Q1 2025 Accounting Advisory Guide: An Active Regulatory Quarter Despite General Market Uncertainty – Accounting Standards

For accounting leaders and financial reporting teams, Riveron accounting advisory professionals round up the
latest insights, examine evolving accounting standards, and explore
relevant business trends.

Key points to know this quarter:

• FASB updates and activity during Q1: The FASB
  agenda in the first quarter of 2025 was focused on gathering
  feedback on exposure drafts and revising those standards, like the
  accounting for software costs, disaggregated income statement
  expenses, consideration payable to a customer in the form of
  shares, and government grants. Notably, for calendar year-end
  issuers, this was the first reporting period for which guidance in
  ASU 2023-07 was applicable and financial statements included the
  disclosure of significant expenses in the segment
  footnote.




• SEC actions and focus during the
  quarter: As the SEC transitions its leadership and awaits
  the appointment of Paul Atkins as new SEC Commissioner, the
  Commission shifted its focus to capital formation and
  cryptocurrency. As part of its efforts to bolster capital
  formation, the SEC expanded the availability of draft confidential
  submissions to follow-on offerings and de-SPACs transactions. In
  cryptocurrency, the SEC repealed SAB 121, established a
  cryptocurrency taskforce and took a step back on crypto related
  investigations underway. Additionally, on the SEC’s climate
  disclosure rule, the SEC has voted to no longer defend the rule in
  legal actions.




• Market uncertainty remains top of mind for company
  leaders: In both the economy and the capital markets,
  uncertainty—driven by changes in government spending and
  policies, tariff policy, inflation, impact of AI, and
  the general economic outlook—has tempered CFO outlook on the
  current year. While there were more IPOs in Q1 compared to the same
  prior-year period, the general investment sentiment has shifted to
  a cautious approach, despite a M&A market that is hungry for
  deals.

1. Accounting Standards Updates

ASU 2023-07 –Segment Reporting updates became
effective in 2024 year-end filings

Q1 2025 was the first annual reporting period for public
calendar year-end filers requiring adoption of the new segment
standard. In addition to existing requirements, companies are now
required to disclose:

• significant expenses for each reportable segment,




• who their chief operating decision maker (CODM) is,




• and how the CODM uses the reported measures of segment profit
  or loss in assessing performance.

Management teams can also elect to disclose more than one
measure of segment profit or loss in the footnotes. Any additional
measures presented under the new standard will be subject to non-GAAP measure reporting requirements.

ASU 2025-01 – Updates to the DISE Standard for
Expense Disaggregation

The FASB issued ASU 2025-01 in the first quarter of 2025 to
clarify the effective date of ASU 2024-03, the DISE standard. This
ASU clarified that non-calendar year-end public filers are required
to adopt the standard in the first annual period beginning after
Dec. 15, 2026, and interim periods beginning after Dec. 15,
2027.

The DISE standard itself requires public companies to break down
income statement expense line items in a more detailed, tabular
format in the footnotes. For example, COGS is required to be
disaggregated into natural expense categories including purchases
of inventory, employee compensation, depreciation, intangible asset
amortization, DD&A as part of oil- and gas-producing
activities, or other depletion expenses.

Although the disaggregation of this data may seem simple,
disparate reporting systems or complex cost structures may cause a
challenge when grouping operating activity into these specified
categories. Management teams should consider preparing for this standard well in advance of
the adoption date so that any necessary adjustments can be made
leading into the adoption period.

Read more about what DISE means for investors in a
related Riveron Viewpoints post.

Upcoming Activity of the FASB

Two proposed ASUs have approaching comment deadlines, addressing
the accounting for environmental credits and making changes and
clarifications to the codification on a broad range of topics.

The objective of the environmental credit standard is to provide
more specific guidance on disclosures around environmental credits
and compliance obligations that may be settled with environmental
credits. This standard is expected to impact filers across
industries because of operations subject to emissions regulations
and environmental credits received for carbon footprint
initiatives.

The FASB has issued invitations to comment on a number of
topics, including KPI reporting, initial recognition of intangible
assets, and on the broader standard-setting agenda.

2. Regulatory Updates

Capital Formation

On March 3, 2025, the SEC announced the Division of Corporation
Finance will help facilitate capital formation by further enhancing
the accommodations available to companies for confidential review
of draft registration statements. These accommodations allow
companies to explore public offerings while maintaining
confidentiality. The expanded accommodations include:

• Ommission of the underwriter’s name from the initial draft
  registration statement




• No time limit on confidential draft registration statements
  post-IPO




• Nonpublic review has been expanded to include Section 12(g)
  registration statements on Forms 10, 20-F, and 40-F




• Nonpublic review process is now available for all de-SPAC
  transaction structures

Focus on Cryptocurrency

The SEC has swiftly changed its policy toward cryptocurrency
with the change in administration. On Jan. 21, 2025, on the heels
of the announcement of Mark T. Uyeda as Acting Chairman of the SEC,
the SEC put out a press release announcing the launch of the
Crypto Task Force. With the creation of the Crypto Task Force, the
SEC has set out to develop a comprehensive and clear regulatory
framework for crypto assets.

The SEC noted in the Task Force press release that the
Commission has historically relied on enforcement actions to
regulate the crypto market on a reactive basis. In addition to
creating more clear regulatory boundaries, the Task Force intends
to develop practical pathways for registration, design effective
disclosure frameworks, and strategically allocate enforcement
resources.

EDGAR Next

The SEC has upgraded the EDGAR system with
necessary security changes. These critical updates include changes
to filer access and account management, as well as modernizing the
API connections. Tracking now exists for the individual making the
filing, rather than at the company level, providing needed security
and visibility for impactful regulatory filings. The move to EDGAR
Next requires coordination and time investment. Companies should
take action to prevent delays in filing as the compliance date
approaches.

• All individual filers need to obtain their credentials to
  Login.gov




• Ensure all CIK, CIK Confirmation Codes (CCC), and passphrases
  are current prior to enrollment




• Determine if delegation to a filing agent is needed and
  communicate enrollment, if applicable




• Determine the account administrator and develop a plan for
  onboarding new users and the required annual confirmation

The EDGAR Next dashboard is live as of March 24, 2025, and
compliance becomes mandatory for all filings beginning Sep. 15,
2025.

XBRL

EDGAR was updated on March 17, 2025, to support 2025 taxonomies. Filers should
migrate to the new taxonomies as soon as possible to ensure tags
used in their filings are the most recent and encompass new
accounting standards and other updates. The 2025 taxonomies include
the newly developed SPAC taxonomy, which is required for the
prospectus disclosures in SPAC IPOs.

3. Other Insights and Webinar Replays

In case you missed it: View a replay of our recent webinars to
learn more about:

Throughout the year, Riveron experts host webinars relevant for
accounting and financial reporting professionals. Many sessions
offer CPE credit to live participants. Sign up for our newsletter to be notified about future
Riveron webinars.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.