The FASB and SEC Updates Every CFO Should Know in 2026

New expense disaggregation rules, first-ever U.S. GAAP government grant guidance, expanded share-based compensation scope, broader tax disclosures and a wave of proposed SEC rule changes … what do they mean for your finance function?

If you are a finance leader at a public, private, or private equity–backed company, the next few reporting cycles will see dynamic changes to your footnote disclosures and potentially to the face of your financial statements. Below we share what is changing, who it affects and where to start in terms of adopting new FASB standards and the SEC proposals that could reshape public company reporting.

FASB Updates: Four Standards on the Runway

1. Disaggregation of Income Statement Expenses: Public Companies Only

ASU 2024-03 is a footnote-only standard. There are no expected changes on the face of the income statement. Public companies must add a tabular disclosure in the footnotes breaking relevant expense captions into five natural categories:

• Purchases of inventory,
• Employee compensation,
• Depreciation of fixed assets,
• Amortization of intangibles, and
• Depreciation, depletion and amortization of capitalized acquisition, exploration and development costs recognized as part of oil and gas producing activities.

Additionally, for each relevant expense caption companies will be required to include the following items as part of the tabular disclosure:

• Expense reimbursements related to cost sharing or cost reimbursement arrangements with other entities,
• Expenses that are required to be disclosed under other applicable GAAP (impairments, exit and disposal activities, derivatives and hedging),
• Expenses presented entirely within one relevant expense caption that are not required under other applicable GAAP (expected credit losses, warranties, costs to obtain or fulfill a contract), and
• A category for other expenses to reconcile to the face of the financial statements.

For the other category, companies will be required to include qualitative disclosures regarding the type and nature of the expenses included within. Selling expenses must also be disclosed each period, along with the company’s own definition of selling expenses annually.

ASU 2025-01 clarifies the adoption of the new standard. ASU 2024-03 will be adopted in the Form 10-K for fiscal years beginning after December 15, 2026, the 2027 10-K for calendar-year filers, with quarterly reporting required a year later. Early adoption is permitted. Companies must be prepared to capture these expense items throughout the year of adoption to support the disclosures in the footnotes and the audit of these amounts for their Form 10-K.

2. Government Grants: The First Comprehensive U.S. GAAP Guidance

Until now, U.S. GAAP had no comprehensive literature on government grants. Therefore, companies analogized to IAS 20, Accounting for Government Grants, contingent gain guidance (ASC 450) or other models — an inconsistency many remember from the Paycheck Protection Program era.

The new standard, ASU 2025-10, applies to all for-profit entities, with not-for-profits scoped out, and is effective for periods beginning after December 15, 2028, for public companies and December 15, 2029, for private companies. Early adoption is permitted, and companies already following IAS 20 should see little change.

Critically, a grant can no longer be recognized simply because the cash arrived: recognition requires the probability of conditions being met and cannot precede the related costs. Grants tied to assets are deferred on the balance sheet; grants tied to income follow the expense. New required disclosures will cover the nature of the grant, accounting policies, amounts recognized, unmet conditions and clawback provisions of the grant.

3. Share-Based Compensation: A Wider ASC 718 Net

Two updates pull more awards into stock compensation accounting. ASU 2025-04 expands the definition of performance conditions to include purchase volumes, dollar-value thresholds, purchases over a specified period and purchases by a customer's customers. This means equity issued to a customer on those terms is now required to be accounted for under ASC 718. It also eliminates the election to recognize performance-condition forfeitures as they occur, requiring an estimate of forfeitures that companies, especially smaller reporting companies and privately held companies, may struggle to support.

ASU 2024-01 adds four examples clarifying profits interests, common in PE-backed and closely held structures. The dividing line is enterprise value: awards that let the holder share in residual equity value, including cash-settled phantom units referenced to share value, are within the scope of ASC 718. However, awards tied only to an operating metric, such as a share of annual net income, are ordinary incentive compensation.

4. Income Tax Disclosures: New for Private Companies in 2026

Public companies adopted ASU 2023-09 and its enhanced disclosures in 2025, while private companies will need to adopt in 2026. How income tax expense is calculated does not change; the disclosures simply get deeper. Companies must:

• Expand the reconciliation between the statutory federal rate and the effective rate;
• Break out income taxes paid by federal, state and foreign jurisdictions;
• Add transparency around tax credits; and
• Show movement in valuation allowances.

Public companies report the disclosures quarterly and annually, while private companies only report annually. For privately held businesses, expect lenders and investors to now see considerably more information about state tax exposure and jurisdictional footprint.

