The Financial Accounting Standards Board (FASB) issued four new Accounting Standard Updates (ASUs) in the fourth quarter of 2025. The Government Accounting Standards Board (GASB) issued one new GASB statement in the fourth quarter of 2025. The latest issue of the Rundown features a summary of the new standards issued in the fourth quarter of 2025. For summaries of standards issued in previous periods view our previous rundowns. In addition, we’ve got a comprehensive listing of all newly effective standards for calendar year-end December 31, 2025, broken down by public business entities, private entities and December 31 year-end governments.
Fourth Quarter 2025 Newly Issued Standards
Financial Instruments—Credit Losses (Topic 326): Purchased Loans
Under current Generally Accepted Accounting Principles (GAAP), when entities acquire financial assets (whether through purchase, business combination, etc.) they are initially recorded at fair value with an allowance for expected credit losses separately recognized in accordance with Topic 326 (CECL). Prior to this update there were two measurement models:
- PCD Assets: If a financial asset acquired has a “more-than-insignificant” deterioration of credit quality since its origination, it is accounted for as a purchased financial asset with credit deterioration (PCD or PCD assets) using a “gross-up approach.” The gross-up approach requires recognition of an allowance for credit losses at the acquisition date with an offsetting gross-up adjustment to the purchase price of the acquired financial asset so that the net value equals the fair value.
- Non-PCD Assets: If a financial asset acquired does not have “more-than-insignificant” deterioration of credit quality since its origination (non-PCD or non-PCD assets), the allowance for credit losses is recognized with a corresponding charge to credit loss expense.
Many stakeholders noted that having two accounting methods (one for PCD and a separate method for non-PCD) creates unnecessary complexity and reduces comparability. In addition, stakeholders noted that the non-PCD approach does not reflect the economics of acquired financial assets that are recorded at fair value because recognizing an allowance through credit loss expense results in double counting of expected credit losses already considered in the fair value measurement.
Lastly, the identification of PCD assets and non-PCD assets is subjective. Most stakeholders support the gross-up approach. Thus, the Board issued this update which requires that purchased “seasoned loans” (acquired in a business combination or > 90 days since origination) be accounted for using the gross-up approach, regardless of whether the financial asset is a PCD or not. This requirement does not apply to credit card receivables.
Effective Date: This ASU is effective for all entities for annual reporting periods beginning after December 15, 2026, and interim reporting periods within those annual reporting periods. However, early adoption is permitted in both interim and annual reporting periods, and we expect many entities to early adopt.
Transition Guidance: Prospectively.
Derivatives and Hedging (Topic 815): Hedge Accounting Improvements
The update changes five aspects of hedge accounting and are intended to align hedge accounting with the economics of an entity’s risk management activities.
Issue 1: Similar Risk Assessment for Cash Flow Hedges
The update expands the hedged risks permitted to be aggregated in a group of individual forecasted transactions in a cash flow hedge by changing the requirement to designate a group of individual forecasted transactions from having a “shared” risk exposure to having a “similar” risk exposure. ASU 2025-09 clarifies that a group of individual forecasted transactions can be considered to have a “similar” risk exposure if the derivative used as the hedging instrument is highly effective against each hedged risk in the group. The update is expected to enable entities to apply hedge accounting to potentially broader portfolio of forecasted transactions.
Issue 2: Hedging Forecasted Interest Payments on Choose-your-Rate Debt Instruments
The update provides a “choose-your-rate debt model” to facilitate the application of cash flow hedge accounting to forecasted interest payments on variable-rate debt instruments with contractual terms that permit the borrower to change the interest rate index and interest rate reset frequency (commonly called “choose-your-rate” debt instruments).
Under the choose-your-rate debt model, the contractual terms of the debt agreement specify the alternative interest rate indexes and interest rate reset frequency that an entity may select as being hedged during the hedging relationship without discontinuing hedge accounting. Under this model, an entity may use simplified assumptions to assess both the probability of forecasted transactions and hedge effectiveness and can apply this model to existing, forecasted issuances of, and subsequent replacements of choose-your-rate debt.
Issue 3: Cash Flow Hedges of Nonfinancial Forecasted Transactions
ASU 2025-09 expands hedge accounting for forecasted purchases and sales of nonfinancial assets. Subject to meeting certain criteria, entities are now permitted to apply hedge accounting for eligible components of forecasted spot-market transactions and forward-market transactions. To qualify for hedge designation, the variable price component of the forecasted purchase or sale is required to meet the criteria to be considered “clearly and closely” related to the nonfinancial asset being purchased or sold, as provided in the current normal purchases and normal sales scope exception of ASC 815.
The update improves GAAP because the application of hedge accounting will not be limited by whether the nonfinancial purchase or sale transaction is through the spot or forward market. In addition, current GAAP limits designation of nonfinancial components to those that are contractually specified. A model based on the “clearly and closely” related criteria permits more hedge accounting.
