FASB issues ASU on derivative scope refinements
Defining Issues | September 2025
The ASU adds a scope exception from derivative accounting and clarifies the interaction between ASC 815 and ASC 606.

ASU 2025-07 expands the population of contracts that are excluded from the scope of derivative accounting. It also clarifies that the revenue guidance in ASC 606 initially applies to share-based noncash consideration received from a customer for the transfer of goods or services.
Applicability
- All entities
Relevant dates
Effective date | All entities |
---|---|
Annual periods – Fiscal years beginning after | Dec. 15, 2026 |
Interim periods – In fiscal years beginning after | Dec. 15, 2026 |
Early adoption allowed? | Yes, for interim or annual periods for financial statements that have not yet been issued or made available for issuance. |
Derivatives Scope Refinement
The ASU adds a scope exception from derivative accounting for nonexchange traded contracts with underlyings based on operations or activities specific to one of the parties to the contract. However, contracts based on certain underlyings or features would not qualify for the scope exception. This change is expected to result in more contracts and embedded features being excluded from the scope of ASC 815. If contracts were previously accounted for as derivatives and now quality for the scope exception, entities will need to determine how to account for such contracts.
Scope clarification for share-based noncash consideration
The ASU also clarifies that the revenue guidance in ASC 606 applies initially to share-based noncash consideration (e.g. shares, share options or other equity instruments) received from a customer for the transfer of goods or services. The guidance in other ASCs, including derivatives (ASC 815) and equity securities (ASC 321), is not applied unless and until the entity’s right to receive or retain the share-based noncash consideration is unconditional under ASC 606.
Report contents
- Source and applicability
- Fast facts, impacts, actions
- Background
- Derivative scope refinement
- Scope clarification for share-based noncash consideration
- Effective dates and transition
- Disclosure
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FASB issues ASU
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