Dive Brief:

• The Financial Accounting Standards Board issued a generally accepted accounting principles standards update that gives companies some relief from challenges they’ve faced in complying with current guidance under Topic 326, Financial Instruments—Credit Losses as well as  Topic 606, Revenue from Contracts with Customer to certain accounts receivable and contract assets, according to a Wednesday press release.  
• The change stems from private companies’ feedback that existing guidance required companies to make costly and complex forecasts of estimated credit losses for AR and contracts. In turn, it provides a “practical expedient” — effectively a simpler way of addressing the rules — which allows all entities to assume that current conditions do not change for the remaining life of the asset and allows private entities to consider potential collection activity that occurs after the balance sheet date in their estimations.  
• The amendments and optional new guidance “are expected to reduce the time and effort necessary to estimate credit losses for current accounts receivable and current contract assets, while continuing to provide decision-useful information to investors and other financial statement users,” the FASB release states. 

Dive Insight:

The new standards update comes as the board is currently in the midst of an agenda consultation initiative aimed at getting feedback on new standards updates that investors and financial report preparers would like to see. Stakeholders have identified several new standard-setting areas of interest, including potential projects related to stablecoins, CFO Dive previously reported.  

The credit loss guidance is latest of four ASU projects completed by the FASB this year. The others related to share-based consideration payable to a customer and stock compensation (Topics 718 and 606), determining the accounting acquirer in a purchase of a variable interest entity (Topics 805 and 810) and a relatively minor clean-up project that clarified the effective date for a project that will require companies to disaggregate income statement expenses for fiscal years beginning after Dec. 15, 2026. 

In March a separate contract-related project narrowly focused on construction contract holdbacks was shelved after it was determined that questions about the current standard could be addressed through “educational efforts.” The FASB issued a report in April seeking to fill in the gaps on applying revenue recognition guidance to construction contracts, CFO Dive previously reported.  

Looking ahead, the FASB expects to issue seven pending high priority or technical agenda projects by the end of the year, according to a Q2 2025 report from FASB Chair Richard Jones. The board has directed the staff to draft final ASUs on several topics including software costs, government grants and derivatives.