ASU Effective Dates at a Glance

SEC Updates: Major Changes Potentially on the Horizon

Optional Semiannual Reporting and a Proposed Form 10-S

A proposed rule released May 5, 2026, would allow companies to elect to report semiannually. Quarterly reporting will remain the default, and companies wishing to elect will have to tick a box on their Form 10-K to elect. Companies who choose to elect will file a new Form 10-S, which is expected to be similar in structure to today’s Form 10-Q.

The SEC’s reasoning: reporting has become too complex and burdensome. A longer reporting cycle would let management focus on long-term strategy as opposed to short-term earnings metrics, fewer required filings could encourage IPOs, and investors would remain informed between reporting period through the issuance of 8-Ks by companies for any material items.

Comment letters on this topic have been extensive. Investors appear to be largely opposed to semiannual reporting, viewing frequent interim reporting as a core benefit of the U.S. markets. Accounting and law firms have been more measured, urging alignment with the FASB, whose disclosure requirements are built around quarters and consideration of other simplification measures.

The UK’s experience is instructive: after returning to semiannual reporting in 2014, there was no measurable increase in CapEx or R&D investment, while analyst coverage declined as reliable interim information dried up — a real risk for smaller and newly public companies. Practical effects matter too, including debt covenants built around quarterly delivery and a longer window of market silence.

A Rebuilt Filer Status Framework

On May 19, 2026, the SEC issued another proposed rule that would potentially simplify financial reporting for many U.S. public companies. The proposed changes issued by the SEC include:

• Raising the large accelerated filer threshold from $700 million to $2 billion in public float, measured over two consecutive years.
• Eliminating the accelerated filer and smaller reporting company statuses, leaving only large accelerated and non-accelerated filers.
• Extending scaled disclosure accommodations and longer filing deadlines to all non-accelerated filers and removing the auditor attestation on internal controls for that group.
• Placing newly public companies in non-accelerated status for a minimum of five years.
• Establishing a new category of small, non-accelerated filers who have less than $35 million in total assets, providing these companies with an additional 30 days to file Form 10-K annual reports and an additional five days to file interim reporting.

Feedback has been broadly supportive of simplification, with two reservations: the five-year post-IPO ramp looks generous for companies that go public with multibillion-dollar floats, and approximately 80% of public companies would no longer undergo an audit of internal controls, even though management’s assessment remains required.

Comment Letter Trends

SEC comment letters on Form 10-K filings fell by roughly 400 between the 2024 and 2025 reporting periods, but the themes remain familiar:

• MD&A: Quantification and more detailed qualitative discussion regarding material period-over-period changes;
• Non-GAAP measures: Given too much prominence and insufficient reconciliation to GAAP measures or reconciled to the wrong GAAP measure;
• Segment reporting: Identification of the chief operating decision maker and operating segments, completeness of disclosures under new segment reporting standards;
• Revenue recognition: Disaggregation and assumptions or significant judgments used in reporting revenue; and
• Goodwill and intangible assets: Key assumptions used for a company’s impairment analysis.

What This All Means for Your Company

• Private Companies: The 2026 tax disclosures are the immediate item. Government grant policy decisions are worth making early. Expense disaggregation does not apply, but treat it as a data-readiness benchmark if an IPO is being contemplated.
• Public Companies: Expense disaggregation is a systems and process project, not a year-end exercise. Watch how the filer status proposal could change your deadlines, comparative statement requirements and internal control audit.
• PE-Backed Companies: Revisit profits interests and management incentive units against ASU 2024-01 and factor the proposed post-IPO on-ramp into exit planning.

Where to Start

• Map the in-scope standards to your entity type and fiscal year-end.
• Test whether your systems can produce the required expense and tax detail, and support it in an audit.
• Review equity awards for customer grants, profits interests and phantom units.
• Document your government grant policy, including recognition triggers and clawbacks.
• Check debt covenants before assuming a lighter interim reporting cadence.

Each of these topics runs deeper than the space of this article allows. If you are working through adoption, evaluating how the SEC’s proposals could affect your reporting or weighing other standards, reach out to your advisers to begin a conversation.

Contact Phil Ryan, Jeff Harnden or a member of your service team to discuss this topic further.

In this blog Cohen & Co is not rendering legal, accounting, investment, tax or other professional advice. Rather, the information contained in this blog is for general informational purposes only. Any decisions or actions based on the general information contained in this blog should be made or taken only after a detailed review of the specific facts, circumstances and current law with your professional advisers.