Issue 4: Net Written Options as Hedging Instruments
The update accommodates differences in the loan and swap markets that developed after the cessation of the London Interbank Offered Rate. Specifically, ASU 2025-09 eliminates the requirement to apply the net written option test to a compound derivative comprising a swap and a written option designated as the hedging instrument in a cash flow hedge or a fair value hedge of interest rate risk.
Issue 5: Foreign-currency-Denominated Debt Instrument as Hedging Instrument and Hedged Item (Dual Hedge)
The update eliminates the recognition and presentation mismatch related to a dual hedge strategy, ora hedge for which a foreign currency denominated debt is both designated as the hedging instrument in a net investment hedge and designated as the hedged item in an interest rate fair value hedge.
ASU 2025-09 requires that an entity exclude the debt instrument’s fair value hedge basis adjustment from the net investment hedge effectiveness assessment. As a result, an entity immediately recognizes in earnings the gains and losses from the remeasurement of the debt instrument’s fair value hedge basis adjustment at the spot exchange rate.
Effective Date: This ASU is effective as follows:
- For pubic business entities, effective for annual reporting periods beginning after December 15, 2026, and interim periods within those annual reporting periods.
- For all other entities, effective for annual reporting periods beginning after December 15, 2027, and interim periods within those annual reporting periods.
Early adoption is permitted.
Transition Guidance: Prospectively.
Government Grants (Topic 832): Accounting for Government Grants Received by Business Entities
Current GAAP does not provide authoritative guidance about the recognition, measurement and presentation of government grants received by for-profit business entities. Currently many for-profit business entities analogize to the guidance in International Accounting Standard (IAS) 20, Accounting for Government Grants and Disclosure of Government Assistance, or to the guidance in Topic 450, Contingencies, or to Subtopic 958-605, Not-for-Profit Entities — Revenue Recognition.
When applying analogous guidance, not all aspects of the analogous guidance might be applicable. Stakeholders have noted that the lack of specific authoritative guidance on the accounting for government grants has led to questions about the acceptability of certain accounting approaches and has resulted in diversity in practice. In response to this the FASB issued ASU 2021-10, Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance. However, even with the disclosure requirements established in ASU 2021-10, stakeholders continued to highlight the lack of specific guidance about recognition, measurement and presentation.
ASU 2025-10 includes guidance for a grant related to an asset and a grant related to income. A grant related to an asset is a government grant that is conditioned on the purchase, construction or acquisition of an asset. A grant related to income is a government grant, other than a grant related to an asset. For example, a grant that reimburses a business entity for operating expenses.
This update requires that a government grant received by a for-profit business entity should not be recognized until:
- It is probable that (a) a business entity will comply with the conditions attached to the grant and (b) the grant will be received.
- A business entity meets the recognition guidance for a grant related to an asset or a grant related to income.
ASU 2025-10 requires that a grant related to an asset be recognized on the balance sheet as a business entity incurs the related costs for which the grant is intended to compensate, either as:
- Deferred income (the deferred income approach); or
- An adjustment to the cost basis in determining the carrying amount of the asset (the cost accumulation approach).
This update requires that a grant related to income, and a grant related to an asset for which the deferred income approach is elected, should be recognized in earnings on a “systematic and rational” basis over the periods in which a for-profit business entity recognizes as expenses the costs for which the grant is intended to compensate. This update requires that a for-profit business entity present a grant related to income and a grant related to an asset for which the deferred income approach is elected as part of earnings either (1) separately under a general heading such as other income or (2) deducted from the related expense.
When a for-profit business entity elects the cost accumulation approach for a grant related to an asset, there is no separate subsequent recognition of the government grant proceeds in earnings. The carrying amount of the asset that reflects the government grant proceeds would be used to determine depreciation for that asset.
The amendments in ASU 2025-10 closely align with the guidance in IAS 20, Accounting for Government Grants and Disclosure of Government Assistance that practitioners have been using analogously.
Consistent with current disclosure requirements created under ASU 2021-10, a for-profit business entity should provide disclosures, including the nature of the government grant received, the accounting policies used to account for the grant and significant terms and conditions of the grant.
Effective Date: This ASU is effective as follows:
- For pubic business entities, effective for annual reporting periods beginning after December 15, 2028, and interim periods within those annual reporting periods.
- For all other entities, effective for annual reporting periods beginning after December 15, 2029, and interim periods within those annual reporting periods.
Early adoption is permitted. If a for-profit business entity adopts this Update in an interim reporting period, it must adopt as of the beginning of the annual reporting period.
Transition Guidance: Either under a “modified prospective approach,” a modified retrospective approach, or a full retrospective approach. The transition requirements are somewhat complex so please review the ASU carefully.
