Don't miss deadlines: Previously issued FASB standards take effect, driving reporting shifts through 2028 | Baker Tilly
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Don't miss deadlines: Previously issued FASB standards take effect, driving reporting shifts through 2028
Dec. 1, 2025
Seventeen already-issued accounting rules from the Financial Accounting Standards Board (FASB) are set to shape how companies and organizations report finances, with mandatory effective dates for some beginning in 2025 and continuing through 2028, demanding meticulous attention to both annual and interim periods.
These Accounting Standards Updates (ASUs) represent shifts that could impact everything from a company's balance sheet to how its financial health is perceived, a Thomson Reuters analysis of the rules found. While some updates were announced years ago, they are now reaching their implementation deadlines. The application of these rules often varies based on a company's size (public versus private) or the specific reporting period. Many large public companies have already adapted, but for others, proactive integration of these changes is essential for accurate financial records and clear financial communication.
Notably, an income tax accounting standard, which takes effect next year, has drawn significant political scrutiny: Lawmakers are now attempting to force the FASB to withdraw it by prohibiting the SEC from approving funding until the controversial rule is eliminated.
Some of the ASUs will mandate adjustments across diverse financial areas, including new methodologies for calculating potential credit losses, accounting treatments for cryptocurrencies, updates to revenue recognition principles and specialized guidelines for joint partnerships, the analysis revealed. The scope of these revisions means their impact on financial reporting could be significant for some firms.
The rules, listed by their earliest effective date (whether for annual or quarterly reports), are as follows:
ASUs effective in 2025 (annual or interim periods)
ASU 2025-02 Liabilities (405): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 122, issued in March 2025, became effective immediately upon issuance. It applies retrospectively to all annual periods beginning after Dec. 15, 2024. Therefore, this ASU is already in effect for the 2025 fiscal year and all subsequent annual and interim reporting periods. This rule ensures that companies follow updated SEC guidance regarding certain liability disclosures, aligning financial statements with current regulatory expectations.
ASU 2024-02 Codification Improvements - Amendments to Remove References to the Concepts Statements, issued in March 2024, has a phased effective date. For public business entities, it is already effective for fiscal years beginning on or after Jan. 1, 2025, including all subsequent annual and interim periods. For all other entities, it becomes effective for fiscal years beginning on or after Jan. 1, 2026, and similarly applies to all subsequent annual and interim periods. This update simplifies the accounting rulebook (the GAAP Codification) by removing outdated references.
ASU 2024-01 Compensation - Stock Compensation (Topic 718): Scope Application of Profits Interest and Similar Awards, issued in March 2024, has varying effective dates based on entity type. For public business entities, it is effective for annual periods beginning on or after Jan. 1, 2025, and applies to all subsequent annual and interim periods. For all other entities, the ASU becomes effective for annual periods beginning on or after Jan. 1, 2026, including all subsequent annual and interim periods. The standard provides clearer rules for accounting for certain equity-based compensation like "profits interest," leading to more consistent measurement and reporting of these awards.
ASU 2023-09 -Income Taxes (Topic 740): Improvements to Income Tax Disclosures, issued in December 2023, has a staggered effective date. For public business entities, it is effective for annual periods beginning on or after Jan. 1, 2025, encompassing all subsequent annual and interim periods. For entities other than public business entities, this ASU will become effective for annual periods beginning on or after Jan. 1, 2026, and applies to all subsequent annual and interim periods. This standard requires companies to provide more detailed information about their income taxes in their financial statements. This enhanced transparency helps investors and analysts better understand a company's tax strategies, its effective tax rate and how different tax jurisdictions impact its bottom line, making financial comparisons between companies more meaningful.
ASU 2023-08 Intangibles-Goodwill and Other Crypto Assets (Subtopic 350-60): Accounting for and Disclosure of Crypto Assets, issued in December 2023, is effective for all entities for fiscal years beginning on or after Jan. 1, 2025. This includes all interim periods within the 2025 fiscal year and all subsequent fiscal years. This rule standardizes how certain types of crypto assets are recognized and measured on the balance sheet, generally at fair value, providing clearer insight into digital asset holdings.
ASU 2023-05 Business Combinations - Joint Venture Formations (Subtopic 805-60): Recognition and Initial Measurement, issued in August 2023, is effective prospectively for all joint venture formations established on or after Jan. 1, 2025. The standard clarifies how companies should initially account for contributions and ownership in joint ventures, ensuring consistent measurement and reporting.
ASU 2023-02 Investments - Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method, issued in March 2023, has differing effective dates. For public business entities, it is already in effect for fiscal years beginning on or after Jan. 1, 2024. For all other entities, this ASU becomes effective for fiscal years beginning on or after Jan. 1, 2025, and applies to all subsequent annual and interim periods. This ASU addresses how companies account for investments in projects that generate tax credits, like those for renewable energy or affordable housing. By allowing a specific accounting method (proportional amortization), it aims to provide a more representative picture of the economic benefits and costs of these socially beneficial investments on a company's financial statements.
ASU 2022-03 Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions, issued in June 2022, has a two-tiered effective date. For public business entities, it is already in effect for fiscal years beginning on or after Jan. 1, 2024. For all other entities, this ASU became effective for fiscal years beginning on or after Jan. 1, 2025, and applies to all subsequent annual and interim periods. This update clarifies how to determine the "fair value" (market value) of shares that a company owns but cannot sell immediately due to contractual agreements. This is important because accurately valuing these restricted shares ensures a company's assets are not overstated or understated, giving a true representation of its financial position, particularly for startups or private equity investments.
