The Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2025-12, Codification Improvements, in December 2025 to clarify, correct errors, and resolve unintended applications of GAAP. While these 33 targeted improvements are not expected to cause major disruptions, several amendments specifically affect nonprofit organizations. This article highlights the changes most relevant to nonprofits and provides practical guidance for implementation.
Key ASU 2025-12 Updates for Nonprofits
Issue 15 – Nonprofit Presentation Guidance
Clarifies the scope of the fair value option in ASC 825-10-15-7(c), referencing appropriate presentation guidance in ASC 958-220-45-9 through 45-12. This correction addresses previous misreferences to ASC 958-10.
Issue 24 – Statement of Activities Language
Removes “recognized and unrecognized” terminology from ASC 958-220-45-9(c) to eliminate confusion regarding what should appear in the statement of activities.
Issue 25 – Accounting for Receivables
Nonprofits must follow Subtopic 326-20 guidance for credit losses, streamlining previous cross-references in ASC 958-310-35-3.
Issue 27 – Impairment for Higher Education
Adds citations in ASC 958-325-35-1(a) to help institutions correctly apply impairment guidance across diverse investment portfolios, following amendments from ASU 2016-13.
Issue 28 – Nonprofit Other Investments
Eliminates obsolete references to equity securities in ASC 958-325-35-5 and 35-7, preventing confusion and ensuring clarity in presentation.
Issue 29 – Probability Assessments for Contributions
Removes outdated guidance requiring probability assessment in ASC 958-360-50-4(d) and 958-605-55-25, which had been superseded by ASU 2018-08.
Issues 30-31 – Business Combinations
Updates references in ASC 958-805-25-21 and ASC 958-805-30-5 to ensure nonprofits correctly apply recognition principles and guidance when acting as acquirers.
Issue 32 – Hedge Documentation
Adds ASC 958-815-25-2 to cross-reference timing and effectiveness guidance from Subtopic 815-20, supporting nonprofits engaged in hedging activities.
Practical Considerations:
Nonprofit preparers and auditors should review financial statement presentations, particularly for organizations with:
- Significant investment portfolios
- Recent business combinations
- Hedge activity
- Long-term receivable management
Even though the ASU primarily clarifies existing guidance, these changes may affect accounting policies, internal documentation, and disclosures.
Effective Date:
ASU 2025-12 is effective for annual reporting periods beginning after December 15, 2026, including interim periods. Early adoption is permitted for periods in which financial statements have not yet been issued.
ASU 2025-12 provides important clarifications that reduce ambiguity in nonprofit accounting. By updating references, eliminating outdated terminology, and improving guidance for receivables, impairment, business combinations, and hedge documentation, nonprofits can achieve more accurate and consistent financial reporting. Proactive review and implementation will ensure compliance and minimize future audit questions.
