Having passed the midpoint of 2025, with year-end and first quarter financial reporting in the books, WilliamsMarston is reflecting on current accounting standard setting and financial reporting developments while looking towards the future for what may come next.

2024 Year-End and 2025 First Quarter Reporting

The most significant development impacting year-end 2024 and first quarter 2025 financial reporting was the adoption of the Financial Accounting Standards Board’s (FASB) guidance to enhance disclosure of expenses of public entities’ reportable segments, as outlined in Accounting Standards Update (ASU) No. 2023-07.  While public companies faced some challenges in determining which items qualified as “significant segment expenses,” a new disclosure requirement, the overall adoption process proceeded smoothly. Investors generally appreciated the expanded transparency, particularly for single-segment companies that had not previously been required to disclose any segment information.

Upcoming Accounting Standard Adoptions

Year-end 2025 reporting will introduce the adoption of another significant disclosure standard for public companies: ASU 2023-09, which aims to enhance the transparency of income tax disclosures.   

Under ASU 2023-09, public entities will be required to disclose:

  • Specific categories in the rate reconciliation,
  • Additional information for reconciling items that are equal to or greater than 5% of the amount computed by multiplying income (or loss) from continuing operations before income tax expense (or benefit) by the applicable statutory income tax rate,
  • Income taxes paid (net of refunds received) disaggregated by federal (national), state, and foreign taxes, with foreign taxes disaggregated by individual jurisdictions in which income taxes paid is equal to or greater than 5% of total income taxes paid,
  • Income (or loss) from continuing operations before income tax expense (or benefit) disaggregated between domestic and foreign, and
  • Income tax expense (or benefit) from continuing operations disaggregated between federal (national), state and foreign.

These new requirements will be a heavy lift for many companies, and ideally, most are already working closely with tax advisors to avoid last-minute challenges ahead of Form 10-K deadlines. Private companies have an extra year to adopt the new standard, which increases disclosure requirements compared to current private reporting rules, though less extensive than those for public companies.

Looking further ahead to 2027 annual reporting, ASU 2024-03, the FASB’s income statement expense disaggregation standard, commonly referred to as DISE, will become effective for public companies.  DISE, which is specific to public companies, requires tabular disclosure, both annually and quarterly, of key expense categories which disaggregate expenses as presented on the face of the income statement, including:

  • Purchases of inventory
  • Employee compensation
  • Depreciation
  • Intangible asset amortization

In addition, public companies must also disclose selling expenses on both an annual and interim basis, along with a description of those selling expenses. 

While 2027 may seem like the distant future, many companies have already launched implementation efforts for the DISE requirements, recognizing that the information required to be disclosed is often not readily available in existing financial reporting systems.

New Standards Issued in 2025

The FASB issued several new ASUs in the first half of 2025.  First, ASU 2025-03 provides clarifying guidance to help companies identify the accounting acquirer in a business combination where the entity being acquired is a variable interest entity (VIE). The ASU improves comparability between transactions involving VIEs and those that do not.

ASU 2025-04 was issued to reduce variation in practice and enhance the clarity, consistency, and practical usefulness of guidance on share-based consideration provided to customers in connection with the sale of goods or services. The new guidance clarifies how to distinguish between service conditions and performance conditions in share-based awards to customers and further aligns how forfeitures of share-based consideration with service conditions and forfeitures of share-based consideration with performance conditions are treated, which affects the measurement of the transaction price.

And very recently, the FASB issued ASU 2025-05 provides all entities with a practical expedient and private companies with an accounting policy election that will simplify the calculation of credit loss reserves for current accounts receivable and current contract assets arising from transactions accounted for under the revenue guidance in Accounting Standards Codification Topic 606.

Ongoing Projects – What’s Coming Soon

The second half of 2025 is expected to be a very busy period for the issuance of new ASUs by the FASB. Topics for which an ASU is expected in the third quarter include:

  • The capitalization of software development costs, which will clarify how capitalization requirements apply in an agile software development environment and improve alignment of capitalization requirements for software as a service providers with those that license software. 
  • Clarification on the scope of derivative guidance, particularly related to revenue transactions.
  •  Improving guidance related to hedge accounting as related to accounting for derivatives. 
  • Reduction of complexity related to the recognition of credit losses for purchased financial assets.

A few plans for ASUs have also been announced for the fourth quarter, which include:

  • Improvements to interim reporting requirements
  • Guidance on the accounting for government grants.

Future Standard Setting

This spring, FASB Chaiman Rich Jones and members of the FASB Staff made their normal rounds speaking at major financial reporting conferences.  Remarks from the Chair and Staff, as well as “Invitations to Comment” (ITC) issued by the FASB staff, provide some insight into what may be next up on the FASB’s agenda. 

The FASB received extensive feedback on their overall “Agenda Consultation” ITC, which included 54 questions seeking stakeholder input on priorities for the Board’s future standard-setting efforts. Among the proposed topics were equity method accounting, distinguishing liabilities from equity, and even the definition of cash equivalents. The FASB also received input on whether they should take on projects relating to the accounting for and disclosure of intangibles, and financial key performance indicators.

As of June 30th, FASB Chair Rich Jones has two years left on his term.  It would not be surprising to see the Board take on and try to fast track one or more significant projects discussed in the ITCs during those two years.