This Financial Reporting Update highlights key developments and issues that are relevant to Finance and Accounting Professionals.
Financial Accounting Standards Board
On January 22, 2025, the Financial Accounting Standards Board published a proposed Accounting Standards Update (ASU) to the FASB Accounting Standards Codification. This update is issued as part of the Board’s project to make continuous improvements to generally accepted accounting principles (GAAP), which are referred to as codification improvements. The improvements cover a variety of topics within the codification and specifically address 34 issues, including removing the master glossary term “Amortized Cost,” clarifying the calculation of earnings per share when a loss from continuing operations exists, clarifying the calculation of the reference amount for beneficial interests, clarifying the guidance for the transfer of receivables from contracts with customers, and clarifying the accounting for certain receivables by not-for-profit entities. The Board is accepting public comments on the proposed ASU until April 22, 2025.
The Private Company Council (PCC) issued its 2024 annual report to highlight areas of progress and accomplishments over the last year – the first such annual report they have ever released. As they look forward to 2025, the PCC aims to continue its regular assessments of financial reporting issues that affect private companies. The council has already identified concerns regarding debt, debt restructurings, and debt modifications and extinguishments that it wants to address this upcoming year. To learn more about this report, you can read our blog post here.
Securities and Exchange Commission
On January 17, 2025, the Securities and Exchange Commission (SEC) announced that it filed 200 total enforcement actions in the first quarter of fiscal year 2025, which ran from October through December 2024. These enforcement actions included a wide range of violations including, but not limited to, financial misstatements, misleading disclosures to brokerage customers, alleged bribery schemes, and failures by advisory firms to disclose conflicts of interest. Out of these 200 enforcement actions, 75 of them occurred in October alone. Additionally, the SEC filed more than 40 enforcement actions between January 1, 2025, and January 17, 2025, indicating that this level of productivity will continue through the second quarter and the rest of 2025.
On March 27, 2025, the Securities and Exchange Commission (SEC) voted to end its defense of rules requiring disclosure of climate-related risks and greenhouse gas emissions. These rules, adopted by the SEC on March 6, 2024, created detailed and extensive special disclosure requirements about climate risks for issuing and reporting companies; they were being challenged in litigation in the Eighth Circuit by various states and private companies. In February, the SEC asked the courts to delay proceedings related to legal challenges to their climate rules, as it felt that additional time was needed for deliberation about the new administration’s stance on this rule. Mark Uyeda, the current SEC Acting Chairman, states that the goal of this vote is to end “the Commission’s involvement in the defense of the costly and unnecessarily intrusive climate change disclosure rules.”
Public Company Accounting Oversight Board
On February 12, 2025, the Public Company Accounting Oversight Board (PCAOB) withdrew its request for SEC approval of rules that would have required registered firms to report a significant new set of firm and engagement metrics relating to audits and audit practices, as well as new metrics related to firm filings on the PCAOB’s Annual Report Form and Special Reporting Form. Sue Coffey, AICPA’s CEO for Public Accounting, stated that the AICPA had expressed concerns that these proposed PCAOB requirements would’ve been harmful to the U.S capital markets and to small and mid-sized audit firms by preventing them from performing public company audits. The AICPA had previously voiced its concerns in a comment letter on December 19, 2024, and Coffey has expressed support for the PCAOB’s decision to withdraw.
American Institute of Certified Public Accountants
On January 14, 2025, the American Institute of Certified Public Accountants (AICPA) updated its practice aid, Accounting for and Auditing of Digital Assets, to assist accounting professionals with Accounting Standards Update (ASU) No. 2023-08, Intangibles – Goodwill and Other – Crypto Assets (Subtopic 350-60): Accounting for and Disclosure of Crypto Assets, effective December 15, 2024. The update comes as there are rapid changes to the market for digital assets and growth in the digital asset practice as they have become increasingly popular, with various forms of new digital assets having become available. This update will help accounting professionals by providing fundamental knowledge of blockchain technology and introducing new terms, such as “crypto intangible assets,” to assist in the implementation of the codified standards.
