On Friday, FASB issued two new Accounting Standards Updates (ASU) that delay many of the effective dates for new standards on leases, hedging, current expected credit losses (CECL), and long-duration insurance contracts.
The updates came a month after FASB voted unanimously to delay certain effective dates for leases, hedging, and CECL and to align the effective dates for long-duration insurance contracts with the new CECL standards.
The new ASUs are as follows:
- ASU No. 2019-10, Financial Instruments — Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates, finalizes effective date delays for private companies, not-for-profit organizations, and certain smaller reporting companies applying the credit losses, leases, and hedging standards.
- ASU No. 2019-09, Financial Services — Insurance (Topic 944): Effective Date, finalizes insurance standard effective date delays for all insurance companies that issue long-duration contracts such as life insurance and annuities.
The ASUs establish the following effective dates:
- Hedging: The effective date for private companies and other nonpublic filers was delayed one year, to fiscal years beginning after Dec. 15, 2020. The effective date for public business entities — fiscal years beginning after Dec. 15, 2018 — was unchanged.
- Lease accounting: The new effective date for preparers that are not public business entities is for fiscal years beginning after Dec. 15, 2020, a one-year extension. The standard went into effect for fiscal years beginning after Dec. 15, 2018, for public business entities, employee benefit plans, and not-for-profit conduit bond obligors, unchanged from previously.
- Accounting for credit losses: The effective date for SEC filers, excluding smaller reporting companies as defined by the SEC, remains as fiscal years beginning after Dec. 15, 2019. The new effective date for all other entities is fiscal years beginning after Dec. 15, 2022. This change extends the effective date for smaller reporting companies by two years and for private companies and other non-SEC filers by one year.
- Insurance: For public business entities, the new effective dates will be fiscal years beginning after Dec. 15, 2021, and for all other entities it will be fiscal years beginning after Dec. 15, 2023.
Early-adoption options for the standards remain unchanged.
FASB began considering the delays in response to concerns from preparers struggling to cope with the major changes to the standards. The concerns of preparers led the AICPA’s Technical Issues Committee (TIC) to send FASB a letter in May requesting a delay in the lease accounting standard effective date for private companies.
— Jeff Drew (Jeff.Drew@aicpa-cima.com) is a JofA senior editor.