Nexalin Technology, Inc. New Standards Disclosure

Recent Accounting Pronouncements

 

In August 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-05, Business Combinations—Joint Venture (“JV”) Formations: Recognition and Initial Measurement. The guidance requires newly formed JVs to apply a new basis of accounting to all contributed net assets, resulting in the initial measurement of contributed net assets under ASC 805-20, Business Combinations. The standard is effective for JVs formed on or after January 1, 2025, with early adoption permitted. The adoption of ASU 2023-05 did not have a material impact on the Company’s consolidated financial statements.

 

In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” (“ASU 2023-09”), which enhances the transparency and decision usefulness of income tax disclosures. Adjustments to the annual disclosure of income taxes include: (1) A tabular rate reconciliation comprised of eight specific categories, (2) Incomes taxes paid, disaggregated between significant national, state, and foreign jurisdictions, (3) Eliminates requirements to disclose the nature and estimate of reasonably possible changes to unrecognized tax benefits in the next 12 months or that an estimated range cannot be made, and (4) Adds a requirement to disclose income (or loss) from operations before income tax expense (or benefit) by national and foreign, and income tax expense (or benefit) from operations disaggregated between national, state and foreign. The ASU was effective for public business entities for fiscal years beginning on or after December 15, 2024 with early adoption permitted. The Company adopted ASU 2023-09 for the current year and has elected to apply the standard on a prospective basis. There was no material impact to the Company’s financial statements as a result of adopting ASU 2023-09.

 

The ASU is effective for annual periods beginning after December 15, 2024, for public business entities, with interim disclosure requirements effective for interim periods beginning after December 15, 2025. Early adoption is permitted. The ASU is generally applied on a prospective basis.

 

The Company adopted ASU 2023-09 for the year ended December 31, 2025. The adoption did not have any materially significant impact on the Company’s consolidated financial statements. The Company has updated its income tax disclosures in these consolidated financial statements to reflect the requirements of the ASU, applied on a prospective basis.

 

In July 2025, the FASB issued ASU 2025-05, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets, which allows entities to elect a practical expedient assuming current conditions as of the balance sheet date will remain unchanged for the remaining life of the asset. The standard is effective for annual periods beginning after December 15, 2025, including interim periods, with early adoption permitted. The adoption did not have a material impact on the Company’s consolidated financial statements.

 

Future Adoption of New Accounting Pronouncements

 

In September 2025, the FASB issued ASU 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. The guidance removes references to software development project stages so that capitalization is based on management authorization, commitment to funding, and probable completion for the intended use. The standard is effective for annual periods beginning after December 15, 2027, including interim periods, with prospective, modified, or retrospective transition methods allowed and early adoption permitted. The Company does not expect the adoption to have a material impact on its consolidated financial statements.

 

In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40), which requires additional disaggregated disclosures of certain income statement expense categories. The standard is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the effect of adopting this guidance.

 

All other newly issued but not yet effective accounting pronouncements are considered either not applicable or immaterial to the Company.