Bridging the GAAP: 2025 Year in Review

This special edition of Centri’s Bridging the GAAP newsletter highlights the year in review for the accounting and financial reporting world.

FASB Standard Setter Updates

Financial Accounting Standards Board

FASB Clarifies Interim Effective Date for New “DISE” Standard

The FASB issued Accounting Standards Update (ASU) 2025-01 to clarify the interim effective date of its new standard requiring public business entities to disclose disaggregated information about certain income statement expense line items. The standard is effective for annual reporting periods beginning after December 15, 2026, and for interim reporting periods within annual reporting periods beginning after December 15, 2027.

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.

FASB Staff Educational Paper Clarifies Guidance on the Presentation and Disclosure of Retainage for Construction Contractors

On April 1, the Board announced the release of an FASB Staff Educational Paper that addresses questions about how to apply revenue recognition guidance about presentation and disclosures to construction contracts that contain retainage (or retention) provisions. The educational paper, which does not change or modify current generally accepted accounting principles (GAAP), was prompted by input from private company stakeholders, including the Private Company Council. The educational paper (a) explains the presentation and disclosure requirements in GAAP about retainage for construction contractors and (b) provides example voluntary disclosures of retainage that would provide more detailed information about contract asset and contract liability balances.

FASB Issues ASU 2025-03

The FASB issued ASU 2025-03, Determining the Accounting Acquirer in the Acquisition of a Variable Interest Entity, revising current guidance for determining the accounting acquirer for a transaction effected primarily by exchanging equity interests in which the legal acquiree is a variable interest entity (VIE) that meets the definition of a business. The amendments require that an entity consider the same factors that are currently required for determining which entity is the accounting acquirer in other acquisition transactions.

ASU 2025-03 is effective for all entities for annual reporting periods beginning after December 15, 2026, and interim reporting periods within those annual reporting periods. Entities are required to apply the new guidance prospectively to any acquisition transaction that occurs after the initial application date. Early adoption is permitted as of the beginning of an interim or annual reporting period.

FASB Issues ASU 2025-04

The FASB issued ASU 2025-04, Clarifications to Share-Based Consideration Payable to a Customer, to clarify the accounting for share-based consideration payable to a customer in conjunction with selling goods or services. The guidance applies to all reporting entities that issue share-based consideration to a customer in the scope of ASC 606 and is effective for fiscal years beginning after December 15, 2026 and interim periods within those fiscal years. Entities are permitted to apply the guidance on either a modified retrospective or retrospective basis.

New ASU Related to the Measurement of Certain Credit Losses

On July 30, the FASB issued ASU 2025-05, Measurement of Credit Losses for Accounts Receivable and Contract Assets, which provides guidance for estimating credit losses under the current expected credit losses (CECL) model for current accounts receivable and current contract assets arising from transactions accounted for under ASC 606. The guidance is effective for periods beginning after December 15, 2025 and will be adopted prospectively. Early adoption is permitted.

FASB Modernizes Guidance on Accounting for Internal Use Software

The FASB issued an Accounting Standards Update that clarifies and modernizes the accounting for costs related to internal-use software in Accounting Standards Codification 350-40, Intangibles – Goodwill and Other – Internal-Use Software. The amendments in this Update remove all references to prescriptive and sequential software development stages (referred to as “project stages”) throughout Subtopic 350-40 to align better with current software development methods, such as agile programming. An entity would be required to start capitalizing software costs when both of the following occur:

1. Management has authorized and committed to funding the software project.

2. It is probable that the project will be completed and the software will be used to perform the function intended (referred to as the “probable-to-complete recognition threshold”).

Exposure Draft on Initial Measurement of Paid-in-Kind Dividends

On September 30, the FASB issued an exposure draft on how an issuer of equity-classified preferred stock (including preferred stock that is classified as temporary equity in accordance with SEC guidance) should initially measure dividends that are satisfied by either issuing additional preferred stock with the same terms or by increasing the liquidation value of the original preferred stock. Under the proposal, such “paid-in-kind” or “PIK” dividends would be initially measured based on the contractual terms of the preferred stock, including the stated PIK dividend rate. The proposal would not affect when to recognize or the subsequent measurement of PIK dividends.

