02/18/2026
From credit risk to reporting consistency: Inside FASB’s latest ASUs
A practical look at FASB’s Q4 2025 ASUs, from credit losses and hedge accounting to government grants and interim reporting.
The Financial Accounting Standards Board (FASB) closed out 2025 with a series of targeted Accounting Standards Updates (ASUs) designed to sharpen clarity, enhance consistency, and address practical challenges in applying U.S. GAAP. From credit loss measurement on acquired loans to hedge accounting refinements, these updates reflect FASB’s ongoing commitment to improving operability and transparency in financial reporting. Understanding these changes early helps organizations maintain compliance and optimize reporting processes.
Below is a summary of selected ASUs issued in late 2025. This list is not exhaustive; please refer to our additional publications for a broader view of recent standard-setting activity.
ASU 2025-08 – Financial Instruments – Credit Losses (Topic 326): Purchased loans
Introduces “purchased seasoned loans” as a defined scope category for gross-up accounting at acquisition.
For all entities, this update is effective for fiscal years beginning after December 15, 2026, including interim periods within those annual reporting periods. Early adoption is permitted.
What you need to know:
ASU 2025-08 introduces a new category of purchased seasoned loans to simplify accounting for acquired loan portfolios and reduce Day 1 credit-loss expense volatility.
Entities must assess whether acquired loans (excluding credit cards) should be classified as Purchased Credit Deteriorated (PCD) assets or purchased seasoned loans under the new criteria (e.g., more than 90 days post-origination, acquirer not involved in origination).
The gross-up method for purchased seasoned loans eliminates the Day 1 credit-loss expense; however, it results in lower interest-income recognition over time because the initial allowance is effectively amortized over the life of the loan.
For loans acquired via business combinations, the new guidance aligns acquired non-PCD loans with PCD accounting when certain criteria are met.
Your next steps:
Review planned loan acquisitions to determine eligibility for the purchased seasoned loan category.
Document criteria for involvement in origination, 90-day threshold, and policy election for subsequent measurement; revise policy manuals.
Update portfolio analytics and loan-level models to incorporate the gross-up method and amortized cost election for eligible loans.
ASU 2025-09 – Derivatives and Hedging (Topic 815): Hedge accounting improvements
Introduces an optional model for hedging variable interest payments on choose-your-rate debt.
Effective: For public business entities (PBEs), this update is effective for fiscal years beginning after December 15, 2026, and interim periods within those annual reporting periods. For entities other than PBEs, this update is effective for fiscal years beginning after December 15, 2027, and interim periods within fiscal years beginning after December 15, 2028. Early adoption is permitted.
What you need to know:
Includes optional choose-your-rate (CYR) hedge model, which permits hedge accounting for cash flows on CYR debt under clarified conditions.
Expands the risks that may be aggregated in a cash flow hedge by allowing groups of forecasted transactions with similar, rather than identical, risk exposures. As a result, reporting entities may be able to apply hedge accounting to a broader range of forecasted transaction portfolios.
Expands hedge accounting for forecasted purchases and sales of nonfinancial assets subject to meeting specific criteria.
Improves hedge accounting for net written options by updating the guidance to reflect differences between the loan and swap markets that emerged after the cessation of LIBOR.
Eliminates recognition and presentation mismatches in dual‑hedge strategies, where a foreign‑currency‑denominated debt instrument is designated both as the hedging instrument in a net investment hedge and as the hedged item in a fair value hedge of interest rate risk.
Provides clearer hedge effectiveness assessments that better align with actual risk-management economics. Reduces operational complexity, although it also introduces new judgments in some cases.
Clarifies certain hedge documentation and designation requirements, including guidance intended to simplify application in practice and improve consistency in documenting forecasted transactions and hedge relationships.
Your next steps:
Identify eligible hedges by reviewing existing and planned hedging relationships (e.g., CYR instruments, forecasted purchases, and sales).
Update hedge documentation and revise hedge designation and effectiveness test procedures.
Adjust treasury and accounting systems to reflect the expanded hedge types and optional hedge models.
ASU 2025-10 – Government Grants (Topic 832): Accounting for government grants received by business entities
Grant is recognized only when it is probable that conditions will be met and the grant will be received.
Effective: PBEs – fiscal years beginning after December 15, 2028, and interim reporting periods within those annual reporting periods. All other entities – fiscal years beginning after December 15, 2029, and interim reporting periods within those annual reporting periods. Early adoption is permitted.
What you need to know:
The update establishes authoritative U.S. GAAP guidance for accounting for government grants received by business entities. Previously, U.S. GAAP lacked guidance about the recognition, measurement, and presentation of such grants, leading to diversity in practice as entities applied different models, including analogies to IASA 20 or not-for-profit guidance
Distinguishes between two types of government grants – grants related to an asset and grants related to an expense – and provides separate recognition guidance.
Government grants are recognized when compliance with the grant’s conditions and receipt of funds are both probable. In addition, the business entity must meet the applicable recognition guidance for either an asset-related grant or an income-related grant.
