Highlights of the 2025 AICPA & CIMA Conference on Current SEC and PCAOB Developments (December 12, 2025)

During the panel discussion on the OCA’s current projects, OCA Professional Accounting Fellow Ella Karafiat commented that with the growing use of AI, there has been an increasing number of questions about the accounting for the development and operation of data centers. The parties involved in these transactions may include, but are not limited to, (1) technology companies that use data centers for computing power, (2) financing entities that fund the construction of data centers, and (3) power and utility companies that provide energy to the data centers. Ms. Karafiat highlighted that while the guidance to be applied to these transactions is not new, it needs to be carefully and thoughtfully evaluated. Specifically, she noted a number of accounting complexities that may arise as a result of these transactions depending on the manner in which they are structured, including the following:

• Consolidation — Often, a data center may be built in a separate legal entity designed for the sole purpose of constructing, owning, and operating a single data center (i.e., a single-asset entity). A single-asset entity is typically a variable interest entity (VIE), and each variable interest holder needs to evaluate whether it is the primary beneficiary of the VIE and should therefore consolidate the VIE. A reporting entity’s consolidation analysis of a VIE includes an evaluation of whether the reporting entity has both of the following characteristics:

  • The power to direct the activities that most significantly affect the VIE’s economic performance.
  • The obligation to absorb losses of the VIE, or the right to receive benefits from the VIE, that could potentially be significant to the VIE.
  Ms. Karafiat noted that a reporting entity is often required to make significant judgments when determining the activities that most significantly affect a single-asset entity and the party that holds power over each of those activities. She observed that the activities that most significantly affect a single-asset entity that owns a data center may include construction and development, leasing, operations and maintenance, and remarketing of the data center.
  See Deloitte’s Roadmap Consolidation — Identifying a Controlling Financial Interest for more information about performing a consolidation analysis.
• Lease accounting — Often in these complex transactions, an asset’s owner allows, or plans to allow, another party to obtain the benefits of the asset. As a result, there may be one or more leases involving the data center building, the IT hardware assets therein (e.g., servers), and the associated power generation assets. For example, a technology company may lease a data center to procure the computing power necessary to support its AI-related activities. When a lease exists, ASC 842 requires the lessee to determine the lease commencement date and, if there is construction, whether the lessee should be considered the deemed owner of the asset during construction. ASC 842 provides a list of factors to be considered in the determination of whether the lessee controls the asset during construction. Ms. Karafiat cautioned that this list is not exhaustive and that all relevant factors should be considered in the determination of who is the accounting owner during construction since such factors will ultimately affect the determination of (1) whether the transaction is within the scope of the sale-and-leaseback guidance in ASC 842 and (2) when assets and liabilities should be recognized on the balance sheet.
  See Deloitte’s Roadmap Leases for more information about determining whether a lessee should be considered the deemed owner of an asset during construction and other leasing matters.
• Fixed assets — An issuer may need to determine the useful life of the data center and any related long-lived assets (because, for example, the issuer consolidates the entity that owns the data center and related assets). Ms. Karafiat reminded preparers that ASC 360 requires entities to continually evaluate the appropriateness of useful lives assigned to long-lived assets. Further, Ms. Karafiat stated that the SEC staff does not view the recognition of an impairment of a long-lived asset as an acceptable substitute for determining the appropriate useful life of the asset. However, when an entity is performing a recoverability test of its long-lived assets, ASC 360 requires an estimate of cash flows based on the entity’s own assumptions about its use of an asset or asset group. This estimate should incorporate all available information.
  See Deloitte’s Roadmap Impairments and Disposals of Long-Lived Assets and Discontinued Operations for more information about performing a recoverability test.

During the OCA’s discussion of current projects and recent consultations, Associate Chief Accountant Jonathan Duersch described an OCA consultation on the application of ASC 815’s NPNS scope exception. In the fact pattern, the entity entered into forward sales contracts for natural gas produced and delivered in the United States. Contract pricing was based on the Dutch Title Transfer Facility index, reduced by a fixed percentage.

