SEC Outlook: Regulatory and Financial Reporting Updates for Q1 2025
The regulatory environment for public companies looks much different in 2025 than in recent years. Within the first few weeks of President Donald Trump taking office, key changes in the leadership and priorities of the SEC have already taken place.
Potential impacts of the rapidly shifting landscape on the financial reporting for SEC registrants are further detailed below.
What’s Changed at the SEC?
On the same day when President Trump took office, Gary Gensler stepped down from as chair of the SEC, a role he’d served since April 2021. While the SEC is a nonpartisan regulatory agency, commissioners, including the chair, are appointed by the president, and it’s not unusual to see turnover in the chair role when there’s a change in the White House administration.
President Trump nominated Paul Atkins, a former SEC commissioner during the Bush administration in the mid-2000s, to succeed Gensler as chair of the SEC. He’s expected to assume the role following confirmation by the Senate sometime later this year. In the interim, Commissioner Mark Uyeda has been designated as acting chairman.
Other notable leadership changes at the SEC include those of Paul Munter, the former chief accountant, and Erik Girding, the former director of the Division of Corporation Finance, both of whom have left the commission.
What Do These Changes Mean for Public Companies?
The SEC has a three-part mission: to protect investors; maintain fair, orderly, and efficient markets; and facilitate capital formation. This core mission will remain the same under new SEC leadership. However, the focal point of the SEC’s efforts will likely shift amongst these three pillars under new leadership.
The SEC was very active under former Chair Gensler with a keen focus on investor protection. During his administration, the SEC undertook several notable rulemaking efforts including those related to climate and cybersecurity. A hallmark of the former chair’s tenure was the SEC’s strong regulatory posture towards crypto assets and crypto asset intermediaries.
Under the new administration, most stakeholders expect the SEC to shift its focus toward the facilitation of capital formation and take a more business-friendly approach to regulation.
Crypto
Early signs of this shift have already been seen. On the first day of Acting Chairman Mark Uyeda’s tenure, he established a crypto task force with the objective of providing better clarity on the regulation of crypto assets and improving paths for crypto-related companies to register with SEC.
A few days later, the interpretive guidance in Staff Accounting Bulletin (SAB) No. 121, related to the accounting for obligations to safeguard crypto assets, was rescinded through the publishing of SAB No. 122. The recission of SAB No. 121 is expected to make it easier for banks and other regulated entities to custody crypto assets.
Climate
Acting Chairman Uyeda directed the SEC staff to request more time to deliberate and determine next steps on the SEC’s controversial climate disclosure rule before continuing to defend it in court on February 11, 2025.
The SEC had previously stayed the effectiveness of the rule until legal challenges were resolved. Some view this decision to pause legal arguments as a signal that the SEC may move to formally rescind the rule in the future.
While these early actions relate specifically to climate and the crypto asset markets, they’re indicative that the SEC’s new leadership will broadly prioritize the reduction of regulatory barriers for companies accessing the capital markets across all industries, in line with President Trump’s regulatory agenda.
How Do These Changes Affect Auditors?
The Public Company Accounting Oversight Board (PCAOB) is an independent agency but is overseen by the SEC, an authority given to the SEC under the Sarbanes-Oxley Act of 2002. During the previous administration, the PCAOB was very active under the leadership of Chair Erica Williams, pursuing numerous new rules and operating a rigorous inspection program of audit firms.
It remains to be seen exactly how the changes at the SEC and in the White House will impact the PCAOB, but it’s worth noting that the last two presidential administration changes led to significant shake-ups in board members, including the former chairs. Chair Williams was reappointed to a second term last June, which runs through October of 2029.
Many stakeholders expect the tone of PCAOB actions to be more balanced under the new administration, similar to that of the SEC. An early indicator of this shift was seen following President Trump’s election, when the PCAOB announced it would delay taking action on a controversial project related to noncompliance with laws and regulations (NOCLAR) until 2025.
Separately on February 11, 2025, the PCAOB withdrew two proposed rules on audit firm reporting and engagement metrics that had been adopted by the PCAOB in 2024.
Many stakeholders, including the AICPA, had been critical of these rules and the impact they would have on the capital markets. These actions are an example of the new administration’s deregulatory approach impacting the financial reporting ecosystem.
What Should Public Companies Focus on Related to Financial Reporting?
In the midst of these changes in the regulatory landscape, public companies are also faced with adopting significant new accounting standards, including the FASB’s new standards on segment reporting and the disaggregation of income statement expenses.
Segment Reporting
ASU 2023-07, Segment Reporting, is effective for public companies in calendar year-end 2024 financial statements. The new standard requires several enhanced disclosures, but perhaps the most noteworthy change is that it permits companies to disclose multiple measures of segment profitability.
This change garnered significant attention from the SEC staff because it allows companies, depending on the circumstances, to disclose measures of profit and loss in the financial statements that are considered non-GAAP measures under SEC rules, like earnings before interest, taxes, depreciation, and amortization (EBITDA).
Since the initial issuance of the ASU, the SEC staff has clarified in speeches and other venues that any measures not specifically required or expressly permitted by GAAP must still comply with the SEC’s non-GAAP rules, even if those measures are allowed to be disclosed under ASC 280.
The interaction of the ASU and the SEC’s non-GAAP rules is complex. It would be prudent for companies to carefully evaluate the impact of disclosing any additional measures prior to doing so, including discussing the rules with their auditors and other advisors, as the disclosure of multiple measures of segment profitability may draw the attention of the SEC staff.
For smaller registrants, another impactful change of the new standard is that it requires companies with a single reportable segment to provide all the ASC 280 segment disclosures. These expanded disclosures will require additional effort from both preparers and auditors of single reportable segment companies.
Disaggregation of Income Statement Expenses (DISE)
Looking farther out on the horizon, the FASB’s DISE standard, ASU 2024-03, will be effective for public companies in calendar year-end 2027 financial statements.
This new standard doesn’t change the timing of expense recognition but will require companies to disclose more granular information about the nature of amounts included in existing expense captions. For example, purchases of inventory, employee compensation, and depreciation will be required to be broken out separately in the footnotes for each relevant caption on the face of the income statement.
While the effective date is still a few years out from 2025, the adoption of DISE may require companies to implement new systems or processes to gather the required disclosure information, and to modify their internal controls over that information. Companies would be wise to start evaluating the impact of the standard sooner rather than later to stay in front of any necessary changes.
We’re Here to Help
If you have questions about the changes happening at the SEC or other regulatory and financial reporting changes, contact your Moss Adams professional.