Interim Reporting (Topic 270)
ASU 2025-11 doesn’t change much. Instead, this update addresses the complexity of the current ASC 270 that’s a result of piecemeal nature of the development of the source literature, the initial codification of the historical content and subsequent amendments to the topic issued over time. ASU 2025-11 is not intended to change the fundamental nature of interim reporting or expand or reduce current interim disclosure requirements. The biggest change is the introduction of a principle that requires entities to disclose events since the end of the last annual reporting period that have a material impact on the entity. After this update, ASC 270 is easier to follow because all interim disclosure requirements will now be in a comprehensive list within ASC 270 instead of disbursed among many Codification Topics.
Effective Date: This ASU is effective as follows:
- For pubic business entities, effective for interim reporting periods within annual reporting periods beginning after December 15, 2027.
- For all other entities, effective for interim reporting periods within annual reporting periods beginning after December 15, 2028.
Early adoption is permitted.
Transition Guidance: This update can be applied either (1) prospectively or (2) retrospectively.
Subsequent Events
Before GASB 105, guidance on subsequent events was housed in Statement 56, which was based on 1972 general auditing standards and lacked specific, modern and comprehensive guidance for governments. Research indicated inconsistent reporting with a roughly 30% omission rate for significant post-year-end events, particularly debt issuances. GASB 105 largely aligns with FASB’s subsequent event guidance.
Significant changes are listed below.
Disclosure of Subsequent Event Date
Guidance requires the date through which subsequent events have been evaluated to be disclosed.
Defined Timeframe
GASB 105 explicitly defines the period for evaluation as starting after the financial statement date and ending on the date the financial statements are available to be issued. The date the financial statements are available to be issued is the date at which (1) The financial statements are complete in a form and format that complies with GAAP; and (2) Approvals necessary for issuance have been obtained.
Clarified Events
Clearly distinguishes between recognized events and non-recognized events. A recognized event is a subsequent event that provides evidence of conditions that existed at the financial statement date that inform about accounting estimates reported as of the financial statement date. For example, the bankruptcy of a water utility’s major customer during the subsequent events time frame may be indicative of deteriorating financial conditions that existed as the financial statement date. A non-recognized event does not inform about conditions that existed at the financial statement date but that results in a significant effect (favorable or unfavorable) that is recognized in the financial statements in the reporting period in which the event occurs and is one of the following:
- A debt-related transaction
- A government combination or disposal of operations
- A change to the legally separate entities that compose the financial reporting entity
- A transaction or other event that is of such a nature that it is essential to the financial statement user’s decision making or assessing accountability
For example, if a water utility’s major customer experienced a major casualty (e.g., fire or flood) that occurred during the subsequent events time frame, that would not be indicative of conditions that existed at the financial statement date but would be an even that is of such a nature that it is essential to the financial statement users.
Specific Disclosures
The following information should be disclosed about a non-recognized subsequent event:
- A description of the non-recognized event and its effect; and
- An estimate of the amount of the effect or the reason why an estimate cannot be made.
Effective Date: This GASB statement is effective for fiscal years beginning after June 15, 2026, and all reporting periods thereafter.
Earlier application is encouraged.
List of Newly Effective Standards
Calendar Year-end Public Companies
The following ASUs are effective for public companies for fiscal year-ends December 31, 2025:
- ASU 2018-12 (as amended by 2020-11): Targeted Improvements to the Accounting for Long-Duration Contracts FN1 FN2
- ASU 2022-05: Transition for Sold Contracts FN1 FN2
- ASU 2023-05: Recognition and Initial Measurement of Joint Ventures FN1
- ASU 2023-08: Accounting for and Disclosure of Crypto Assets FN1
- ASU 2023-09: Improvements to Income Tax Disclosures
- ASU 2024-01: Compensation—Stock Compensation (Topic 718): Scope Application of Profits Interest and Similar Awards FN1
- ASU 2025-02: Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 122
FN1 – Effective for smaller reporting companies (SRCs)
FN2 – Including interim periods within those fiscal years (e.g., Q1 2025 for calendar year end public entities)
Calendar Year-end Private Companies
The following ASUs are effective for private companies for fiscal year-ends December 31, 2025:
- ASU 2018-12 (as amended by 2020-11): Targeted Improvements to the Accounting for Long-Duration Contracts
- ASU 2022-05: Transition for Sold Contracts
- ASU 2023-02: Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method
- ASU 2022-03: Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions
- ASU 2023-05: Recognition and Initial Measurement of Joint Ventures
- ASU 2023-08: Accounting for and Disclosure of Crypto Assets
Governmental Entities
As a reminder, the following GASB statement is effective for governmental entities for fiscal year-ends December 31, 2025:
