Version 7 - April 2025 (CUD release)

Content update

Legislative changes for December 2025 financial year

These amendments take effect immediately and apply fully retrospectively to annual periods beginning after December 15, 2024.
This update primarily amends an SEC paragraph following the issuance of SEC SAB 122 and amends paragraph 405-10-S99-1 without linking to a transition paragraph.

These amendments take effect for public business entities for fiscal years beginning after December 15, 2024. For all other entities, the amendments take effect for fiscal years beginning after December 15, 2025.
This update mainly amends the Codification to remove references to various Concepts Statements. In most instances, these references are extraneous, and users do not need them to understand or apply the guidance. In other instances, prior Statements used these references to provide guidance in certain topical areas.
The Board believes removing all references to Concepts Statements from the guidance will simplify the Codification and distinguish between authoritative and nonauthoritative literature.

For public business entities, these amendments take effect for annual periods beginning after December 15, 2024, and interim periods within those annual periods. For all other entities, the amendments take effect for annual periods beginning after December 15, 2025, and interim periods within those annual periods.
This update primarily adds an illustrative example with four fact patterns demonstrating how an entity applies the scope guidance in paragraph 718-10-15-3 to determine whether Topic 718 governs a profits interest award.
The fact patterns focus on the scope conditions in paragraph 718-10-15-3. This example aims to reduce complexity in determining if a profits interest award falls under Topic 718 guidance and reduce existing diversity in practice.
The amendments in paragraph 718-10-15-3 improve its overall clarity and operability without changing the guidance.

For public business entities, these amendments take effect for annual periods beginning after December 15, 2024. For entities other than public business entities, the amendments take effect for annual periods beginning after December 15, 2025.
These amendments require public business entities annually to disclose specific categories in the rate reconciliation and provide additional information for reconciling items meeting a quantitative threshold (equal to or greater than 5% of pre-tax income multiplied by the statutory rate)..
Entities must provide separate disclosure for any reconciling item listed below if the item's effect equals or exceeds 5 percent of the amount calculated by multiplying the income (or loss) from continuing operations before income taxes by the applicable statutory income tax rate.
If the reconciling item falls within the effect of cross-border tax laws, tax credits, or nontaxable or nondeductible item categories, entities must disaggregate it by nature. ii. If the reconciling item falls within the foreign tax effects category, entities must disaggregate it by jurisdiction (country) and by nature, except for reconciling items related to changes in unrecognized tax benefits discussed in (4). iii. If the reconciling item does not fall within any category listed in (1), entities must disaggregate it by nature.
When categorizing reconciling items (except for those related to changes in unrecognized tax benefits discussed in (4)), entities should use the following definitions: the state and local income tax category includes income taxes imposed at the state or local level within the jurisdiction (country) of domicile; the foreign tax effects category includes income taxes imposed by foreign jurisdictions; and the remaining categories listed in (1) include federal (national) income taxes imposed by the jurisdiction (country) of domicile.
Entities must present reconciling items on a gross basis. There are two exceptions: entities may present unrecognized tax benefits and the related tax positions, and the tax effects of certain cross-border tax laws and related tax credits, on a net basis.
Entities may disclose reconciling items in the changes in unrecognized tax benefits category on an aggregated basis for all jurisdictions. The amendments in this update require that all entities disclose the following information about income taxes paid on an annual basis:
Disclose the amount of income taxes paid (net of refunds received), disaggregated by federal (national), state, and foreign taxes.
Disclose the amount of income taxes paid (net of refunds received), disaggregated by individual jurisdictions where the income taxes paid (net of refunds received) equal or exceed 5 percent of total income taxes paid (net of refunds received).
The amendments in this update require that all entities disclose the following information:
Disclose income (or loss) from continuing operations before income tax expense (or benefit), disaggregated between domestic and foreign sources.
Disclose income tax expense (or benefit) from continuing operations, disaggregated by federal (national), state, and foreign categories.
The amendments in this update eliminate the requirement for entities to either disclose the nature and estimated range of reasonably possible changes in the unrecognized tax benefits balance within the next 12 months, or state that they cannot make such an estimate.
The amendments in this update remove the requirement for entities to disclose the cumulative amount of each type of temporary difference when they do not recognize a deferred tax liability because of the exceptions to comprehensive recognition related to subsidiaries and corporate joint ventures.
The amendments in this update replace the term public entity as currently used in Topic 740 with the term public business entity as defined in the Master Glossary of the Codification.

