Health industries quarterly insights: Q1 2025

The FASB’s new standard on income tax disclosures, ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, will be effective for calendar-year public companies in their 2025 annual reports. For entities other than public business entities (non-PBEs), the standard’s requirements are significantly less detailed are not effective until calendar 2026 year-end annual reports.

The new guidance focuses on two specific disclosure areas:
1. A disaggregated effective tax rate reconciliation.
2. A break-down of income taxes paid by jurisdiction.

The standard requires public business entities to provide a tabular effective tax rate reconciliation (using both percentages and reporting currency amounts) between:

(1) the reported income tax expense (or benefit) from continuing operations and
(2) the product of the income (or loss) from continuing operations before income taxes and the applicable statutory federal (national) income tax rate of the jurisdiction (country) of domicile. The standard prescribes eight specific categories of reconciling items, which if applicable and subject to a 5% threshold must be included in the reconciliation. Those eight categories must be further disaggregated by the specific foreign jurisdiction in which those effects arise.

Given the magnitude of changes to the tabular reconciliation as compared to the existing requirements, we recommend companies start now to develop the processes and systems to gather the data, and implement controls over the disclosures.

PBEs should consider leveraging their 2024 data to assess the sufficiency of their processes and controls to meet the new disclosure requirements ahead of the effective date. Additionally, starting early will allow entities to assess the extent of comparability of results for prior periods, which may influence whether to adopt the disclosure prospectively or retrospectively.

Please refer to our In Depth for further detail on this topic.

ASU 2023-05, Business Combinations—Joint Venture Formations (Subtopic 805-60): Recognition and Initial Measurement, applies to the initial formation of a “joint venture” or a “corporate joint venture” (both referred to as a “JV”) and is effective for all new JVs with a formation date on or after January 1, 2025. JVs formed prior to January 1, 2025 may elect to apply the new guidance retrospectively back to their original formation date.

The guidance requires a JV to apply a new fair value basis as of the formation date to all of the assets contributed and liabilities assumed by the JV. The new basis should be measured under ASC 805-20, Business Combinations—Identifiable Assets and Liabilities, and any Noncontrolling Interest, with certain exceptions for goodwill and in process research & development.

The new guidance does not impact the accounting by the entities that contribute assets to the JV.

Please refer to our Equity Method Investments and Joint Ventures Guide for further information on the accounting for a JV formation.

ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“DISE”) is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted.

For further information and updates on the DISE standard, please refer to our In Depth and our recently released podcast.

On February 11, 2025, Acting SEC Chairman Mark Uyeda issued a statement regarding the SEC’s rule, "Enhancement and Standardization of Climate-Related Disclosures for Investors," adopted on March 6, 2024. The SEC had previously stayed the rule pending the outcome of the legal challenge to the rule in the Eighth Circuit Court. In acting Chair Uyeda’s statement, he indicated that he had directed the Commission staff to request that the court delay scheduling oral arguments to allow the Commission time to deliberate and determine appropriate next steps in the litigation.

Notwithstanding a relatively lower volume of IPO activity, private investors continue to look for opportunities in the biotech arena, generally through complex debt, equity and hybrid instruments. These investors are generally highly sophisticated and focused on preferential terms in event of liquidation while retaining participation in common stock appreciation and seeking the ability to exit or monetize their investments at either specific points in time or over time.

Tune into our podcast to hear more regarding the transaction types, accounting considerations and challenges encountered in these complex financial instruments.

In addition, refer to our publication Six questions companies need to ask about private credit, for additional insights into private credit transactions.

The FASB continues to make progress on its technical agenda, including issuing proposed new standards on the definition of a derivative, software costs, government grants, and environmental credit obligations during the fourth quarter of 2024. However, none of these standards are expected to be finalized until the second half of 2025 at the earliest.

In addition, late in 2024, the FASB issued three invitations to comment on their longer-term agenda, financial key performance indicators and recognition of internally-generated intangibles. The potential recognition of internally generated intangibles would have a significant impact on any companies engaged in significant R&D activities and the FASB’s deliberations would likely benefit from input from those preparers.

As described in our US Deals 2025 outlook, mergers and acquisitions activity is poised to gain momentum in 2025 due to large amounts of dry powder, the need for business model reinvention and shifting regulatory priorities.

Today’s corporate development leaders operate in an ecosystem that’s being transformed by long-term mega trends, including radical technological advancements and significant demographic and political realignments. Companies that don’t address these challenges could face the ire of activist investors and, eventually, obsolete business models.

If your company is considering an M&A transaction, IPO or divestiture, refer to PwC’s latest materials linked below.

Roadmap for an IPO: A guide to going public

Carve-out financial statements guide

On January 7, 2025, FDA published final guidance intended to tighten regulations for manufacturers sharing off-label information with healthcare providers (HCPs). The guidance increases manufacturers’ responsibilities when leading off-label communications with HCPs.

Please refer to our publication for further details and what this could mean for your organization.