ASU 2020-11 Financial Services - Insurance (Topic 944): Effective Date and Early Application, issued in November 2020, has differing effective dates based on entity type and reporting period. For public business entities that are SEC filers (excluding smaller reporting companies), this ASU is already effective. For all other entities, the annual reporting requirements became effective for fiscal years beginning on or after Jan. 1, 2025. This means that for a calendar-year company, the 2025 annual financial statements must apply to this ASU. However, the interim reporting requirements for these entities will not become effective until interim periods within fiscal years beginning on or after Jan. 1, 2026. Therefore, interim reports for 2025 would follow prior guidance, with the ASU's interim provisions applying to interim periods within fiscal years starting in 2026 and subsequent years. This ASU is designed to make insurance companies' financial statements more transparent and comparable, particularly regarding their liabilities for future policyholder claims. This helps investors better assess the long-term financial health and solvency of insurance providers.
ASUs effective in 2026 (annual or interim periods)
ASU 2025-05 Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets, issued in July 2025, will become effective for all entities for annual reporting periods beginning on or after Jan. 1, 2026. This includes all interim reporting periods within those annual periods. For a calendar-year company, this means the ASU will be applied starting Jan. 1, 2026. This ASU, building on previous credit loss guidance (CECL), focuses on how companies estimate potential losses from unpaid customer invoices (accounts receivable). This means businesses will need to be more proactive in estimating and reserving bad debts, providing a more conservative and realistic view of their future cash flows and the quality of their customer payments.
ASU 2024-04 Debt - Debt with Conversion and Other Options (Subtopic 470-20): Induced Conversions of Convertible Debt Instruments, issued in November 2024, will be effective for all entities for annual reporting periods beginning on or after Jan. 1, 2026. This includes all interim reporting periods within those annual periods. For a calendar-year company, the ASU will apply starting Jan. 1, 2026. When a company offers incentives to encourage bondholders to convert their debt into equity (shares), this ASU clarifies how those incentives are accounted for. This ensures the financial impact of such transactions, which can affect a company's debt-to-equity ratio and earnings per share, is consistently and accurately reported, giving a clearer picture of its capital structure changes.
ASUs effective in 2027 (annual or interim periods)
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, issued in September 2025, will become effective for all entities for annual reporting periods beginning on or after Jan. 1, 2027. This includes all interim reporting periods within those annual periods. This update addresses two areas: first, refining what qualifies as a "derivative" for accounting purposes (complex financial instruments used to manage risk) and second, how to account for revenue when customers pay with shares instead of cash. The goal is to ensure companies are properly classifying and valuing these sophisticated financial tools and accurately reporting revenue when non-cash payments are involved, leading to more reliable financial statements.
ASU 2025-04 Compensation-Stock Compensation (Topic 718) and Revenue from Contracts with Customers (Topic 606): Clarifications to Share-Based Consideration Payable to a Customer, issued in May 2025, will become effective for all entities for annual reporting periods, including interim periods, beginning on or after Jan. 1, 2027. This focuses on how companies recognize revenue when they pay customers with their own shares as an incentive. It aims to ensure that such share-based incentives are properly accounted for, preventing misstatements of revenue and expenses and giving investors a clear view of the true economics of customer relationships.
ASU 2025-03 Business Combinations (Topic 805) and Consolidation (Topic 810): Determining the Accounting Acquirer in the Acquisition of a Variable Interest Entity, issued in May 2025, will become effective for all entities for annual reporting periods beginning on or after Jan. 1, 2027, and will also apply to all interim periods within those annual periods. This ASU helps clarify which company is considered the "accounting acquirer" in complex transactions involving variable interest entities (VIEs). Correctly identifying the accounting acquirer is crucial because it determines which entity's financial results are consolidated, ultimately impacting how the combined business's assets, liabilities and earnings are presented to the public.
ASU 2025-01 Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date, issued in January 2025, has a staggered effective date. Its provisions for annual periods become effective for fiscal years beginning on or after Jan. 1, 2027. For interim reporting, the ASU applies to interim periods within annual periods beginning on or after Jan. 1, 2028. This ASU refines the effective dates for the broader initiative of disaggregating (breaking down) income statement expenses. The ultimate goal of this larger initiative is to provide more granular detail on how a company spends its money (e.g., separating selling expenses from administrative costs), allowing for better analysis of efficiency and cost control.
ASU 2024-03 Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, issued in November 2024, has a phased effective date. Its requirements for annual periods will become effective for fiscal years beginning on or after Jan. 1, 2027. The interim reporting requirements will apply to interim periods within fiscal years beginning on or after Jan. 1, 2028. This is the core ASU requiring companies to provide more detailed breakdowns of their expenses on the income statement. Instead of just seeing a "total operating expenses" line, investors will get clearer categories, making it easier to pinpoint areas of significant spending and understand a company's operational structure, which can be invaluable for benchmarking against competitors.
ASUs effective in 2028 (annual or interim periods)
ASU 2025-06 Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software, issued in September 2025, will become effective for all entities for annual reporting periods beginning on or after Jan. 1, 2028. This includes all interim reporting periods within those annual periods. For a calendar-year company, this means the ASU will apply starting Jan. 1, 2028. The standard focuses on how companies account for the costs of developing or purchasing software for their own internal use. It aims to provide clearer guidance on what costs can be capitalized (treated as an asset) versus expensed, which can significantly impact a company's reported assets, profitability and cash flow, especially for tech-heavy businesses.
