November 2025 Financial Reporting, Governance, and Risk Management
Message from Sydney Garmong, Partner, National Office
We have been anxiously waiting for the final Financial Accounting Standards Board (FASB) standard on purchased loans to fix the “double count” issue. On Nov. 12, 2025, the FASB issued a press release and Accounting Standards Update (ASU) 2025-08, “Financial Instruments – Credit Losses (Topic 326): Purchased Loans.” This ASU fixes the day one credit loss expense/double count issue in a business combination or asset acquisition. The project was referred to as purchased financial assets (PFA) and was renamed purchased seasoned loans (PSL), which is fitting given a fall issuance and our love for pumpkin spiced lattes. The ASU is effective for annual reporting periods beginning after Dec. 15, 2026 (so 2027 for Dec. 31 year-ends). Early adoption is permitted.
In case you missed it, we issued our annual conference takeaways from the American Institute of Certified Public Accountants (AICPA) and Chartered Institute of Management Accountants (CIMA) bank and credit unions conferences.
- 2025 AICPA & CIMA Conference on Banks & Savings Institutions Takeaways
- 2025 AICPA & CIMA Conference on Credit Unions Takeaways
Last week, we began our 2025 Crowe Financial Services Conference occurring in seven locations. We kicked off the annual event in Nashville, Tennessee, and Dallas. This week, we hosted in Washington, D.C., and Columbus, Ohio, and we are in Los Angeles today and tomorrow for the conference. After Thanksgiving, we are hosting in Indianapolis on Dec. 3-4 and New York on Dec. 4-5. Registration is available at 2025 Crowe Financial Services Conference, and we offer up to 11 hours of CPE credit. We hope you are able to join us. If you cannot attend in person, we hope you can join our webinar, to be held on Dec. 16, for up to three hours of CPE credit. Registration for the webinar will open soon.
We wish you and yours a very happy Thanksgiving.
Financial Institutions Executive Briefing
Get updates on accounting, governance, risk management, and compliance issues.
From the federal financial institution regulators
Fed governor suggests new type of master account
On Oct. 21, 2025, Federal Reserve Board (Fed) Governor Christopher Waller announced the regulator will explore a new type of “skinny” master account that would provide legally eligible institutions access to the Fed’s payment rails, but without the full range of services that a full-fledged master account offers. The account would serve firms focused on payments innovation that today often rely on third-party banks to reach Fed services.
Agencies issue SAR and AML FAQ
On Oct. 10, 2025, the National Credit Union Administration (NCUA) together with the Federal Deposit Insurance Corp. (FDIC), the Fed, the Office of the Comptroller of the Currency (OCC), and the Financial Crimes Enforcement Network (FinCEN) issued updated frequently asked questions on suspicious activity reporting (SAR) requirements and anti-money laundering/countering the financing of terrorism (AML/CFT) compliance. The guidance clarifies topics such as structuring-related filings, continuing-activity review timelines and documentation of decisions not to file a SAR. While the updates do not change underlying Bank Secrecy Act (BSA)/AML legal requirements, they represent a notable departure from existing supervisory expectations.
Fed changes large bank holding company ratings
On Nov. 5, 2025, the Fed finalized proposed changes to its supervisory rating framework for large bank holding companies. The final framework largely follows a July 2025 proposal that a bank with no more than one “deficient” rating will still be considered “well managed.”
FDIC and Fed withdraw climate-risk principles for large banks
On Oct. 16, 2025, the FDIC, the Fed, and the OCC announced they are rescinding the interagency “Principles for Climate-Related Financial Risk Management for Large Financial Institutions,” originally issued in October 2023. The agencies noted that existing safety and soundness standards already require institutions to manage material risks, including emerging risks.
Fed seeks comment on changes to stress testing
On Oct. 24, 2025, the Fed requested public comment on proposals designed to enhance the transparency and accountability of its annual stress-test process. The proposals cover changes to the underlying stress-test models, updates to the framework for developing scenarios, and improvements in reporting and disclosure related to future stress-test cycles. The Fed estimates the proposed changes would not materially change the overall capital-requirement outcomes for the subjected firms.
Comments on the scenarios for the 2026 test are due Dec. 1, 2025, and comments on the model and scenario transparency proposals are due Jan. 22, 2026.
FinCEN flags $9 billion in Iranian shadow banking flows
On Oct. 23, 2025, FinCEN published a Financial Trend Analysis identifying roughly $9 billion in Iranian shadow banking activity during 2024. The report details how Iranian state-linked entities used front and shell companies, oil traders, and intermediary banks to move funds through U.S. correspondent accounts and global payment networks, circumventing sanctions.