During the OCA’s discussion on current projects, Ms. Karafiat observed the continued growth in private credit, particularly lending by entities outside the traditional banking system (e.g., private funds and business development companies) in forms such as corporate direct lending, infrastructure debt, and asset-backed financing. Such lenders generally apply ASC 946, which requires measurement of investments at fair value under ASC 820. Because private credit investments are generally illiquid and have limited observable market data, preparers often rely on Level 3 inputs to determine the fair value of those loans. Under ASC 820, entities are required to develop unobservable inputs by using the best information available under the circumstances, which often includes an entity’s own data. Ms. Karafiat noted that when an entity uses its own data to develop unobservable inputs, it should adjust those inputs to reflect market participant assumptions, including the consideration of risk (e.g., incorporating changes in borrower credit risk into discount rates, expected losses, or other pricing terms). Further, when an entity determines that a transaction price represents fair value upon initial recognition but the valuation model that the entity expects to use for subsequent measurement yields an initial fair value estimate that differs from the transaction price, the valuation model should be calibrated in such a way that it yields the same estimate of fair value as the transaction price. Ms. Karafiat emphasized that an entity should not recognize a gain or loss at inception because of a difference between the valuation model and the transaction price; a gain or loss should only be recognized as a result of subsequent changes in circumstances. The SEC staff also highlighted Rule 2a-5 of the Investment Company Act of 1940 on good-faith fair value determinations, stressing the importance of robust governance over valuation risks, methodology selection and testing, and oversight of pricing services — considerations that are increasingly important given the expansion of private credit activities.

During a panel discussion on the current and future tax regulatory landscape, participants highlighted considerations related to the interpretation and application of certain provisions of the new tax legislation commonly referred to as the One Big Beautiful Bill Act as well as uncertainties associated with the future of the OECD’s “Pillar Two” tax rules.1 Panelists emphasized that as more regimes rely on book income for tax compliance purposes, tax policy and financial reporting are becoming increasingly intertwined, which amplifies the need for cross‑functional coordination between a company’s tax, controllership, legal, investor relations, and reporting arms. Accordingly, panelists urged companies to conduct business modeling holistically throughout the organization when evaluating the tax impacts of operational and financing planning.

During the panel discussion on the OCA’s current projects, Ms. Karafiat summarized two recent OCA consultations related to stablecoins.

Mr. Jones and multiple FASB staff members gave an update on several key items on the FASB’s research agenda. Mr. Jones commented that the FASB is considering stakeholder feedback on its invitations to comment (ITCs) on financial KPIs for business entities and the accounting for and disclosure of intangibles. On the basis of such feedback, the Board will decide whether standard setting is needed in either of those areas.

During a panel discussion, Mr. Jones, Mr. Day, Ms. Debbeler, and Ms. Sangiuolo highlighted the progress on the FASB’s technical agenda during 2025 and the FASB’s recent standard-setting activities. They discussed final ASUs issued in 2025 as well as ongoing standard-setting and research projects, including the following:

• Final ASUs:
  • ASU 2025-05 on the measurement of credit losses for accounts receivable and contract assets.
  • ASU 2025-06 on the accounting for and disclosure of software costs.
  • ASU 2025-07 on derivatives scope refinements and scope clarification for share-based noncash consideration from a customer in a revenue contract.
  • ASU 2025-08 on the accounting for purchased loans.
  • ASU 2025-09 on hedge accounting.
  • ASU 2025-10 on the accounting for government grants.
  • ASU 2025-11 on interim reporting.
• Ongoing projects:
  • Accounting for environmental credit programs.
  • Financial key performance indicators for business entities.

During his keynote speech, Chairman Atkins noted concerns about the decline in the number of companies listed on the U.S. exchanges by approximately 40 percent since the mid-1990s. To address these concerns, he outlined three priorities for revitalizing U.S. capital markets:

• Disclosure rationalization — Reducing voluminous disclosure requirements (e.g., those related to risk factors and executive compensation) by recalibrating Regulation S-K to focus on material information.
• Securities litigation — Addressing litigation costs by discouraging meritless securities litigation (e.g., by reversing an SEC staff policy of not permitting IPOs by companies that have adopted mandatory arbitration and fee-shifting provisions).
• Corporate governance — Refocusing shareholder proposal and corporate governance rules to focus on shareholders whose interests align with those of the registrant.

