Heritage Insurance Holdings, Inc. New Standards Disclosure

Recently adopted accounting guidance

Accounting Standards Update No. ASU 2023-09. In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2023-09 (“ASU 2023-09”) Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This update enhances income tax disclosures by requiring public entities to report income tax expense disaggregated by federal, state, and foreign taxes, with further detail on specific jurisdictions over a quantitative threshold. In addition, public entities must also separately disclose reconciling items equal to or greater than five percent of pretax income from operations by the applicable federal statutory rate. The Company has adopted this guidance on a prospective basis for the fiscal year beginning on January 1, 2025 and resulting in enhanced income tax disclosures beginning with the Company's consolidated financial statements for the year ending December 31, 2025.

Recent accounting guidance not adopted

Accounting Standards Update No. ASU 2025-06. On September 18, 2025, the FASB issued updated guidance under ASC 350-40 on the accounting for internal-use software costs. The updated guidance removes all references to software development project stages so that the guidance is neutral to different software development methods and allows for the application of iterative software development methods such as agile. The updated guidance requires that an entity capitalize software costs when both: 1) management has authorized and committed to the funding of the software project, and 2) it is probable that the project will be completed, and the software will be used to perform its intended function. Additionally, the updated guidance clarifies that internal and external training costs and maintenance costs must be expensed as incurred.

The updated guidance is effective for the quarter ended March 31, 2028, and can be applied on a prospective, modified, or retrospective transition approach. Early adoption is permitted. The adoption of this guidance is not expected to have a material effect on the Company’s results of operations, financial position, or liquidity.

ASU 2025-01 and 2024-03 Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40). This ASU requires disaggregated disclosure of certain income statement expenses, such as employee compensation and depreciation, for public business entities. The ASU does not change the expense captions an entity presents on the face of the income statement; rather, it requires disaggregation of certain expense captions into specified categories in disclosures within the footnotes to the financial statements. The ASU also requires disclosure of a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively. ASU 2025-01 amends the effective date of ASU 2024-03, clarifying that "public business entities are required to adopt the guidance in annual reporting beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027." In addition, early adoption of the ASU is permitted. The Company is evaluating the guidance impact on the current presentation of the Company's income statement and expects the adoption to result in additional disclosures for certain expenses.

There are other new accounting pronouncements issued by the FASB that the Company has adopted or will adopt, as applicable. The Company does not believe any of these new accounting pronouncements have had, or will have, a material impact on its consolidated financial statements or disclosures.