Government grants related to an asset may be recognized using either a deferred income approach or a cost accumulation approach. Under the deferred income approach, earnings are recognized on a systematic and rational basis over the periods in which the related costs are expensed. Under the cost accumulation approach, the asset’s carrying amount – including the grant proceeds – is used to determine depreciation or other subsequent accounting.
The update creates an exception for government grants related to income acquired in a business combination. For such grants, the acquirer recognizes and measures deferred income in a manner consistent with how the acquiree would have accounted for the grant if the acquiree had not fully complied with the grant’s conditions as of the acquisition date.
Business entities must choose an accounting policy to apply consistently to similar grants, such as recognizing grant benefits over time as deferred income or by reducing the cost of related assets.
There are different presentation requirements based on the type of grant and accounting policy elected. There are also additional disclosure requirements for the nature of the grant, related accounting policies, and the effect on financial statement amounts.
Your next steps:
Review existing grant arrangements that are not completed on or after the effective date of this ASU to identify whether they meet the definition of a government grant under the new guidance. Assess whether systems and processes can track compliance with grant conditions.
Evaluate whether current financial reporting systems can support the presentation and disclosure requirements for deferred income and grant-related amortization.
Make sure systems can track conditions, performance obligations, and measurement impacts.
ASU 2025-11 – Interim Reporting (Topic 270): Narrow-scope improvements
Clarifies the applicability, types of interim reporting, and the form and content of interim financial statements required under U.S. GAAP.
Effective: PBEs – interim periods within annual periods beginning after December 15, 2027. All other entities – interim periods within annual periods beginning after December 15, 2028. Early adoption is permitted.
What you need to know:
The update makes Topic 270 easier to apply by consolidating interim disclosure guidance and creates a comprehensive list of disclosures required in interim financial statements and accompanying notes.
The update requires entities to disclose material interim events that occurred since the last annual reporting period that impact the entity.
The update does not materially expand or reduce the nature or extent of interim disclosures beyond clarifying existing requirements.
Your next steps:
Revise interim reporting policies to reflect clarified scope and disclosure requirements.
Implement a comprehensive interim disclosure checklist aligned with Topic 270 amendments.
Educate financial reporting and accounting teams on new disclosure requirements.
ASU 2025-12 – Codification Improvements
The update is technical and clarificatory, improving usability rather than establishing new accounting principles. The update addresses 33 issues, spans a wide range of codification topics, and applies to reporting entities with the scope of the affected accounting guidance. Selected items from this update are highlighted below. For a full list of the items updated, refer to the ASU.
Effective for fiscal years beginning after December 15, 2026, including interim reporting periods within those annual periods.
What you need to know:
Diluted EPS Calculations (ASC 260 – Earnings Per Share): Clarifies when a company reports a loss from continuing operations and holds contracts that may be settled in stock or cash and are accounted for as assets or liabilities, the combined effect of numerator adjustments and potential common shares in the denominator may not always be antidilutive. Accordingly, entities must adjust the numerator of diluted EPS to reflect the income or loss that would have resulted if the contract had been classified as equity and evaluate whether the combined effect is dilutive, rather than assuming all potential shares are antidilutive.
Lease Receivables Clarification (ASC 842 – Leases): Confirms that lease receivables arising from sales-type or direct financing leases are excluded from enhanced loan disclosure requirements for certain refinancings and restructurings involving borrowers experiencing financial difficulty.
Beneficial Interests (ASC 325 – Investments – Other): Clarifies that the reference amount for beneficial interests should be reduced by the allowance for credit losses, which affects the calculation of accretable yield and interest income recognition over the life of the beneficial interest.
Treasury Stock Retirements (ASC 505 – Equity): Explicitly permits an entity to deduct the entire excess of repurchase price over par or stated value from additional paid-in capital (APIC) when treasury stock is retired, provided APIC does not become negative.
Transfers of Receivables from Contracts with Customers (ASC 606 and ASC 860): Clarifies that transfers of receivables from contracts with customers recognized in accordance with ASC 606, Revenue from Contracts with Customers that meet the definition of a financial asset are subject to the requirements of ASC 860, Transfers and Servicing.
NFP Clarifications: Several amendments also clarify matters for not-for-profit entities (NFP) These include determining whether an interest constitutes a controlling financial interest for an NFP business-oriented healthcare entity with an investment in a for-profit entity; requiring receivables arising from exchange transaction to be measured using ASC 326-20, Financial Instruments – Credit Losses – Measured at Amortized Cost; and removing the probability assessment for conditional contributions. The update provides additional guidance on distinguishing contributions from exchange transactions and includes other improvements to consistency in NFP financial reporting.
Your next steps:
Review each relevant section of the update to understand how the clarifications apply to your entity’s circumstances.
Reassess procedures for diluted EPS computation when losses occur, including numerator adjustments and potential shares considerations.
Evaluate current lease reporting to confirm sales-type or direct financing lease receivables are excluded from certain enhanced disclosures.
Update processes for accounting for transfers of customer receivables to help ensure they are appropriately scoped under ASC 860.
Maryna Rabko
Senior Manager, CFO Advisory
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