Why Lenders Will Scrutinize Your 2026 Tax Footnotes

If you run a private company, you probably don’t think much about the footnotes in your financial statements. They’re the part most business owners skim over, while lenders, auditors, and investors comb through them. But starting in 2026, those footnotes are about to get a lot more complicated.

Two new Accounting Standards Updates (ASUs) from the Financial Accounting Standards Board (FASB) will soon take effect. If your company follows GAAP (Generally Accepted Accounting Principles) as many private businesses do to satisfy lenders or investors, these changes will apply to you.

The New Rules

• ASU 2023-09 Income Taxes
  Effective for fiscal years beginning after December 15, 2025 (so January 1, 2026, for calendar-year companies). This rule requires businesses to provide a detailed breakdown of income tax payments by federal, state, and foreign jurisdictions. It also requires a more complex narrative (qualitative) rate reconciliation that explains why your effective tax rate differs from the statutory rate.
• ASU 2024-01 Stock Compensation
  Effective for the same time period. This rule clarifies how to account for profits, interests, and stock-based awards, reducing diversity in practice. Some companies may need to change their current accounting treatment, especially when deciding if an award is treated as equity or as a liability.

What This Means for Business Owners

• More Data Collection: Under the old system, a company could simply show one income tax number. The new rules demand a line-by-line disclosure of where taxes are paid. That means tracking and organizing tax payments in far greater detail than before.
• Closer Scrutiny of Equity Awards: If you grant profits interests or stock awards, you will need to make sure your accounting treatment lines up with the clarified standards. What might have seemed acceptable before could trigger questions under the new rules.
• A Heavy Lift in 2026: These rules do not change the actual tax you pay or the equity you grant. They change how you explain it. And that explanation must be ready for lenders and investors who will use it to understand your tax exposure and the future cash flow implications of your business.

Why This Matters

For many small and mid-sized businesses, these changes will be a headache. They raise the bar on transparency in financial statements and require deeper collaboration between business owners, tax teams, and accounting advisors. But there is a silver lining: non-public companies are not required to provide the full tabular reconciliation that public companies must prepare. Your reporting burden is still heavy, but not nearly as overwhelming as what public companies face.

Action Steps

• Start Early: Begin collecting tax data by jurisdiction in 2025 so you are not scrambling in 2026.
• Check Your Compensation Plans: If you offer profits interests or stock awards, confirm your accounting team is aligned with the new standards.
• Loop in Your Advisors: Your CPA and accounting team should already be planning for these disclosures. Make sure they have what they need from you now.

Most business owners do not want to be accountants, and they should not have to be. But when new rules arrive, they cannot be ignored. The good news is that with early planning, these compliance changes do not have to derail your operations.

At Supporting Strategies, we track these updates so you do not have to. We help businesses collect the right data, prepare accurate disclosures, and stay on the good side of lenders and investors. That way you can focus on growing your company while we handle the details buried in the fine print.