CohnReznick's Not-for-Profit and Education practice recently hosted its 2026 FASB update, featuring Jeff Mechanick, FASB senior staff member and chair of the Not-for-Profit Advisory Committee. The session covered recent Accounting Standards Updates (ASUs), current technical and research projects, and issues considered through the FASB's public agenda consultation.

The following highlights key accounting developments discussed during the session and their potential implications for not-for-profit and educational organizations.

Recent accounting standards updates

Several recent ASUs may affect accounting policies and implementation practices across the not-for-profit and education sectors.

ASU 2025-05: Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Asset

ASU 2025-05 is intended to reduce the cost and burden of applying the current expected credit losses (CECL) model to short-term receivables arising from revenue transactions.  

Key provisions include:

• • An accounting policy election that allows organizations to consider collections received after the balance sheet date when estimating expected credit losses
  • A practical expedient that allows entities to assume that current economic conditions at the balance sheet date will not change over the remaining life of the receivable or contract asset when estimating expected credit losses
  • Illustrative examples that demonstrate approaches organizations may use to estimate expected credit losses on short-term receivables
  • A reminder to consider individually significant balances when facts and circumstances warrant separate evaluation

For not-for-profit and educational organizations, the guidance may apply to short-term receivables such as tuition, patient, grant, and other trade receivables. Finance teams should consider the examples and available policy elections when determining how to apply CECL to these balances.

The standard is effective for annual reporting periods and interim reporting periods within those periods beginning after December 15, 2025, with early adoption permitted, using the prospective transition method.

ASU 2025-06: Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software

ASU 2025-06 updates the accounting guidance for costs incurred in developing software for internal use. The guidance modernizes the previous stage-based model to better reflect current software development practices.

Key provisions include:

• • Removal of references to prescriptive, sequential software development stages
  • A capitalization threshold based on whether management has authorized and committed funding for the project and whether it is probable that the project will be completed and the software used as intended
  • Factors for evaluating whether the probable-to-complete threshold has been met, including technological uncertainty and whether significant performance requirements continue to be substantially revised
  • Removal of separate guidance for website development, bringing those costs within the broader internal-use software model

The standard is effective for annual reporting periods beginning after Dec. 15, 2027, with early adoption permitted. Organizations may use the prospective, modified transition, or retrospective approaches.

ASU 2025-07 - Derivatives and Hedging (Topic 815) and Revenue from Contracts with Customers (Topic 606): Derivatives Scope Refinements and Scope Clarification for Share-Based Noncash Consideration from a Customer in a Revenue Contract

Recent guidance also narrows the types of arrangements subject to derivative accounting by introducing a scope exception for certain contracts in which variability is based on the activities or operations of one or more parties to the contract.

For not-for-profit organizations, the change may affect arrangements such as certain risk-based revenue agreements in healthcare and some pledges or grants that otherwise could have been evaluated under derivative accounting guidance.  

The guidance is effective for annual reporting periods beginning after December 15, 2026, with early adoption permitted. An entity can apply the amendments either prospectively or on a modified retrospective basis.

ASU 2026-02: Environmental credits and environmental credit obligations (Topic 818)

ASU 2026-02 addresses the accounting for environmental credits and related obligations, including their recognition, measurement, presentation, and disclosure.

Entities participating in environmental credit programs should determine whether the new guidance applies to their activities and whether existing accounting policies, processes, and documentation will support implementation.

The new guidance is effective for annual reporting periods beginning after December 15, 2028. Early adoption is permitted. Entities are required to apply Topic 818 retrospectively.

FASB technical and research projects 

The FASB is also evaluating several technical and research efforts that could affect future financial reporting across the sector. While these efforts have not resulted in final guidance, they provide early insight into issues finance leaders may want to follow.

Digital assets and cash equivalents

The FASB is evaluating issues related to the classification, presentation, and disclosure of certain digital assets, including whether some digital assets should be treated similarly to cash equivalents. The research also considers whether additional disclosures could provide more meaningful information to financial statement users.

Entities that hold or transact in digital assets should follow the project as the FASB considers potential changes to their presentation and disclosure in financial statements.

An exposure draft is expected to be issued in the 4th quarter of 2026.

Subjective acceleration clauses and debt default disclosures

The FASB is considering changes to the accounting treatment of subjective acceleration clauses, sometimes referred to as material adverse change clauses, that are included in many loan and debt agreements.

Under current practice, the presence of a subjective acceleration clause may affect debt classification even when the clause has not been exercised. The proposed approach would instead focus on whether the clause has actually been triggered rather than its mere presence in the agreement.

The project also considers broader disclosures about debt defaults for private companies and not-for-profit organizations. Finance teams should consider how the proposed changes could affect debt classification and financial statement disclosures.

An exposure draft is expected to be issued in the 4th quarter of 2026.

Equity method accounting

The FASB continues to evaluate potential improvements to equity method accounting as part of its broader standard-setting activities. Entities with equity method investments should consider how future changes could affect accounting policies, financial reporting processes, and related disclosures.  

An exposure draft is expected to be issued in the 4th quarter of 2026.

Not-for-profit topics considered through the FASB agenda consultation

Through its recent public agenda consultation, the FASB considered several financial reporting issues specific to the not-for-profit sector. The Board did not add any of them to its technical agenda but plans to continue discussing them with its Not-for-Profit Advisory Committee to determine whether additional education, implementation resources, or communication could address questions arising in practice.

Below-market and interest-free loans: The Board weighed whether donor loans need additional guidance, including whether these arrangements contain embedded contributions. Stakeholder feedback indicated that existing U.S. GAAP, along with the AICPA's not-for-profit audit guide, provides sufficient direction. 

Not-for-profit consolidation guidance: Although the framework has developed from multiple sources over time, outreach indicated that practitioners generally reach appropriate conclusions using existing flowcharts and implementation resources. Broader changes could depend on the outcome of the FASB's separate research on consolidation guidance for business entities.

Liquidity disclosures: Stakeholders raised concerns that the qualitative disclosures introduced through ASU 2016-14 have become boilerplate and that organizations interpret "general expenditures" inconsistently. The FASB will explore whether education could help organizations tailor these disclosures using flexibility already available under U.S. GAAP.

Operating measures: Earlier standard-setting efforts explored a standardized operating measure, but outreach continued to reflect diverse views. When an operating measure is used, consistency and transparency remain important, including disclosing what is and is not included when that is not apparent from the statement of activities.