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Bridging the GAAP: March 2025

Centri’s Bridging the GAAP newsletter highlights this month’s news, developments and emerging issues in the accounting and financial reporting world. 

FASB Standard Setter Updates

Financial Accounting Standards Board

March 5, 2025 Meeting

The Board discussed feedback received on the proposed Accounting Standards Update, Business Combinations (Topic 805) and Consolidation (Topic 810): Determining the Accounting Acquirer in the Acquisition of a Variable Interest Entity. The Board made the following decisions. The Board affirmed its decisions to require an entity involved in an acquisition transaction that meets all of the following conditions to assess the factors in paragraphs 805-10-55-12 through 55-15 to determine which entity is the accounting acquirer:

1. The legal acquiree is a VIE.
2. The legal acquiree VIE meets the definition of a business.
3. The transaction was effected primarily by exchanging equity interests.

The Board decided not to revise the proposed amendments related to the disclosure requirements applicable to the primary beneficiary in a reverse acquisition of a VIE.

The Board affirmed its decision to require prospective application of the amendments and that an entity disclose the nature of and reason for the change in accounting principle in the period of adoption. The Board decided that the amendments will be effective for annual reporting periods (including interim periods within annual reporting periods) beginning after December 15, 2026, for all entities.

The Board directed the staff to draft a final Accounting Standards Update for vote by written ballot.

For more information, see the FASB’s Tentative Board Decisions.

FASB Amends Codification for SAB 122

On March 18, the FASB issued ASU 2025-02, Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 122, which amends ASC 405, Liabilities to remove the accounting for obligations to safeguard crypto assets an entity holds for its platform users following recent guidance in SEC Staff Accounting Bulletin (SAB) 122. 

Upcoming March 26, 2025 Meeting

At its upcoming meeting, the Board will discuss the following items:

1. The Board will discuss feedback received on the proposed Accounting Standards Update, Derivatives and Hedging (Topic 815): Hedge Accounting Improvements, and begin redeliberations.
2. The Board will discuss feedback received on the proposed Accounting Standards Update, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets for Private Companies and Certain Not-for-Profit Entities, and begin redeliberations.
3. The Board will discuss the PCC’s recommendation to remove the Presentation of Contract Assets and Contract Liabilities for Construction Contractors project from its technical agenda.
4. If necessary, the Board will discuss minor issues on technical projects or administrative matters.

SEC Regulatory Updates

Securities and Exchange Commission

SEC Crypto Task Force Seeks Feedback

In a speech by Commissioner Hester Peirce, the SEC Crypto Task Force requested input from stakeholders on (1) crypto assets that are securities because they have the intrinsic characteristics of securities, (2) crypto assets that are offered and sold as part of an investment contract, which is a security, even though the crypto asset may not itself be a security, (3) tokenized securities, and (4) all other crypto assets, which are not securities.

Members of the public interested in providing input on these or other related matters may do so using the written submission form for input to the Crypto Task Force on the Commission’s website. Members of the public also may request a meeting to discuss their feedback on these and other related matters via the meeting request form on the SEC’s website. While no deadline was indicated, Commissioner Peirce noted that the earlier input is received, “the more likely it is to inform the options for consideration.”

SEC Staff Issues Statement on Meme Coins

On February 27, the SEC’s Division of Corporation Finance (“Corp Fin”) released a statement expressing its views on “meme coins.” Corp Fin describes a “meme coin” as a type of crypto asset inspired by internet memes, characters, current events, or trends for which the promoter seeks to attract an enthusiastic online community to purchase the meme coin and engage in its trading. Corp Fin noted that meme coins typically are purchased for entertainment, social interaction, and cultural purposes, their value is driven primarily by market demand and speculation, and they are akin to collectibles, typically with limited or no use or functionality.

Corp Fin provided its view that these types of meme coins do not meet the definition of a security under the federal securities laws. As such, neither meme coin purchasers nor holders are protected by the federal securities laws. Corp Fin also considered the Howey test and determined the offer and sale of meme coins does not involve an investment in an enterprise and is not undertaken with a reasonable expectation of profits derived from the entrepreneurial or managerial efforts of others. This statement does not extend to meme coins that are inconsistent with this description, and Corp Fin indicated that it will evaluate the economic realities of a given crypto asset transaction when determining whether the crypto asset meets the definition of a security.