Heather Rosenberger, chief accountant in the Division, led a conversation with the SEC staff on segment reporting in which the staff provided insight into the findings from its filing reviews related to the recent adoption of ASU 2023-07 by public entities. The discussion focused on the topics below.

In August 2025, the Division issued Question 130.05 of the C&DIs on the Exchange Act Rules to clarify an issuer’s filer status after it determines that it no longer qualifies as an SRC under the revenue test as defined in Rule 12b-2(2) or Rule 12b-2(3)(iii)(B) of the Exchange Act. In accordance with that definition, an issuer must assess both its public float and its annual revenue. In the panel discussion on Division developments, Ms. Lowe explained that, in a manner consistent with the guidance in C&DI Question 130.05, if an issuer that had concluded in the immediately preceding year that it qualified as an SRC under the revenue test determines that on its annual determination date (i.e., the last business day of its second quarter) it no longer qualifies as an SRC under the revenue test, the issuer would still be a nonaccelerated filer for filings due in the subsequent calendar year. This is because the issuer would still be eligible to continue to apply the requirements for SRCs under the revenue test until the end of the subsequent calendar year. In addition, because the company is not considered a large accelerated filer for filings due in the subsequent calendar year, it could also retain EGC status if it meets all other EGC eligibility criteria.

In his keynote remarks, Chairman Atkins called for the profession to “get back to basics” and highlighted the importance of integrity, objectivity, independence, and professional skepticism. Mr. Hohl outlined top priorities for the OCA, including responsiveness to emerging issues, oversight of the PCAOB and FASB, and international standard setting.

Mr. Hohl emphasized the pace of change. He stated that the OCA is “laser focused” on understanding how developments such as digital assets and AI affect financial reporting as well as accounting and auditing.

Regarding the SEC’s oversight of the FASB, Mr. Hohl highlighted the importance of high-quality standards and robust cost-benefit analysis with preparers. With respect to the SEC’s oversight of the PCAOB, he outlined the following focus areas:

• Modernizing the inspection process by increasing the focus on firms’ systems of quality control and shifting accountability to firm leadership, as well as making inspection reports more meaningful.
• Improving the standard-setting process, with emphasis on convergence and cooperation with other international standard setters, including the development of a framework to support convergence, and up-front standard-setting agenda consultations.
• Enhancing the responsiveness of the PCAOB to audit firms.
• Promoting auditor communications that focus on material items that are relevant to investors and stakeholders.

Mr. Hohl highlighted the importance of U.S. standard setters’ collaboration with international standard setters and the desirability of convergence, noting that cooperation and convergence will reduce investor confusion and may reduce undue costs while expediting the standard-setting process. Similarly, during the OCA staff panel session, Ms. Karafiat highlighted the benefits of high-quality financial reporting and close collaboration between the FASB and the IASB. Mr. Hohl underscored the importance of moving toward a single set of high-quality auditing standards that are developed globally and would be used in the United States. Further, he emphasized that even partial convergence would deliver meaningful benefits for investors, such as by reducing confusion, costs, fragmentation, and potential risks of auditor noncompliance. Lastly, Mr. Hohl remarked that it is important for the international standard setters to have strong governance and stable funding.

In his opening remarks, Mr. Botic illustrated the value that the PCAOB provides to investors, highlighting three pillars of investor protection: the PCAOB’s inspection program, its adoption of new and revised auditing standards, and its promotion of transparency into the audit process.

Auditor independence was front and center at this year’s conference. Chairman Atkins stressed the ongoing importance of integrity, objectivity, and independence in the profession to guard against bias and self-interest. Mr. Hohl reinforced this message, stating the SEC will “insist on rigorous independence and objectivity.” He remarked that recent shifts — such as the rise of AI and increased private equity involvement in accounting firms — are introducing complexities and risks to audit quality and independence. Mr. Hohl added that the SEC staff will consider its independence rules and determine what changes, if any, need to be made to adapt to the evolving business environment.