The ASU aims to address stakeholder feedback indicating that identifying, analyzing, and documenting macroeconomic data as part of developing reasonable and supportable forecasts is challenging and costly, and generally does not have a material effect on the allowance for shorter-term receivables. Stakeholders also noted that the ability to consider collection activity after the balance sheet date would reduce both complexity and level of effort without negatively impacting decision-useful information for financial statement users.
Under the ASU, when developing their forecasts, all entities are allowed to adopt a practical expedient to assume that current conditions as of the balance sheet date persist throughout the forecast period. Additionally, private companies can make an accounting policy election to consider post-balance sheet date collections when estimating credit losses.
These amendments are to be applied prospectively for fiscal years beginning after December 15, 2025. Early adoption is permitted in any period where financial statements have not yet been issued. An entity making these elections after the effective date is not required to perform a preferability assessment.
The full text of ASU 2025-05 can be found at HERE
Published: 09/03/2025
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