Recently Adopted Accounting Guidance
In December 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update (ASU) No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This ASU updates income tax disclosures by requiring annual disclosures of disaggregated information, based on meeting a quantitative threshold, about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. The update was adopted retrospectively for Federated Hermes’ December 31, 2025 Form 10-K. The adoption did not have a material impact on Federated Hermes’ disclosures.
Recently Issued Accounting Guidance Not Yet Adopted
In November 2024, the FASB issued ASU No. 2024-03 Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of income statement expenses. This ASU updates expense disclosures by requiring additional information about specific expense categories in the notes to financial statements at interim and annual reporting periods. The update is effective for Federated Hermes for the December 31, 2027 Form 10-K, with early adoption permitted, and allows for either the prospective or retrospective adoption method. Management is currently evaluating this ASU to determine its impact on Federated Hermes’ disclosures.
In September 2025, the FASB issued ASU No. 2025-06 Intangibles—Goodwill and Other— Internal-Use Software (Subtopic 350-40) Targeted Improvements to the Accounting for Internal-Use Software. This ASU amends certain aspects of the accounting for and disclosure of software costs under Accounting Standards Codification (ASC) 350-40 Intangibles—Goodwill and Other—Internal-Use Software by removing references to software development phases for cost capitalization and specifying the disclosures required under ASC 360-10 Property, Plant, and Equipment. The update is effective for Federated Hermes for the March 31, 2028 Form 10-Q with early adoption permitted, and allows for the retrospective, modified retrospective or prospective adoption methods. Management is currently evaluating this ASU to determine its impact on Federated Hermes’ Consolidated Financial Statements.
About New Standards Disclosures
New accounting standards disclosures describe recently adopted pronouncements and those not yet effective, along with management's assessment of their expected impact. This section provides an early warning system for upcoming changes to how a company reports its financial results, often years before the new rules take effect.
Key signals: when management describes a not-yet-adopted standard's impact as "material" or "still being evaluated," it signals potential significant changes to reported metrics upon adoption. Watch for standards that affect a company's core operations — for example, revenue recognition changes for software companies or lease accounting changes for retailers with large store footprints. The transition method chosen (full retrospective versus modified retrospective) affects comparability with prior periods. Companies that delay adoption to the latest permitted date may be struggling with implementation complexity. Compare the disclosed impact assessments against peers in the same industry to gauge whether management's expectations are reasonable.