FASB Is Tweaking Its Receivables Rule Again: What It Means for Your 2026 Year-End
On September 2, the Financial Accounting Standards Board (FASB) released a proposal to clean up 21 areas of GAAP. Near the top of the list: clarifying the scope of the new credit-loss shortcut for accounts receivable that it issued just last year (Journal of Accountancy; Deloitte DART). Comments are due November 19, 2026.
That may sound like inside baseball. It isn't. The rule it touches — ASU 2025-05 — is effective for most private companies and nonprofits this year. If your fiscal year runs on the calendar, your December 31, 2026 financial statements are the first ones it applies to. At SoFla Prime Consulting, we're helping clients decide now how to use it, before the year-end close.
Quick background: the allowance for bad debts got harder
A few years ago, the "CECL" standard (ASC 326) changed how companies estimate bad debts. Instead of booking a loss only when it looked likely, companies had to estimate losses they expect over the life of a receivable — including forecasts about the economy. For a small business with 45-day receivables, building an economic forecast for its allowance felt like overkill. Many owners and auditors agreed.
What ASU 2025-05 changed
FASB issued ASU 2025-05 in July 2025 to ease that burden (FASB, ASU 2025-05). It offers two pieces of relief:
A practical expedient (all entities). You can assume the conditions that exist on your balance-sheet date stay the same for the rest of the receivable's life. No forward-looking economic forecast is required (Grant Thornton).
An accounting policy election (private companies and most nonprofits). You can use cash you actually collected after year-end — up to the date the statements are available to be issued — to size the allowance. The Journal of Accountancy gives a simple example: if you have $10 million of receivables and collect $7 million of them by late February, only the remaining $3 million needs to be evaluated for loss (Journal of Accountancy).
The rule applies to annual periods beginning after December 15, 2025, with early adoption allowed. It is applied going forward only — no restating prior years (FASB; Eide Bailly).
What it does NOT cover
This is where the proposed clarification matters, and where we see the most confusion:
Only current receivables from customer contracts. The relief covers current accounts receivable and contract assets arising from revenue under ASC 606. Long-term notes and other financial assets are outside it (FASB).
Rent from operating leases is a different animal. For our real estate and property management clients: tenant receivables under operating leases fall under the lease standard (ASC 842), not CECL, so this shortcut doesn't change how you assess them.
Nonprofits: pledges are excluded. Contributions and pledges receivable stay under ASC 958. Program fees, tuition and similar exchange revenue can qualify (GRF CPAs & Advisors).
Your 2026 year-end checklist
Decide on the elections now. Talk with your auditor before December so there are no surprises in fieldwork.
Sort your receivables. Separate customer receivables (in scope) from lease, pledge and note receivables (out of scope).
Track post-year-end cash by invoice. The subsequent-collections election only works if you can tie January and February receipts to specific year-end balances. Clean cash application in your accounting system is essential.
Pick and document your cutoff date. You must disclose the date through which you considered collections (Grant Thornton).
Still look at today's conditions. The expedient removes the forecast, not judgment. If a major customer is struggling on December 31, that belongs in the estimate.
Watch the FASB proposal. The final clarification on scope could land before your statements are issued.
The bottom line
ASU 2025-05 is one of the rare accounting changes that makes life easier — but only if your books are set up to use it. The payoff goes to companies with clean receivables aging and good cash application, not to those scrambling in February.
SoFla Prime Consulting, a Boca Raton-based fractional CFO and accounting firm, helps real estate companies, property managers, nonprofits and growing businesses get year-end ready. If you'd like a second set of eyes on your receivables and allowance policy before the close, reach out to our team.
Sources
Strickland, B. "FASB proposes several incremental improvements to GAAP." Journal of Accountancy, Sept. 2, 2026.
Deloitte. "FASB Proposes Targeted Improvements to the Codification." DART, Sept. 2026.
FASB. Accounting Standards Update No. 2025-05, Financial Instruments—Credit Losses (Topic 326), July 2025.
Arman, D. "Insights into the practical effects on CECL by FASB ASU 2025-05." Journal of Accountancy, Oct. 20, 2025.
Grant Thornton. "Measuring credit losses on current accounts." Aug. 2025.
Stallsmith, T. "2026 Accounting Standards Updates Issued and Applicable Now." Eide Bailly, July 20, 2026.
GRF CPAs & Advisors. "ASU 2025-05: What Nonprofits Need to Know about the New CECL Practical Expedient."
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