The new guidance would apply to all entities and would be able to be adopted prospectively or on a modified retrospective basis for instruments outstanding at the initial application date. An effective date has not been set yet, but early adoption would be permitted.

FASB Issues Guidance on Purchased Loans

The Board issued guidance that introduces a new model to account for the initial allowance for credit losses recognized upon acquisition on certain purchased loans (now defined as “purchased seasoned loans”). Under the new model, the initial allowance for credit losses recognized upon acquisition of certain loans that have not experienced a more-than-insignificant credit deterioration since origination and are deemed seasoned will be recorded as an adjustment to the amortized cost basis of the loan, as opposed to in earnings. The guidance is effective for all entities for periods beginning after December 15, 2026 and will be adopted prospectively. Early adoption is permitted.

FASB Issues Post-Implementation Review Report for Its Leases Standard

On November 20, the Board issued its report on Post-Implementation Review: Leases (842). The report discusses how the FASB staff conducted the Leases post-implementation review (PIR) process, which included outreach with over 1,600 individuals with diverse backgrounds, key implementation support provided throughout the adoption of the leases standard, and using what was learned during the PIR process to improve the leases standard and, more broadly, the standard-setting process.

International Accounting Standards Board (IASB)

SEC Regulatory Updates

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 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.

SEC Extends Compliance Deadlines on Reporting Enhancements for Registered Investment Companies

On April 16, the SEC extended the compliance dates for amendments adopted in August 2024 to Forms N-PORT and N-CEN that apply to certain registered investment companies. The amendments will require more frequent and timely reporting of monthly portfolio holdings and related information to the SEC and the public on Form N-PORT and require open-end funds to report information about service providers used to comply with liquidity risk management program requirements on Form N-CEN.

The amendments to Forms N-PORT and N-CEN now become effective on November 17, 2027. Funds generally will be required to comply with the amendments for reports filed on or after that date, except that fund groups with net assets of less than $1 billion will have until May 18, 2028 to comply with the Form N-PORT amendments.

SEC Staff Releases Statement on Crypto Asset Exchange-Traded Products

On July 1, the SEC’s Division of Corporation Finance (Corp Fin) released a statement to provide its views on the application of certain disclosure requirements to offerings and registrations of securities by issuers of crypto asset exchange-traded products (crypto asset ETPs). The statement provides examples of disclosures related to crypto asset ETPs that are required by Regulation S-K and Regulation S-X observed in recent filings as well as common issues noted during filing reviews. It emphasizes the need for tailored disclosures specific to the issuer’s facts and circumstances.

SEC Releases Statement on “Liquid Staking”

On August 5, the SEC’s Division of Corporation Finance (Corp Fin) released a statement providing its views on a specific type of proof-of-stake activity (referred to as “liquid staking”) as part of an effort to provide greater clarity on the application of the federal securities laws to crypto assets. Corp Fin believes that “Liquid Staking Activities” (as defined in the SEC’s statement) do not involve the offer and sale of securities within the meaning of Section 2(a)(1) of the Securities Act of 1933 or Section 3(a)(10) of the Securities Exchange Act of 1934. The statement does not provide guidance on the accounting for liquid staking arrangements.

SEC Staff Publishes New Guidance on Accelerated Filer Status Determination for Certain SRCs

The SEC staff published a compliance and disclosure interpretation (C&DI) to note that a registrant that qualified as a smaller reporting company (SRC) based on the two-part revenue and public float test, and therefore was a non-accelerated filer, will remain a non-accelerated filer for filings due in the year after losing SRC status. As a result, the registrant does not need auditor attestation under Section 404(b) of the Sarbanes-Oxley Act for the year SRC status was lost and can file its periodic reports that are due in the next year by the non-accelerated filer deadlines. However, the registrant will not be eligible for SRC accommodations (e.g., scaled disclosure requirements) beginning with its Form 10-Q for the first fiscal quarter of the year after losing SRC status.

