equity securities subject to contractual sale restrictions reflected in the balance sheet (2) the nature and remaining duration of the restriction(s), and (3) the circumstances that could cause a lapse in the restrictions. | |
| Effective date for PBEs | Fiscal years beginning after December 15, 2023 |
| Effective date for non-PBEs | Fiscal years beginning after December 15, 2024 |
| Early adoption | Permitted |
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