Don't miss deadlines: Previously issued FASB standards take effect, driving reporting shifts through 2028

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)

1. 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.
2. 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.
3. 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.
4. ASU

ASUs effective in 2026 (annual or interim periods)

1. 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 for bad debts, providing a more conservative and realistic view of their future cash flows and the quality of their customer payments.
2. 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)

1. 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.
2. 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, giving investors a clear view of the true economics of customer relationships.
3. 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.

ASUs effective in 2028 (annual or interim periods)

1. 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.

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