For example, a calendar-year registrant with historical annual revenue of less than $100 million and a public float of less than $700 million has previously qualified as an SRC and non-accelerated filer. As of 30 June 2025, the registrant’s public float rose above $700 million, so it will no longer qualify as an SRC and is required to begin providing non-scaled, larger-company disclosures in its Form 10-Q for the first fiscal quarter of 2026. On 31 December 2025, the registrant assesses its filer status. Based on the C&DI, it retains non-accelerated filer status, despite its public float, because it previously qualified as an SRC based on both revenue and public float. The registrant will remain a non-accelerated filer for filings due in 2026 and will not need auditor attestation under Section 404(b) for 2025. This C&DI does not apply to registrants that qualified as SRCs based on the public float test only. Registrants should engage with legal counsel when considering the applicability of this C&DI to their facts and circumstances.

SEC Extends Compliance Date for Form PF Amendments

The SEC and US Commodity Futures Trading Commission (CFTC) extended the compliance date for amendments to Form PF, the confidential reporting form for certain SEC-registered investment advisers to private funds, from October 1, 2025 to October 1, 2026. This third extension is intended to provide additional time for the SEC and CFTC to complete their reviews of the amendments in accordance with the January 2025 Presidential Memorandum related to regulatory actions by executive departments and agencies.

Court Pauses SEC Climate Disclosure Rules Litigation

On September 12, the US Court of Appeals for the Eighth Circuit paused its consideration of legal challenges to the SEC’s climate-related disclosure rules, pending further action by the SEC. The SEC had previously communicated to the Court that it did not intend to review or reconsider the rules and asked the Court to decide the case before the SEC commits to a course of action.

The Court’s order highlighted that “it is the [SEC’s] responsibility to determine whether its Final Rules will be rescinded, repealed, modified or defended in litigation,” effectively sending the matter back to the SEC to determine whether it will defend, amend, or withdraw the rules.

SEC Chair Paul Atkins Speech on “Project Crypto” Developments

In a recent speech, SEC Chair Paul Atkins signaled the next step toward an enhanced regulatory framework for crypto assets. He indicated that the SEC will consider establishing a token taxonomy for various categories of crypto assets that is anchored in the Howey test and would distinguish, for example, digital collectibles and digital tools from tokenized securities. Chair Atkins also said that he has requested that the SEC staff prepare recommendations to facilitate capital formation in this space in the coming months.

Other Regulatory Updates

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.

European Commission adopts revisions related to Taxonomy Regulation

On July 4, the European Commission adopted a delegated act that amends the Taxonomy Regulation delegated acts. The changes are part of the “Omnibus I” package of improvements intended to reduce the regulatory burden on entities in the European Union. The amendments will be subject to review by the European Parliament and Council for a period of four months, which can be extended to six months, and are not final until published in the Official Journal. Once published, the amendments apply as of January 1, 2026, although entities may elect not to apply them to years beginning in 2025.The scope of entities subject to the Taxonomy Regulation is part of a separate “content” proposal expected to be finalized later this year.

European Commission Adopts Voluntary Sustainability Reporting Standard for SMEs

On July 30, the European Commission announced its adoption of the voluntary standard for small- and medium-sized enterprises (SMEs) developed by EFRAG (the VSME). The VSME are intended to reduce the administrative burden on SMEs by making it easier for them to respond to requests for sustainability information from large companies and financial institutions subject to mandatory reporting under the Corporate Sustainability Reporting Directive (CSRD).

IOSCO Issues Statement on Valuation Information in Financial Reporting

The International Organization of Securities Commissions (IOSCO) issued four publications including a statement on the importance of high-quality valuation information in financial reporting. IOSCO’s statement emphasizes the need for globally consistent, high-quality valuation practices to improve the reliability of financial reporting. It highlights areas for improvement in valuation inputs, assumptions, and disclosures, and it calls on issuers, audit committees, auditors, and valuation experts to strengthen governance, documentation, disclosures, and professional skepticism.

CARB Delays Reporting Deadline Under California Climate Disclosure Law

The California Air Resources Board (CARB) delayed the initial reporting deadline for Scope 1 and Scope 2 emissions and is no longer requiring limited assurance in the first year of reporting under the California climate disclosure law (SB 253). CARB also clarified certain definitions expected to be used in the regulations for SB 253 and the climate-related financial risk law (SB 261). Additionally, the US Court of Appeals for the Ninth Circuit issued an injunction, pending appeal, pausing the implementation of SB 261.