From the Financial Accounting Standards Board (FASB)
FASB issues final standard on credit losses for purchased loans
On Nov. 12, 2025, the FASB issued Accounting Standards Update (ASU) 2025-08, “Financial Instruments – Credit Losses (Topic 326): Purchased Loans,” to simplify and improve consistency in accounting for acquired loans under the current expected credit loss (CECL) model. The ASU resolves the “double count” issue that exists between purchased credit-deteriorated (PCD) and non-PCD. For PCD loans, the day one allowance is established by purchase price allocation, whereas for non-PCD loans, the day one allowance is established by a charge to earnings, which is then accreted into interest income and overstates the yield prospectively. The FASB significantly expanded loans qualifying for the gross-up method by introducing purchased seasoned loans (PSLs). A loan is considered a PSL if it is 1) acquired in a business combination accounted for under Topic 805 or 2) purchased more than 90 days after origination when the acquirer was not involved in origination. Credit cards, trade receivables arising from transactions accounted for under Topic 606, and debt securities are excluded from the scope of the ASU. Under the gross-up approach, an allowance for credit losses (ACL) is recorded at acquisition with an equal increase to the amortized cost basis, eliminating Day 1 credit loss expense. Entities also may elect, on an acquisition-by-acquisition basis, to subsequently measure the ACL using the amortized cost basis when estimating losses with nondiscounted methods, which would allow pooling of PSLs with originated loans.
The amendments are effective for all entities for annual periods beginning after Dec. 15, 2026, including interim periods within those annual periods. The guidance should be applied prospectively to loans acquired on or after the adoption date. Early adoption is permitted.
FASB adds digital asset project to agenda
At its Oct. 29, 2025, meeting, the FASB discussed whether certain digital assets should qualify as cash equivalents under U.S. GAAP. In response to stakeholder concerns about inconsistent accounting treatment, the board voted to add a project to its technical agenda to explore updates to the cash-equivalent definition or creation of a new “digital cash equivalents” category. Several approaches were outlined for further study, and while no final decisions were made, FASB staff will continue research and outreach to assess potential effects on financial reporting and liquidity presentation.
From the Securities and Exchange Commission (SEC)
CorpFin issues statement on shareholder proposal challenges for 2025-2026 proxy season
On Nov. 17, 2025, the SEC’s Division of Corporation Finance (CorpFin) announced that it will not respond to no-action requests to exclude shareholder proposals under Rule 14a-8, except for those relying on Rule 14a-8(i)(1). CorpFin will continue to review requests under Rule 14a-8(i)(1) related to the application of state law and precatory proposals until sufficient guidance is available.
CorpFin releases Q&A for after the government shutdown
On Nov. 13, 2025, the SEC’s CorpFin released a Q&A document to provide transparency and address common inquiries from issuers with pending filings before the commission. During the government shutdown, issuers filed more than 900 registration statements. CorpFin staff members are working to clear the backlog as quickly as possible.
Chair outlines SEC’s approach to digital assets
On Nov.12, 2025, Chair Paul Atkins delivered remarks outlining the next phase of the SEC’s “Project Crypto” initiative. He emphasized the importance of applying the federal securities laws to crypto assets with fairness and clarity and announced that the SEC will consider establishing a token taxonomy grounded in the Howey investment contract framework. Atkins noted that most crypto tokens trading today are not securities but might have been sold through investment contracts that have since ended. He outlined plans for tailored offering exemptions to promote innovation and capital formation while maintaining investor protections, and he reaffirmed the SEC’s commitment to working with other regulators and Congress to develop a clear, modern framework for digital assets.
Chair calls for IPO revitalization
In his Oct. 9, 2025, keynote remarks at the Weinberg Center’s 25th anniversary gala, Atkins emphasized the need to make public company status more attractive to issuers, citing the continued decline in the number of exchange-listed companies. He stated that efforts to “make IPOs great again” should focus on simplifying and scaling disclosure requirements, depoliticizing shareholder meetings, and reforming securities litigation to reduce frivolous lawsuits. He reaffirmed the SEC’s commitment to strengthening U.S. capital markets through policies that enhance efficiency, innovation, and investor participation.
SEC chair comments on security-based swap dealer definition
On Oct. 29, 2025, Atkins issued a statement addressing the upcoming expiration of the phase-in period for the de minimis exception to the security-based swap dealer definition. Beginning Nov. 8, 2025, firms will be subject to lower thresholds – $3 billion for credit default swaps (CDS) and $150 million for non-CDS security-based swaps – based on a 12-month look-back period. The phase-in period is set to end on Nov. 8, 2026.
Atkins noted that SEC staff had begun analyzing the thresholds using transaction data, but the review is currently paused due to the government shutdown. He emphasized that once operations resume, the SEC will evaluate whether relief from the phase-in termination date is warranted, ensuring that the lower thresholds do not take effect before the staff report and public comments are fully considered.
SEC extends Regulation NMS compliance deadlines
On Oct. 31, 2025, the SEC issued an exemptive order extending compliance dates for several rules under Regulation NMS. The order defers compliance with the revised minimum pricing increment and access-fee provisions until November 2026 and delays compliance with the fee-determinability requirement until February 2026.
From the Public Company Accounting Oversight Board (PCAOB)
PCAOB engages academics to advance audit quality
The PCAOB held its 12th Annual Conference on Auditing and Capital Markets on Oct. 16-17, 2025, in Washington, D.C., in partnership with the Accounting Review. The event brought together more than 115 researchers to discuss developments in auditing, regulation, and capital markets, with a focus on research that can inform the PCAOB’s oversight and standard-setting work. Ten research papers covered topics such as auditing and management disclosures, private equity investment in accounting firms, and auditor independence.
