backOn July 30, 2025, the Financial Accounting Standards Board issued an Accounting Standards Update (“ASU”) that addresses challenges in applying Topic 326, Financial Instruments—Credit Losses, to accounts receivable and contract assets arising from transactions accounted for under Topic 606, Revenue from Contracts with Customers.
The ASU responds to feedback from the Private Company Council and private company stakeholders that emphasized the cost and complexity of developing a reasonable and supportable forecast when estimating expected credit losses and the significant effort to estimate and record certain expected credit losses. The ASU allows stakeholders to elect to use an expedient assumption that current conditions as of the balance sheet date do not change for the remaining life of the assets, and it authorizes certain entities to consider collection activity after the balance sheet date in estimating expected credit losses for Topic 606 transactions. These changes are expected to reduce the time and effort associated with estimating credit losses for these transactions, according to the FASB.
The FASB’s news release announcing the new ASU is available here. A copy of the ASU is available here.