Adopting new accounting standards is critical for companies aiming to maintain financial integrity and competitive edge. By proactively aligning with these standards, businesses can enhance transparency, foster investor confidence, and make well-informed financial decisions.

The below list highlights selected ASUs effective in 2024 and is not intended to list all ASUs effective in 2024. For further information, explore our matrix of FASB amendments and effective dates for potential impacts on your accounting and financial reporting.

ASU 2022-04 — Liabilities — Supplier Finance Programs (Subtopic 405-50)

Effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, except for the amendment on rollforward information, which is effective for fiscal years beginning after December 15, 2023.

What you need to know:

• The ASU aims to enhance transparency regarding supplier finance programs because (1) Stakeholders observed a lack of explicit disclosure requirements in GAAP specific to these programs and (2) Buyer parties often present obligations covered by supplier finance programs in the same balance sheet line item as accounts payable or in another line item, depending on the arrangement’s facts and circumstances.
• ASU 2022-04 requires entities to disclose specific information about their supplier finance program obligations, enhancing transparency for investors and other stakeholders.

Your next steps:

• Identify the supplier finance programs within the organization and determine if the existing obligations are within the scope of ASU 2022-04.
• Prepare or update the disclosure in order to comply with ASU 2022-04.
• Train staff on how to apply the guidance going forward and the impact ASU 2022-04 may have on company’s financial reporting.

ASU 2023-07 — Segment Reporting (Topic 280)

Effective for public entities in annual periods beginning after 15 December 2023.

Read our more detailed outline of the new Segment Reporting requirements of the FASB and SEC staff.

What you need to know:

• The ASU aims to enhance transparency in segment reporting and introduces segment reporting for all public entities that file financial statements with the SEC, even those that have a single reportable segment and historically have not provided segment disclosures under legacy ASC 280.
• Public companies must provide more transparency in both quarterly and annual reports regarding the significant expenses incurred from their reportable segments.
• The focus is on disclosing significant segment expenses to ensure stakeholders have a clearer understanding of cost structures within each reportable segment.
• The SEC staff have provided interpretive guidance on the topics of reportable segment measures of profit and loss or significant expenses that are not determined in accordance with the measurement principles of US GAAP (that is, constitute non-GAAP measures). Public entities will have to comply with such additional SEC staff interpretations related to the interaction of their guidance on disclosing non-GAAP measures and reportable segment disclosures in US GAAP financial statements.
• ASU 2023-07 enhances the quality of segment disclosures, benefiting investors and other users of financial statements.

Your next steps:

• Public entities that conclude they have a single reportable segment or single operating segment will also have to comply with all segment disclosure requirements in revised ASC 280.Prepare the additional new disclosure requirements in ASU 2023-07 in addition to the legacy ASC 280 disclosure requirements for the public entity’s annual financial statements for fiscal years beginning after December 15, 2024 and prior year comparatives..
• Prepare the additional new disclosures required in ASU 2023-07 in addition to the legacy ASC 280 disclosure requirements for the public entity’s interim financial statements within annual periods beginning after December 15, 2025 and prior interim period comparatives.
• Train staff on how to apply the guidance going forward and any implications of the ASU 2023-07 specifically applicable to the company.

ASU 2023-01 — Leases (Topic 842)

The amendments in this ASU are effective for fiscal years beginning after 15 December 2023, including interim periods within those fiscal years. Get more details.

What you need to know:

• The practical expedient described in Issue 1 of ASU 2023-01 allows eligible entities to elect to use the written terms and conditions of a common control leasing arrangement to determine whether such arrangement is or contains a lease. This practical expedient, however, is not available to common control arrangements that do not have written terms and conditions.

The second issue in ASU 2023-01 (Issue 2) addresses the amortization of leasehold improvements associated with common control leasing arrangements.  

