FASB introduces guidance on credit losses for receivables
July 31, 2025
The new ASU provides optional guidance to address challenges in applying Topic 326.
The Financial Accounting Standards Board (FASB) has issued an update to improve credit loss measurement for accounts receivable and contract assets.
The new accounting standards update (ASU) provides optional guidance to address challenges in applying Topic 326 to current accounts receivable and contract assets under Topic 606.
It offers a practical expedient for entities to assume unchanged conditions as of the balance sheet date for the assets’ remaining life.
The Private Company Council initiated this standard-setting activity following feedback from private company stakeholders.
Concerns included the cost and complexity of developing forecasts for expected credit losses and estimating losses for receivables and contract assets collected before financial statements are issued.
The ASU amendments aim to reduce the time and effort needed to estimate credit losses while maintaining decision-useful information for investors and financial statement users.
Entities other than public business entities can elect to consider post-balance sheet date collection activity when estimating credit losses.
Earlier in July 2025, FASB and the Accounting Standards Board of Japan (ASBJ) held their thirty-fifth bilateral meeting in Tokyo, Japan.
The meeting formed part of their cooperative work on developing high-quality global accounting standards, as stated in a joint announcement.
During the meeting, both boards exchanged updates on their activities and discussed shared agenda items, including agenda consultation, business combinations, and environmental credit programmes.
The next meeting is scheduled for the second half of 2026 in Norwalk, US.
In May 2025, FASB issued an ASU amending requirements for identifying the accounting acquirer in business combinations under FASB Accounting Standards Codification Topic 805.
The update, which was based on a recommendation from the Emerging Issues Task Force, modified the previous guidelines for identifying the accounting acquirer in transactions that mainly involve the exchange of equity stakes.
It is particularly relevant when the legal acquiree is a variable interest entity that qualifies as a business.
[The Accountant Online]
