Standard Setters' Updates

Standard Setters’ Updates | 6-8 Min Read

Two developments from the Financial Accounting Standards Board and the Securities and Exchange Commission carry direct implications for how companies prepare their financial statements heading into 2026 and 2027 reporting cycles. One clarifies exactly when new expense disaggregation rules kick in. The other removes a balance sheet requirement that had created real accounting complexity for companies holding crypto assets on behalf of clients. Both are worth understanding now, well ahead of their effective dates, rather than during the crunch of year-end close.

ASU 2025-01: When Expense Disaggregation Disclosures Actually Apply

In November 2024, FASB issued ASU 2024-03, which requires public business entities to disaggregate expenses in the income statement into specific categories and reconcile those figures back to the totals already reported in the financial statements. The intent is straightforward: give investors and analysts more visibility into what actually makes up a company’s cost base, rather than leaving broad expense line items unexplained.

After the standard was issued, FASB recognized that the original effective date created confusion, particularly around how the requirement applied to interim reporting periods. To resolve this, the Board issued ASU 2025-01, which clarifies the effective date as follows:

Annual reporting periods: beginning after December 15, 2026
Interim reporting periods: within annual reporting periods beginning after December 15, 2027

In practice, this means most public business entities have a longer runway than the original standard implied, but the clarification also removes any ambiguity about when the clock actually starts. Finance teams should treat this as a data infrastructure question now, not a disclosure question later, since building the systems to track and reconcile disaggregated expense categories takes considerably longer to implement well than to disclose.

ASU 2025-02: The SEC Reverses Course on Crypto-Asset Safeguarding

The second development traces back to 2022, when the SEC published Staff Accounting Bulletin (SAB) No. 121 under Topic 5.FF, covering how entities should account for obligations to safeguard crypto assets held on behalf of platform users. SAB 121 required entities in this position to record both a liability and a corresponding asset at fair value on their balance sheets.

In practice, this created real accounting complexity without a clear corresponding benefit, since the guidance did not map cleanly onto how safeguarding arrangements actually function economically. To address this, the SEC issued SAB No. 122, formally rescinding the interpretive guidance in SAB 121.

FASB responded by issuing ASU 2025-02, which informs preparers of this rescission and directs entities to instead apply standard loss contingency guidance under ASC 450-20 when accounting for crypto-asset safeguarding obligations, rather than the bespoke fair value recognition approach SAB 121 had required.

Effective date: Entities should apply the rescission of Topic 5.FF on a fully retrospective basis in annual periods beginning after December 15, 2024, meaning this change is already in effect for most calendar-year filers as they prepare 2026 financial statements.

What This Means for Finance Teams Preparing 2026 Filings

For companies with any crypto-asset safeguarding arrangements, the shift away from SAB 121’s fair value recognition approach and toward standard ASC 450-20 loss contingency treatment should already be reflected in current financial statements, given the retrospective effective date. This is worth confirming directly with your auditors if it hasn’t been addressed yet.

For companies working toward expense disaggregation compliance, the extended effective dates under ASU 2025-01 buy time, but the underlying data work does not shrink to fit a longer deadline. Building the general ledger structure and cost allocation methodology needed to disaggregate and reconcile expense categories credibly is a multi-quarter project for most organizations, not a year-end adjustment.

Frequently Asked Questions

When does the expense disaggregation disclosure requirement take effect?

Under ASU 2025-01, annual reporting periods beginning after December 15, 2026, must comply with interim reporting periods within annual reporting periods beginning after December 15, 2027, also in scope.

What was SAB 121, and why was it rescinded?

SAB 121 was the 2022 SEC guidance requiring entities safeguarding crypto assets for platform users to record a liability and corresponding asset at fair value. The SEC rescinded it through SAB 122 because it created accounting complexity without a clear practical benefit.

What accounting guidance now applies to crypto-asset safeguarding obligations?

Following the SAB 121 rescission, entities apply standard loss contingency guidance under ASC 450-20 when accounting for obligations to safeguard crypto assets, rather than the fair value recognition SAB 121 had required.

Is the SAB 121 rescission retroactive?

Yes. Entities apply the rescission on a fully retrospective basis in annual periods beginning after December 15, 2024, which means it is already in effect for most calendar-year filers.

What is ASU 2024-03, and how does it relate to ASU 2025-01?

ASU 2024-03, issued in November 2024, is the original standard requiring public business entities to disaggregate income statement expenses into specific categories. ASU 2025-01 does not change the substance of that requirement; it only clarifies when it takes effect.

Who should be tracking these updates?

CFOs, controllers, financial reporting teams, and auditors of public business entities, particularly those with crypto-asset custody arrangements or complex expense structures subject to disaggregation requirements.

Talk to Our Team

Preparing for expense disaggregation compliance or reassessing crypto-asset accounting treatment under the current guidance? Pierag’s Accounting Advisory practice helps finance teams translate standard-setter updates like these into practical implementation plans well ahead of effective dates. Talk to our team about your reporting readiness.