On February 13, 2025, the AICPA Auditing Standards Board (ASB) had two exposure drafts approved by the ASB in separate votes during a public meeting. The first of the drafts, Proposed Statement on Standards for Attestation Engagements, Scope Limitations in a Review Engagement, highlights proposed revisions to AT-C Section 210, Review Engagements, in the AICPA Professional Standards. The proposed revisions are available for public comment until May 30, 2025, in response to a potential practice issue related to recent regulations for sustainability reporting. This proposition would amend AT-C Section 210, permitting issuance of a qualified conclusion or a disclaimer of conclusion in an attestation review when a scope limitation exists. The proposed amendment would become effective on or after December 15, 2026, if issued as a final standard. The second exposure draft, Proposed Statement on Auditing Standards, External Confirmations, proposes changes to AU-C Sections 330, Performing Audit Procedures in Response to Assessed Risks and Evaluating the Audit Evidence Obtained; 500, Audit Evidence; and 505, External Confirmations, among other sections in the AICPA Professional Standards. The belief of the ASB is that audit quality will improve for audits of financial statements of non-issuers by proposing amendments such as: new requirements to confirm cash and cash equivalents; clarifying direct access to information; new requirements around using an intermediary; and clarifying the reliability of responses to confirmation requests. The deadline for public comment on this proposed amendment is June 30, 2025, and if issued as a final standard it will become effective no earlier than December 15, 2027.
On March 10, 2025, the AICPA Professional Ethics Executive Committee (PEEC) task force asked for feedback on their discussion memorandum regarding potential revisions to independence rules in the AICPA Code of Professional Conduct. These independence enhancements are related to alternative practice structures, including an increase in the prevalence of private-equity investments in accounting firms. The PEEC believes that there needs to be more clarity regarding outside investment in CPA firms, particularly in terms of auditor independence, portfolio companies, and other private equity-related entities. The PEEC asked for comments on its depiction of an Alternative Practice Structure (APS), its preliminary conclusions, and two options for a draft interpretation of independence rules, one for private-equity-related entities and one that is more general. Public comments should be submitted by June 15, 2025.
On March 26, 2025, the AICPA submitted comments to the Treasury and the IRS recommending changes to automatic enrollment requirements for newly established 401(k) and 403(b) retirement savings plans. Under the SECURE 2.0 Act, it is required for newly established 401(k) and 403(b) plans to automatically enroll eligible employees for the plan year, unless the employee opts out on their own, and they must enroll the employee at an initial contribution rate of at least 3% of the employee’s pay, increasing by one percentage point each year until it reaches at least 10% of pay. In January 2025, the IRS released proposed regulations for the automatic enrollment provisions. The AICPA recommends that the IRS should clarify the investment requirements for Trustee Direct Plans, determine employee count for small businesses, and define a predecessor employer. Comments can be submitted through the Federal Register, and a public hearing is scheduled for April 8, 2025.
On March 26, 2025, the AICPA Accounting and Review Services Committee (ARSC) voted to issue an amendment clarifying that a CPA preparing financial statements as part of a consulting services engagement in accordance with CS Section 100, Consulting Services: Definitions and Standards, is not required to apply the framework of AR-C Section 70, Preparation of Financial Statements, when preparing financial statements. By preparing financial statements outside of AR-C Section 70, the quality management standards do not apply and the engagement is not included in the population subject to peer review. Because preparation of financial statements is not considered an attest service, the ARSC determined that this change would not affect public interest as CPAs are still required to follow the AICPA Code of Professional Conduct. CPAs are also required to follow CS Section 100, which states that general professional standards of professional competence, due professional care, planning and supervision, and sufficient relevant data apply to consulting services. The Statement on Standards for Accounting and Review Services (SSARS), Applicability of AR-C Section 70 to Financial Statements Prepared as Part of a Consulting Services Engagement, will be effective for financial statements prepared for periods ending on or after December 15, 2026, with early implementation permitted.