What Is an Accounting Standards Update (ASU)? A Simple Guide

An Accounting Standards Update (ASU) is the document the Financial Accounting Standards Board (FASB) issues to amend the Accounting Standards Codification (ASC), the source of authoritative U.S. GAAP for nongovernmental entities. The ASU explains what changed, why, who is affected, and when the change takes effect. The ASU itself is not authoritative; the amended Codification is. One more layer applies to companies that file with the Securities and Exchange Commission (SEC): for those registrants, SEC rules and interpretive releases are also authoritative GAAP.

For intermediate accounting, remember this chain: FASB issues an ASU → the ASU communicates the amendments → the ASC contains the guidance. Students mix these up all the time. Keep the document (the ASU) separate from the rulebook (the ASC) and you will sidestep a classic exam trap.

What does an Accounting Standards Update explain?

An Accounting Standards Update helps readers understand the change to accounting guidance. It identifies the affected area, describes the amendments, and explains relevant implementation information. The amendment may address a broad accounting issue or clarify an existing requirement. A short ASU can still change how you account for a transaction, so never skip one because it looks small.

Question to ask	Why it matters
What changed?	Identify the guidance that was added, amended, or removed.
Why did it change?	Understand the reporting problem or clarification behind the amendment.
Who is affected?	Determine whether the amendment applies to the entity or transaction.
When does it apply?	Find the effective date and any early-adoption provisions.
How is it applied?	Read the transition requirements and any available choices.

FASB states the distinction directly in its updates: an ASU communicates changes to the Codification and is not itself authoritative. You can see this explanation near the beginning of FASB ASU 2025-12. The example is linked to show the document’s structure, rather than to require you to study that update’s individual amendments here.

How are Accounting Standards Updates numbered?

Every ASU carries a two-part number: the year it was issued, then its order within that year. ASU 2025-12 is the twelfth Update FASB issued in 2025. The number tells you when the document came out. It does not tell you the topic, so always read the title as well.

ASUs began in 2009. Before that, FASB issued Statements of Financial Accounting Standards, usually shortened to SFAS or FAS. When the Codification became the source of authoritative GAAP in 2009, FASB stopped issuing new Statements and started issuing Updates. The first one, ASU 2009-01, formally established the Codification as the source of authoritative U.S. GAAP for nongovernmental entities.

Quick check: if an older textbook mentions “FAS 168,” that was the last Statement FASB issued. Everything after it is an ASU.

What is inside an Accounting Standards Update?

Most ASUs follow the same layout, which makes them easier to read once you know the pattern:

• Summary. A plain-language overview that answers a fixed set of questions: Why is FASB issuing this Update? Who is affected? What are the main provisions? How do they differ from current GAAP, and why are they an improvement? When will the amendments be effective, and what are the transition requirements?
• Amendments to the FASB Accounting Standards Codification. The actual changes, shown paragraph by paragraph, with added words underlined and deleted words struck through.
• Background Information and Basis for Conclusions. The Board’s reasoning, including the alternatives it considered and why it rejected them.
• Amendments to the GAAP Taxonomy (older Updates call it the XBRL Taxonomy). Changes to the tags companies use when they file financial statements electronically with the SEC.

Study tip: read the Summary first, then jump straight to the effective date and transition paragraphs. Save the Basis for Conclusions for when you want to understand why the Board made a particular choice.

Accounting Standards Update vs ASC vs Concepts Statements

Document or source	Main job	Does it establish authoritative requirements?
Accounting Standards Codification (ASC)	Organizes accounting guidance by topic, subtopic, section, and paragraph.	It is the authoritative source recognized by FASB for nongovernmental U.S. GAAP.
Accounting Standards Update (ASU)	Communicates amendments and explains the change and its timing.	The ASU document itself is not authoritative. Its amendments change the Codification.
Statement of Financial Accounting Concepts	Provides objectives and concepts used to develop standards.	No. Concepts Statements do not establish GAAP.

Think of the ASC as the organized reference and an ASU as the explanation of an amendment to that reference. A Concepts Statement serves a different purpose: it helps the Board reason about accounting issues. It is not an alternative rulebook that a preparer can choose when a Codification requirement is inconvenient.