Your next steps:

• Review existing leases within the company to identify any common control arrangements. Evaluate whether the amendments in this ASU is applicable to those arrangements. Update lease accounting systems to incorporate the changes brought about by ASU 2023-01.
• Train the staff on how to apply the guidance going forward and any implications of the ASU 2023-01 specifically applicable to the company.
• Review our Lease Accounting Implementation Tools

ASU 2022-03 — Fair Value Measurement (Topic 820)

Effective for public entities for annual periods beginning after December 15, 2023, and interim periods within those annual periods. For all other entities for annual periods beginning after December 15, 2024. Early adoption is permitted for both interim and annual financial statements that have not yet been issued or made available for issuance. Get a detailed overview.

What you need to know:

• The ASU 2022-03 is issued to enhance comparability of financial information for entities holding equity securities subject to contractual restrictions on sale.
• The focus is on equity securities that have contractual limitations prohibiting their sale.
• Clarifications around premium and discounts, which should be consistent with characteristics of reporting entity rather than characteristic of asset or liability.
• ASU 2022-03 clarifies that contractual restrictions on the sale of an equity security should not be considered part of the equity security’s unit of account. Therefore, these restrictions are not factored into measuring the fair value of the equity security under ASC 820.
• Entities that are not governed by ASC 946, Financial Services – Investment Companies, will have different transition requirements.

Your next steps:

• Review the company’s investment portfolio to identify equity securities subject to contractual sale restrictions. Assess the fair value of these securities based on the amendments in this ASU.
• Collaborate with valuation specialists or experts to determine the appropriate fair value measurement techniques.
• Include the appropriate disclosures related to equity securities subject to contractual sale restrictions in the company’s financial statements.

ASU 2024-01 — Compensation — Stock Compensation (Topic 718)

Effective for public entities for annual periods beginning after December 15, 2024, and interim periods within those annual periods. For all other entities for annual periods beginning after December 15, 2025, and interim periods within those annual periods. Early adoption is permitted for both interim and annual financial statements that have not yet been issued or made available for issuance. If an entity adopts the amendments in an interim period, it should adopt them as of the beginning of the annual period that includes that interim period.

What you need to know:

• ASU 2024-01 adds an illustrative example to demonstrate how an entity applies the scoping guidance to determine whether a profits interest award falls within the scope of ASC 718 (which applies to share-based payment arrangements) or ASC 710 (similar to a cash bonus or profit-sharing arrangement).

Your next steps:

• Analyze the characteristics of profits interest awards granted by the company and whether such awards should be accounted under ASC 718 or other guidance.
• Prepare the appropriate disclosures for new and existing awards.
• Train the staff on how to apply the guidance going forward and the impact ASU 2024-01 may have on the company’s financial reporting.

ASU 2023-05 — Business Combinations — Joint Venture Formations (Subtopic 805-60)

Effective prospectively for all joint venture formations with a formation date on or after 1 January 2025. Additionally, a joint venture that was formed before January 1, 2025 may elect to apply the amendments retrospectively if it has sufficient information. Early adoption is permitted in any interim or annual period in which financial statements have not yet been issued (or made available for issuance), either prospectively or retrospectively.

What you need to know:

• ASU 2023-05 enhances consistency and usefulness of information for investors, establishes a new basis of accounting for identifiable assets, liabilities, and noncontrolling interests in newly formed joint ventures (JVs).
• This ASU requires entities that meet the definition of a joint venture to recognize its assets and liabilities under a new basis of accounting. Specific Adaptations for JV Formations per ASU 2023-05:
  •  A joint venture is the formation of a new entity without an accounting acquirer.
  • A joint venture measures its identifiable net assets and goodwill, if any, at the formation date.
  • Initial measurement of a joint venture’s total net assets is equal to the fair value of 100 percent of the joint venture’s equity.
  • A joint venture provides relevant disclosures.

Your next steps:

• Evaluate joint ventures formed before January 1, 2025 to determine if they meet the criteria established in  ASU 2023-05 for retrospective application. For joint ventures formed on or after January 1, 2025, ensure that the entities meet the scope criteria to apply the amendments in ASU 2023-05.
• For entities within the scope of ASU 2023-05, prepare the disclosures in order to comply with the amendments in this update.
• Train the staff on how to apply the guidance going forward and the impact that ASU 2023-05 may have on the company’s financial reporting.

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