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Bridging the GAAP: May 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

April 30, 2025 Meeting

The Board continued redeliberations on the proposed Accounting Standards Update, Financial Instruments—Credit Losses (Topic 326): Purchased Financial Assets and directed the staff to draft a final Accounting Standards Update for vote by written ballot. The Board also added a project to its technical agenda to address the measurement of paid-in-kind (PIK) dividends on equity-classified preferred stock for issuers of those instruments.

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

FASB Issues Proposal on Accounting for Debt Exchanges

On April 30, the FASB issued a proposed ASU that would require an exchange of debt instruments involving multiple creditors that meet certain requirements to be accounted for by the debtor as the issuance of a new debt obligation and an extinguishment of the existing debt obligation. When those requirements are met, an entity would not need to perform a quantitative analysis of the change in cash flows to determine if the transaction should be accounted for as (1) a modification of the existing debt or (2) the issuance of new debt and the extinguishment of the existing debt. The proposed ASU was based on a recommendation made by the Emerging Issues Task Force (EITF) in October.

Comments are due by May 30.

May 7, 2025 Meeting

The Board discussed feedback received on the proposed Accounting Standards Update, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. 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 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.

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