See the FASB Codification tutorial for the four-level structure. For the broader purpose of the reporting framework, read the student guide to GAAP.

Video: Accounting Standards Updates and the Codification

In this excerpt, which runs about a minute and a half, Professor Farhat covers three things: where the conceptual framework fits, what an Accounting Standards Update is, and how the Codification organizes accounting guidance. Watch it before continuing to the steps for reading an update.

What you will hear in the clip:

• The conceptual framework guides the Board but does not set GAAP.
• An Accounting Standards Update communicates a change to the Codification.
• The Codification is organized so you can find the authoritative guidance by topic.

How should a student read an Accounting Standards Update?

Start with the summary. Identify the reporting issue, the entities affected, and the main provisions. Before focusing on technical wording, explain the purpose of the update in one sentence. That gives your research a clear direction.

Then connect the explanation to the amendments. Determine which Codification topics and paragraphs are affected. Read the amendments in context and check how they relate to the transaction. A summary is helpful, but it does not eliminate the need to understand the actual guidance.

Read effective dates and transition requirements carefully. Issuance and effectiveness are different events. The date FASB publishes an update does not automatically mean every entity applies its amendments immediately. Requirements can differ by entity type, reporting period, and permitted adoption choices.

Separate proposals from final updates. An exposure draft seeks feedback on proposed guidance. It is not the final outcome. The Board considers comments and may revise the proposal before issuing an update. The FASB standard-setting process explains how public input fits into this sequence.

Due process and authority are different. Due process is the public, step-by-step procedure FASB follows before it issues anything: research, a proposal for comment, review of the comments, and a public vote. Both ASUs and Concepts Statements go through that process. Going through the same process does not give them the same authority. An ASU amends GAAP. A Concepts Statement does not. See the FASB Rules of Procedure, Section IV(H)(1) on Accounting Standards Updates and Section IV(H)(2) on Statements of Financial Accounting Concepts. Section IV(H)(1) states plainly that an Update is not itself authoritative.

A simple Accounting Standards Update timing example

Assume a hypothetical update is issued in Year 1. Its amendments apply to a particular company beginning in Year 3, and early adoption is not permitted. In Year 1, the accountant learns what will change and plans for the transition. The company does not apply the new requirements solely because the update has been issued.

In Year 3, the company follows the applicable amendments and transition provisions. This example contains no real effective date: its purpose is to separate publication from application. In an actual problem, use the dates and conditions stated in the relevant guidance.

Now change one fact: early adoption is permitted. That gives an eligible entity a possible choice, subject to the update’s conditions. It does not mean every entity automatically adopted early. You still need the company’s facts before deciding which guidance applies.

A real example: ASU 2023-09, Improvements to Income Tax Disclosures

FASB issued ASU 2023-09 in December 2023. Its amendments are effective for public business entities for annual periods beginning after December 15, 2024, and for all other entities for annual periods beginning after December 15, 2025. Early adoption is permitted.

Walk through it for a calendar-year company. A public business entity applies the new disclosures for the first time in its financial statements for the year ending December 31, 2025. A private company gets one more year and applies them for the year ending December 31, 2026. Notice the pattern: issued in Year 1 (2023), required in Year 3 (2025) for public business entities, and in Year 4 (2026) for everyone else. That staggered timing, with public business entities going first, is common in ASUs.

What is Pending Content in the Codification?

When FASB issues an ASU, the Codification does not simply swap the old paragraph for the new one. Until the amendments are effective for every entity, the Codification shows both versions. The new wording appears in a box labeled Pending Content, with a Transition Date and a link to the transition guidance. The original paragraph stays visible for entities that have not adopted yet.

Why this matters for you: if you look up a topic and see two versions of the same paragraph, you are looking at an amendment that is still rolling out. Check the Transition Date, then decide which version applies to the entity and period in your problem. The FASB Codification lesson on this site walks through the topic, subtopic, section, and paragraph structure you will be navigating.

Need a refresher? Review the ASU, ASC, and Concepts Statements comparison, or return to On this page.

Quick review: ASU practice questions

1. Is an ASU the same as the ASC? No. The ASU communicates amendments, while the ASC organizes the authoritative guidance. The similar abbreviations refer to different things.