The amendments in this update become effective for all entities for fiscal years beginning after December 15, 2024, including interim periods within those fiscal years.
The amendments in this update apply to assets (which entities will subsequently measure at fair value, recognizing changes in net income each reporting period) that meet all the following criteria:
Meet the definition of intangible assets as defined in the Codification.
Do not provide the asset holder with enforceable rights to or claims on underlying goods, services, or other assets.
Are created or reside on a distributed ledger based on blockchain or similar technology.
Are secured through cryptography.
Are fungible.
Are not created or issued by the reporting entity or its related parties.
The amendments in this update also require that an entity present (1) crypto assets measured at fair value separately from other intangible assets on the balance sheet and (2) changes from remeasuring crypto assets separately from changes in the carrying amounts of other intangible assets on the income statement (or statement of activities for not-for-profit entities).
While the amendments in this update do not otherwise change presentation requirements for the statement of cash flows, the amendments require specific presentation of cash receipts when an entity receives crypto assets as noncash consideration in the ordinary course of business (or as a contribution, for a not-for-profit entity) and converts them nearly immediately into cash.
For annual and interim reporting periods, the amendments in this update require that an entity (including one subject to industry-specific guidance) disclose the following information:
Disclose the name, cost basis, fair value, and number of units for each significant crypto asset holding, and the aggregate fair values and cost bases of the crypto asset holdings that are not individually significant.
For crypto assets subject to contractual sale restrictions, disclose their fair value, the nature and remaining duration of the restriction(s), and the circumstances that could cause the restriction(s) to lapse.
For annual reporting periods, the amendments in this update require that an entity disclose the following information:
Provide a rollforward, in the aggregate, of activity in the reporting period for crypto asset holdings, including additions (with a description of the activities that resulted in the additions), dispositions, gains, and losses.
For any dispositions of crypto assets in the reporting period, disclose the difference between the disposal price and the cost basis and describe the activities that resulted in the dispositions.
If the entity does not present gains and losses separately, identify the income statement line item where it recognizes those gains and losses.
Disclose the method the entity uses for determining the cost basis of crypto assets.

For public business entities, the amendments become effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. For all other entities, the amendments become effective for fiscal years beginning after December 15, 2024, including interim periods within those fiscal years.
The amendments in this Update permit reporting entities to elect to account for their tax equity investments, regardless of the tax credit program from which the entity receives the income tax credits, using the proportional amortization method if the investment meets certain conditions.
Under the proportional amortization method, an entity amortizes the initial cost of the investment in proportion to the income tax credits and other income tax benefits it receives and recognizes the net amortization and income tax credits and other income tax benefits in the income statement as a component of income tax expense (benefit). To qualify for the proportional amortization method (if an entity elects it according to paragraph 323-740-25-4), the investment must meet all of the following conditions:
It must be probable that the tax equity investor will receive the allocable income tax credits.
The tax equity investor must not have the ability to exercise significant influence over the underlying project's operating and financial policies.
Income tax credits and other income tax benefits must provide substantially all of the projected benefits. Projected benefits include income tax credits, other income tax benefits, and other non-income-tax-related benefits. The tax equity investor determines the projected benefits on a discounted basis, using a discount rate consistent with the cash flow assumptions the investor used when deciding to invest in the project.
The tax equity investor’s projected yield, based solely on the cash flows from the income tax credits and other income tax benefits, must be positive.
The tax equity investor must be a limited liability investor in the limited liability entity for both legal and tax purposes, and its liability must be limited to its capital investment.
The amendments require all tax equity investments using the proportional amortization method to apply the delayed equity contribution guidance in paragraph 323-740-25-3. (This guidance necessitates recognizing a liability for delayed equity contributions that are unconditional and legally binding, or when contingent contributions become probable).
The amendments prohibit LIHTC investments
not
accounted for using the proportional amortization method from applying the delayed equity contribution guidance (paragraph 323-740-25-3).
The amendments remove the equity method impairment example for LIHTC investments previously found in Example 1, Subtopic 323-740.
Consequently, entities must apply the impairment guidance in Subtopic 323-10 (Investments—Equity Method and Joint Ventures—Overall) to LIHTC investments accounted for using the equity method.
The amendments require entities to apply the guidance in Topic 321 (on accounting for equity investments) to LIHTC investments not accounted for using either the proportional amortization method or the equity method.
These changes effectively limit the applicability of Subtopic 323-740 guidance solely to tax equity investments accounted for using the proportional amortization method.
The amendments mandate specific disclosures for all investments generating income tax credits and benefits under a tax credit program where the entity elected the proportional amortization method (this includes investments within that program not meeting the conditions for the method).
Reporting entities must disclose information in annual and interim periods allowing investors to understand:
The nature of the entity's tax equity investments.
The effect of these investments and related tax benefits on the entity's financial position and results of operations.
The amendments also provide examples of disclosures entities can use to meet these objectives.

Public business entities must adopt the amendments for fiscal years beginning after December 15, 2023, including interim periods within those years.
All other entities must adopt the amendments for fiscal years beginning after December 15, 2024, including interim periods within those years.
The amendments clarify that entities should
not
consider a contractual restriction on the sale of an equity security as part of the security's unit of account when measuring its fair value.
The amendments also clarify that an entity cannot recognize or measure a contractual sale restriction as a separate unit of account.
The amendments require entities to disclose the following information for equity securities subject to contractual sale restrictions:
The fair value reflected in the balance sheet.
The nature and remaining duration of the restrictions.
Circumstances that could cause the restrictions to lapse.

Early adoption for accounting standards