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FASB ASU 2025-08

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In November 2025, the FASB issued a significant change to ASC 326 — ASU 2025-08—Financial Instruments—Credit Losses (Topic 326): Purchased Loans. 

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Guidance. The ASU was issued in response to concerns about the accounting for acquired financial assets, specifically purchased loans. 

Existing GAAP classifies purchased financial assets as either:

  • Purchased credit deteriorated (PCD) assets accounted for using the gross-up approach recognizing an allowance for expected credit losses at acquisition offset by a gross-up adjustment to the purchase price or 

  • Non PCD assets recognized at fair value with allowance for expected credit loss expense. 

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In an added paragraph, ASC 326-20-30-16, the ASU expands the use of the gross-up method to purchased seasoned loans. Further, the ASU defines a purchased season loan as a loan that meets either of the following criteria and is not a purchased financial asset with credit deterioration or a financial asset listed in ASC 326-20-30-19:

a. The loan is obtained through a business combination accounted for using the acquisition method in accordance with ASC  805-20.

b. The loan is 

(i) obtained through a transfer that is not a business combination accounted for using the acquisition method in accordance with ASC 805-20 or 

(ii) initially recognized through the consolidation of a variable interest entity in accordance with ASC 810-10-30-3. In addition, the loan must meet both of the following criteria:​

​1. The loan is obtained more than 90 days after its origination date.

2. The transferee was not involved with the origination of the loan. See ASC 326-20-30-17 for guidance on how to assess whether the transferee was involved with the origination of the loan.

The following are specifically excluded from the purchased season loan category:

  • Credit cards,

  • Debt securities, and

  • Trade receivables arising from transactions accounted for under ASC 606.

(ASC 326-20-30-19)

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Effective Date

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For all entities, the ASU:

  • Is effective beginning after December 15, 2026, including interim periods within annual periods, and

  • May be adopted early in any interim or annual period where the financial statements have not been issued.

(ASC 326-10-65-7)

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Transition Method

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Entities should apply the ASU prospectively to loans that are acquired on or after the date of initial application. (ASC 326-10-65-7)

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