2. Can a Concepts Statement override a specific Codification requirement? No. Concepts Statements do not establish GAAP. A general concept does not permit a company to disregard applicable authoritative guidance.

3. Must a company apply every amendment on the day the ASU is issued? No. Check the effective date, applicability, early-adoption provisions, and transition requirements.

What does the CPA Exam test about Accounting Standards Updates?

The FAR section of the CPA Exam tests the amended guidance, not the ASU document. You are unlikely to be asked to recite an ASU number. You will be tested on the new requirements once they become eligible.

The AICPA’s policy on new pronouncements is specific. A change in accounting or auditing standards becomes eligible for testing in the later of two dates: (1) the first calendar quarter beginning after the pronouncement’s earliest mandatory effective date, regardless of entity type, or (2) the first calendar quarter beginning six months after the pronouncement’s issuance date. Once the new content is eligible, the old content it replaced is removed from the exam.

Apply that to ASU 2023-09 from the example above. It was issued in December 2023, so six months later is June 2024, and the first calendar quarter after that begins July 1, 2024. Its earliest mandatory effective date is for annual periods beginning after December 15, 2024, so the first calendar quarter after that begins January 1, 2025. The later date wins: the new income tax disclosure requirements became eligible for testing on January 1, 2025.

Exam tip: when a question says a new standard was issued this year, do not assume the company applies it this year. Look for the effective date and whether early adoption is permitted. Practice this pattern with the FAR test bank.

Key takeaways

• An Accounting Standards Update (ASU) is the document FASB uses to amend the Accounting Standards Codification (ASC). The ASU explains the change; the ASC holds the rule.
• The ASU is not authoritative. The amended Codification is. For SEC registrants, SEC rules and interpretive releases are also authoritative.
• ASU numbers show the year and the order of issue. ASU 2025-12 is the twelfth Update of 2025.
• Issuance is not effectiveness. Always check the effective date, which entities it covers, whether early adoption is permitted, and the transition method.
• Statements of Financial Accounting Concepts guide the Board’s thinking but do not establish GAAP.
• Until an amendment is effective for every entity, the Codification shows the new wording as Pending Content next to the current paragraph.

Frequently asked questions about an Accounting Standards Update

Who issues ASUs? The Financial Accounting Standards Board. Learn more about the organization in what FASB does.

Does every ASU introduce an entirely new topic? No. Some updates amend or clarify existing guidance. Others address broader reporting issues. Read the specific amendment to understand its effect.

Why study an ASU if it is not authoritative? It explains the change, the reasons behind it, and implementation timing. Those details help you understand how the Codification is being amended and which requirements apply.

How are ASUs numbered? By year and order of issue. ASU 2025-12 is the twelfth Update FASB issued in 2025. The number gives the timing, not the topic.

Where can I find Accounting Standards Updates? FASB lists every ASU, with a free PDF of each, in the Standards section of fasb.org. The Codification itself is at asc.fasb.org, where the free Basic View shows the authoritative text and any Pending Content.

Is an exposure draft the same as an ASU? No. An exposure draft is a proposal FASB publishes for public comment. An ASU is the final document issued after the Board considers those comments and votes.

What is Pending Content? The new wording of a Codification paragraph that has been amended by an ASU but is not yet effective for every entity. It appears in a labeled box with a Transition Date, next to the current paragraph.

When does the CPA Exam start testing a new ASU? In the later of two dates: the first calendar quarter after the pronouncement’s earliest mandatory effective date, or the first calendar quarter beginning six months after its issuance date.

Do ASUs apply to governments or nonprofits? ASUs amend the FASB Codification, which applies to nongovernmental entities, including not-for-profit organizations. State and local governments follow GASB standards, and the federal government follows FASAB.

About the author

Mansour Farhat, CPA, CIA, DBA, is the founder of Farhat Lectures and the instructor behind its accounting and CPA Exam video lessons. He holds a Doctor of Business Administration from Temple University and a Master of Accountancy from Bloomsburg University. His lessons take students from their first accounting course through the CPA, CMA, and EA exams, with a focus on explaining the reasoning behind each answer. Read more about Professor Farhat.