SEC Enhances Accommodations for Issuers Submitting Draft Registration Statements

The SEC is expanding the accommodations available for issuers that submit draft registration statements for nonpublic review. The enhanced accommodations include:

• Expanding the availability of the nonpublic review process for the initial registration of a class of securities under the Exchange Act to include both Section 12(b) and Section 12(g) registration statements on Forms 10, 20-F, or 40-F.
• Permitting issuers to submit draft registration statements regardless of how much time has passed since they became subject to the reporting requirements of Section 13(a) or 15(d) of the Exchange Act.
• Expanding the availability of the nonpublic review process for a de-SPAC transaction in situations where the SPAC is the surviving entity (i.e., SPAC-on-top structure) as long as the target is eligible to submit a draft registration statement.
• Permitting issuers to omit the name of the underwriter(s) from their initial draft registration statement submissions, when otherwise required by Items 501 and 508 of Regulation S-K, provided that they include the name of the underwriter(s) in subsequent submissions and public filings.

SEC Accepts 2025 FASB Taxonomies

The FASB announced the SEC has accepted the 2025 GAAP Financial Reporting Taxonomy (GRT), the 2025 SEC Reporting Taxonomy (SRT), and the 2025 GAAP Employee Benefit Plan Taxonomy (EBPT). The FASB also finalized the 2025 DQC Rules Taxonomy (DQCRT) and the 2025 GAAP Meta Model Relationships Taxonomy (MMT), which together with the GRT, the SRT, and the EBPT are collectively referred to as the “FASB Taxonomies.”

The 2025 GRT contains updates for accounting standards and other recommended improvements. The 2025 EBPT contains updates from the 2024 EBPT for elements for tagging of annual reports for employee stock purchase, savings, and similar plans filing SEC Form 11-K. The 2025 SRT contains improvements for elements whose underlying recognition and measurement are not specified by generally accepted accounting principles (GAAP) but are commonly used by GAAP filers and for SEC schedules related to supplemental information.

The DQCRT is uniquely structured from the typical design of XBRL taxonomies because it is narrowly focused on conveying the XBRL US Data Quality Committee’s (DQC) validation rules and contains a subset of the DQC rules, predominantly for regulator use. It is not intended to be used in SEC filers’ extension taxonomies. The 2025 MMT includes relationships that assist preparers in identifying the proper elements, data users in the consumption of data, and in writing business rules that leverage the additional relationship information.

SEC Releases Statement on Crypto Mining  

On March 20, Corp Fin released a statement to provide its views on certain activities related to proof-of-work networks referred to as “mining.” Corp Fin believes that a company performing “Mining Activities” over “Covered Crypto Assets” (both as defined in the statement) on its own or as part of a mining pool do not involve the offer and sale of securities.

Other Regulatory Updates

European Commission Proposes Changes to CSRD as Part of Omnibus Package

The European Commission (EC) proposed changes to its Corporate Sustainability Reporting Directive (CSRD) as part of an Omnibus simplification package that would cut back on the scale and scope of the EU sustainability reporting requirements.

Under the proposal, the CSRD would be postponed by two years (becoming effective January 1, 2027) for large entities that aren’t listed (including large EU subsidiaries of US multinationals) and would only apply to entities that have more than 1,000 employees (previously 250 employees) and either revenue above EUR 50 million or total assets above EUR 25 million.

Additionally, the EC plans to amend the European Sustainability Reporting Standards to substantially reduce the number of data points entities must report and proposes eliminating the requirement for sector-specific standards. The EU Taxonomy would become voluntary for entities in the scope of the CSRD with revenue of less than EUR 450 million. The EC also plans to reduce the reporting requirements for the EU Taxonomy.

Certain aspects of the proposal would need to be agreed to by the European Parliament and Council of the European Union before becoming effective, and EU Member States would then need to transpose those aspects into local law.

Japan Adopts Sustainability Statements Based on ISSB Standards

On March 5, the Sustainability Standards Board of Japan (SSBJ) issued its inaugural sustainability disclosure standards:

1. Universal Sustainability Disclosure Standard, Application of the Sustainability Disclosure Standards
2. Theme-based Sustainability Disclosure Standard No. 1, General Disclosures
3. Theme-based Sustainability Disclosure Standard No. 2, Climate-related Disclosures

The first two SSBJ standards together correspond to International Sustainability Standards Board (ISSB) IFRS S1, General Requirements for Disclosure of Sustainability-related Financial Information, while the third aligns with IFRS S2, Climate-related Disclosures.

The standards may be applied voluntarily for annual reporting periods ending on or after the release of the standards, although the SSBJ standards were developed on the assumption that they would eventually be required to be applied by entities listed on the Prime Market of the Tokyo Stock Exchange (TSE). The SSBJ standards are currently only available in the Japanese language; however, an overview paper with general information on the standards is available in English.

Rikki Williams

Senior Director | CPA

Rikki is a Senior Director at Centri Business Consulting. He has more than 18 years of public and private accounting experience. View Rikki Williams's Full Bio