What You Need to Know About New Accounting Standards – 2026 Accounting Standards Updates Issued and Applicable Now

Summary: This ASU introduces an accounting model that establishes recognition, measurement, presentation, and disclosures requirements for environmental credits and compliance obligations that may be settled using environmental credits. Environmental credits are enforceable rights represented to prevent, control, reduce, or remove emissions or other pollution that are separately transferable in an exchange transaction. An entity is required to recognize an environmental credit as an asset when it is probable that the credit will be 1) used to settle and environmental credit obligation, 2) transferred in an exchange transaction, or 3) used in a nonreciprocal transfer. The new standard outlines the requirements for recognition, presentation, and disclosure of these assets.

In addition, the standard identifies environmental credit obligations as enforceable obligations resulting from regulatory compliance programs represented to prevent, control, reduce, or remove emissions or other pollution that may be settled with environmental credits. The standard also addresses the measurement, presentation, and disclosure for the obligations.

The update should be applied on a retrospective basis through a cumulative-effect adjustment to the opening balance of retained earnings (or other appropriate component of equity or net assets) as of the beginning of the annual reporting period of adoption. An entity should not recast any financial information before the period of adoption. 

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.

Summary: This update is intended to improve the relevance and consistency in application of the induced conversion guidance in FASB Accounting Standards Codification Subtopic 470-20, Debt—Debt with Conversion and Other Options. Current generally accepted accounting principles provide guidance for determining whether a settlement of convertible instruments at terms different from the original conversion terms should be accounted for as an induced conversion (as opposed to a debt extinguishment). Because that guidance was written in the context of share-settled convertible debt instruments, stakeholders raised questions about how to apply the existing induced conversion guidance to settlements of convertible debt instruments with cash conversion and other features that have become prevalent in the marketplace. The amendments in the ASU clarify requirements for determining whether certain settlements of convertible debt instruments, including convertible debt instruments with cash conversion features or convertible debt instruments that are not currently convertible, should be accounted for as an induced conversion.

Summary: This update removes references to the various FASB Concepts Statements. FASB Concepts Statements are nonauthoritative guidance considered by the FASB when developing standards. In most instances, the reference to the Concepts Statements is extraneous and does not require an entity to understand or apply the guidance. 

Additionally, in certain instances, the codification references Concepts Statements that are superseded, which could provide opportunities for diverse implementation over time. The removal of the Concepts Statements from the codification will draw a distinction between authoritative and non-authoritative literature. Generally, the amendments in this update are not intended to result in significant accounting changes for most entities. 

Entities may elect to apply this on either a prospective basis on all transactions recognized on or after the date the entity first applies the amendments or retrospectively to the beginning of the earliest comparative period presented.  

Summary: The amendments in the ASU add an illustrative example to Topic 718 to demonstrate how an entity should apply the scope guidance to determine whether profits interests and similar awards should be accounted for in accordance with this topic. The example is meant to address a reported diversity in practice in determining whether to account for an award under Topic 718, Compensation – General (Topic 710), or other topics.

The amendments should be applied either retrospectively to all prior periods presented in the financial statements or prospectively to profits interest and similar awards granted or modified on or after the date at which the entity first applies the amendments. 

Summary: The intent of this standard is to enhance the decision usefulness of income tax disclosures. The standard applies to all entities subject to ASC Topic 740, Income Taxes, however, certain of the disclosures that are required by the amendments in this update are not required for entities other than public business entities. For entities other than public business entities this standard requires disclosures about the specific categories of reconciling items in individual jurisdictions that result in a significant difference between the statutory tax rate and the effective tax rate. 

In addition, entities will be required to disclose the amount of income taxes paid (net of refunds received) disaggregated by federal, state, and foreign taxes. They will also disclose the amount of income taxes paid (net of refunds) disaggregated by individual jurisdictions in which income taxes paid (net of refunds received) is equal to or greater than five percent of total income taxes paid (net of refunds). The standard also outlines additional disclosure requirements for all entities and specific updates for public business entities.   

This standard will be applied on a prospective basis, but retrospective application is permitted.