Many entities feel confident about year-end financial reporting, until a new requirement surfaces late in the process.
That’s often how accounting updates create stress. The challenge is not the rule itself. It’s realizing too late that it applies to you.
ASU 2023-09, which focuses on income tax disclosures, is a good example. On the surface, it may sound like a technical update. In practice, it changes how organizations gather, organize, and communicate tax-related information. This matters now because the standard takes effect for calendar 2026 year-ends for many entities.
What Is ASU 2023-09 and Why Does It Matter?
ASU 2023-09 focuses on providing clearer, more detailed insight into how entities calculate and report income taxes.
For many leaders, the key takeaway is simple: This standard increases transparency.
That means:
- More detail in rate reconciliations
- Clearer breakdowns of income taxes paid
- Expanded disclosure expectations across jurisdictions
For organizations used to more streamlined disclosures, financial reporting teams now may need to gather data they have not historically tracked in detail.
Based on industry summaries, the emphasis is on consistency and comparability. Stakeholders want to better understand how tax positions vary across time and geography.
Who This Applies To (Including Nonprofits with UBIT)
A common question we hear is, “Does this apply to us?”
Here’s the simplest way to think about it: If your entity has income taxes, this standard likely applies.
That includes:
- Closely held businesses
- Multi-entity organizations
- Nonprofits with unrelated business income (UBIT)
- Organizations operating across multiple jurisdictions
The nonprofit angle is especially important.
Many nonprofit leaders assume income tax standards don’t apply to them, and that’s true in many cases, but UBIT changes the picture. If your organization generates taxable income from activities outside your core mission, you may fall within scope.
As noted in the implementation context, all entities with income taxes, including those with UBIT, will be affected. This is where early clarity matters. Waiting until year-end to assess applicability often leads to rushed data gathering and incomplete disclosures.
What’s Actually Changing (In Plain Language)
Rather than focusing on technical language, it helps to look at what will feel different in practice.
Here’s what most organizations will notice:
1. More Detailed Rate Reconciliation
You will need to explain more clearly why your effective tax rate differs from statutory rates.
This may include:
- Specific categories of adjustments
- Quantitative breakdowns
- Consistent presentation year over year
2. Greater Transparency Around Taxes Paid
Entities may need to disclose income taxes paid by jurisdiction, especially at a more granular level.
This requires:
- Better tracking of where taxes are paid
- Alignment between accounting and tax records
- Coordination across entities or departments
3. Expanded Qualitative Context
Numbers alone are not enough. The standard encourages clearer explanations that help users understand the story behind the data.
For leadership teams, this creates a new expectation. Reporting needs to feel more intentional and less reactive.
What to Gather Now (Your Readiness Checklist)
The biggest risk with ASU 2023-09 is timing. Here’s a practical checklist your team can start working through now:
Data & Documentation
- Historical income tax payments by jurisdiction
- Prior year rate reconciliation details
- Documentation supporting tax adjustments
- UBIT calculations and supporting schedules (for nonprofits)
Internal Processes
- How tax data flows between accounting and tax teams
- Whether systems capture jurisdiction-level detail
- Who is responsible for assembling disclosures
Coordination Points
- Communication between internal finance and external advisors
- Alignment across multiple entities or subsidiaries
- Timing of data collection during the year
Many organizations find that the data exists, but not in a format that supports expanded disclosure. Addressing that gap early makes year-end much smoother.
Questions to Ask Your CPA Before Year-End
Strong preparation starts with the right conversations. Here are a few questions we recommend bringing to your CPA:
- Does ASU 2023-09 apply to our organization based on our structure?
- What new disclosures will we need to include in 2026?
- Are there data gaps we should address now?
- How should we adjust our year-end timeline or process?
- For nonprofits: how does UBIT impact our reporting under this standard?
These conversations often uncover small adjustments that make a big difference later.
How This Connects to Broader 2026 Changes
ASU 2023-09 is one of several updates shaping 2026 reporting.
For example:
- ASU 2024-01 addresses stock compensation and profits interest awards, which may affect certain ownership structures
- SAS 149 introduces changes to group audits, impacting organizations with multiple entities or investments
While not every standard will apply to every organization, they share a common theme. Preparation matters more than technical interpretation.
Organizations that start early tend to experience more predictable year-end processes. Those that wait often deal with compressed timelines and last-minute questions.
Early Preparation Changes the Experience
We often see two different experiences at year-end.
One feels rushed. Teams scramble to gather missing information, and questions come up late in the audit process. The other feels structured, and teams know what to expect. Data is organized. Conversations happen ahead of deadlines. The difference usually comes down to timing. The new standard creates an opportunity to move toward that second experience. With a bit of planning, reporting can feel more manageable and more transparent.
Moving Forward
Reporting changes like ASU 2023-09 have a way of surfacing quickly. The organizations that feel most confident at year-end are not the ones who know every detail of the standard. They are the ones who start early, ask thoughtful questions, and build simple processes to support new requirements.
If your organization has income tax exposure, now is a good time to take a closer look. Even a short internal review can highlight whether additional data, documentation, or coordination will be needed.
You don’t have to navigate this alone. These updates are a natural part of how financial reporting evolves, and with the right guidance, they become manageable. If you’re unsure how this applies to your organization, our team is always here to walk through it with you.