Acting Chair George R. Botic opened the conference with a speech underscoring the PCAOB’s commitment to using academic insights to enhance audit quality and address emerging issues such as private-equity investment in audit firms and the impact of artificial intelligence on auditing.
PCAOB issues data on restatements and auditor turnover
On Oct. 15, 2025, the PCAOB released “Data Points: Financial Restatements and Auditor Turnover,” which analyzes trends from 2005 to 2024. The report finds that “Big R” financial restatements – those disclosed in SEC Form 8-K, Item 4.02 – occurred at an average annual rate of about 3%. Among companies with such restatements, nearly 30% changed auditors in the preceding year, compared with an average annual auditor-change rate of roughly 11% across all companies. The analysis highlights an association between auditor turnover and subsequent financial restatement risk, indicating that companies undergoing an auditor change are more likely to report a material restatement in the following year than the general population.
PCAOB SEIAG holds meeting
At its Nov. 5, 2025, virtual meeting, the PCAOB’s Standards and Emerging Issues Advisory Group (SEIAG) discussed the implications of artificial intelligence and cryptocurrency for the auditing profession. Botic emphasized that auditors and regulators must proactively address both the opportunities and risks these technologies pose. Christina Ho, board member, urged clear, principles-based guidance and agile standard-setting to ensure AI advances strengthen audit quality. Kara Stein, board member, highlighted the importance of balancing innovation with appropriate safeguards and clarifying standards for audits involving digital assets.
From the Center for Audit Quality (CAQ)
CAQ emphasizes the importance of professional skepticism
On Oct. 28, 2025, the AntiFraud Collaboration (AFC) in collaboration with the CAQ published “The Role of the Auditor: Exercising and Maintaining Professional Skepticism,” which emphasizes that in today’s environment of evolving fraud risks and more complex financial reporting, maintaining a questioning mindset, or professional skepticism, is essential to audit quality. The document outlines several key themes: the importance of a “skepticism continuum,” a behavioral range of doubt, to guide auditors; the need for continuous learning, particularly as technology, including AI, changes audit risks; and the importance of creating a culture and environment in audit firms and clients organizations that support and reward skeptical thinking. It also addresses the obstacles that can impede professional skepticism, such as over-familiarity, blind trust in technology, or organizational pressures, and offers guidance on how to mitigate those risks through training, challenge, and governance. Additionally, it provides practical tips for exercising professional skepticism.
CAQ analyzes disclosures in S&P 500 10-Ks
The CAQ released on Oct. 23, 2025, a series of analyses that examine how S&P 500 companies are addressing emerging topics including climate-related information, artificial intelligence, and digital assets in their most recent Form 10-K filings as of June 2025. The climate-related study noted that a majority of companies reference climate risks, often focusing on regulatory developments, transition risks, and sustainability initiatives. The AI-related analyses found increasing mentions of AI, with disclosures concentrated in risk factors and business sections, reflecting both opportunities and risks tied to AI use, data governance, and ethical considerations. The digital asset analyses showed that approximately 9% of S&P 500 companies referenced digital-asset-related matters, highlighting regulatory uncertainty, market volatility, and evolving accounting guidance. Together, they show how U.S. public companies are expanding their disclosures to address evolving investor expectations and regulatory attention across sustainability, technology, and innovation-related risks.
CAQ looks at auditor assurance in AI use
The CAQ published on Oct. 13, 2025, “The Role of the Auditor in AI: Present and Future,” which explores how auditors can enhance trust and transparency as companies increasingly use artificial intelligence. It highlights the growing demand for assurance on the reliability, ethics, and security of AI systems and outlines how auditors, through their independence and expertise, can provide assurance on governance, compliance, and risk management. The report also offers key considerations and questions for boards to guide oversight of AI strategy, risk, disclosure, and readiness for future assurance engagements.
FASB materials reprinted with permission. Copyright 2025 by Financial Accounting Foundation, Norwalk, Connecticut. Copyright 1974-1980 by American Institute of Certified Public Accountants.
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Fed explores new master account type, FASB issues PSL ASU, SEC chair outlines digital assets approach, CorpFin releases post-shutdown Q&A & more.
Get details of OCC and FDIC financial and reputation risk proposals, FASB internal-use software ASU, CorpFin government shutdown Q&A, and more.
Read about FDIC, NCUA Q2 industry data; Fed large bank capital requirements; FASB digital assets project; SEC reg flex agenda; PCAOB QC 1000 timeline.
Fed explores new master account type, FASB issues PSL ASU, SEC chair outlines digital assets approach, CorpFin releases post-shutdown Q&A & more.
Get details of OCC and FDIC financial and reputation risk proposals, FASB internal-use software ASU, CorpFin government shutdown Q&A, and more.
Read about FDIC, NCUA Q2 industry data; Fed large bank capital requirements; FASB digital assets project; SEC reg flex agenda; PCAOB QC 1000 timeline.