Regulatory updates

The Financial Accounting Standards Board (FASB) has issued an Accounting Standards Update (ASU) to enhance financial reporting by requiring public companies to provide more detailed disclosures about certain expenses in the notes to financial statements at each interim and annual reporting periods.

Key updates in the ASU include:

Enhanced disclosures: Public companies should now disclose the following specific expenses:

• Purchases of inventory
• Employee compensation
• Depreciation
• Intangible asset amortization
• Depreciation, depletion, and amortisation related to oil- and gas-producing activities included in each relevant expense caption.

Qualitative descriptions: Companies should provide qualitative descriptions of amounts not separately disaggregated quantitatively.

Selling expenses: Companies should disclose total selling expenses and, in annual reports provide a definition of selling expenses.

The amendments are effective for annual reporting periods beginning after 15 December 2026, and for interim periods beginning after 15 December 2027. Early adoption is permitted.

To access the ASU please click here

The FASB has released an Accounting Standards Update (ASU) to improve the relevance and consistency of the guidance on induced conversions in Subtopic 470-20, Debt—Debt with Conversion and Other Options.

Currently, the guidance on induced conversions applies only to conversions that include the issuance of all equity securities issuable pursuant to the conversion privileges provided in the terms of the debt at issuance. Current Generally Accepted Accounting Principles (GAAP) do not address how this criterion should be applied to the settlement of a convertible debt instrument that does not require the issuance of equity securities upon conversion (for example, a convertible debt instrument with a cash conversion feature).

The ASU clarifies the requirements for determining whether certain settlements of convertible debt instruments should be accounted for as an induced conversion. Under the amendments, to account for a settlement of a convertible debt instrument as an induced conversion, an inducement offer is required to provide the debt holder with, at a minimum, the consideration (in form and amount) issuable under the conversion privileges provided in the terms of the instrument. An entity should assess whether this criterion is satisfied as of the date the inducement offer is accepted by the holder. If, when applying this criterion, the convertible debt instrument had been exchanged or modified (without being deemed substantially different) within the one-year period leading up to the offer acceptance date, an entity should compare the terms provided in the inducement offer with the terms that existed one year before the offer acceptance date. The amendments do not change the other criteria that are required to be satisfied to account for a settlement transaction as an induced conversion.

The amendments in the ASU are effective for annual reporting periods beginning after 15 December 2025, with early adoption permitted. The transition requirements have also been provided for the amendments.

To access the text please click here