In mid-October, the FASB approved an accounting standards update (ASU) to grant private companies, not-for-profit organizations, and certain small public companies additional time to implement FASB standards on leases, current expected credit losses (CECL), hedging, and long-duration contracts, such as life insurance and annuities.
The decision follows concerns about the difficulties of implementing so many new standards, particularly considering the impact of the new revenue recognition standard.
A summary of the changes is as follows:
- Lease accounting - The new effective date for companies with a calendar year-end that are not public business entities is January 1, 2021, a one-year extension. The effective date for calendar year-end public business entities, employee benefit plans that file or furnish financial statements with the SEC, and not-for-profit conduit bond obligors remains January 1, 2019.
- Credit losses - The effective date for calendar year-end SEC companies, excluding smaller reporting companies, remains January 1, 2020. The new effective date for all other calendar year-end companies is January 1, 2023.
- Derivatives and hedging - The effective date for calendar year-end public business entities remains January 1, 2019. The new effective date for calendar year-end companies that are not public business entities is updated to January 1, 2021, a one-year extension.
- Long-duration insurance contracts - The new effective date is January 1, 2022, for calendar year-end public business entities and January 1, 2024, for all other entities with a calendar year-end.
FASB expects to issue the final accounting standards update in mid-November.
P&N is working to provide seminars, webinars, and other resources designed to help you understand and implement these changes. Although the effective dates are delayed, it is critical to continue to focus on these accounting standards. Please contact P&N if you need assistance.