Effective dates will be delayed for private companies and certain other entities for FASB’s standards on accounting for leases, credit losses (known as CECL), and hedging after a unanimous vote Wednesday by FASB.
FASB directed its staff to draft an Accounting Standards Update (ASU) that will change the effective dates and be issued following a formal written ballot by the board, which is expected to take place in November. In a separate project, FASB voted to delay the effective date of its standard for accounting for insurance companies issuing long-term insurance contracts.
Under the ASU, effective dates for the lease accounting, hedge accounting, and accounting for credit losses standards will be affected as follows:
- SEC filers: The hedge accounting and lease accounting effective dates would remain for fiscal years beginning after Dec. 15, 2018, and the credit loss effective date would remain for fiscal years beginning after Dec. 15, 2019, except for smaller reporting companies, whose credit loss effective date would be extended to fiscal years beginning after Dec. 15, 2022.
- All other public business entities: The hedge accounting and lease accounting effective dates would remain for fiscal years beginning after Dec. 15, 2018, while the credit loss effective date would change from fiscal years beginning after Dec. 15, 2020, to fiscal years beginning after Dec. 15, 2022. The effective date of fiscal years beginning after Dec. 15, 2018, for lease accounting would also apply to employee benefit plans that file or furnish financial statements with or to the SEC as well as not-for-profit entities that have issued or are conduit bond obligors for securities that are traded, listed, or quoted on an exchange or over-the-counter market.
- Private companies and all others: The hedge accounting and lease accounting effective dates would be delayed one year to fiscal years beginning after Dec. 15, 2020. The credit loss effective date would be delayed two years to fiscal years beginning after Dec. 15, 2022.
Early-adoption options for the standards will remain unchanged.
FASB members said during a board meeting that one of the advantages of the delay is that it will allow preparers with limited resources to learn from the implementation performed by large public companies that possess more staffing and resources.
“It is quite clear that private companies have the ability to learn from what others have done,” FASB Chairman Russell Golden said. “I think it’s good that we’re going to allow smaller reporting companies to also have that advantage. I think having additional time to get through at least one annual audit cycle and regulatory cycle will help have an increased quality implementation by smaller reporting companies and private companies.”
FASB also voted to align the effective date of ASU No. 2017-04, Intangibles — Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, with the amended effective dates for the credit loss standard.
The new effective date for the long-term insurance contract standard for SEC filers excluding eligible smaller reporting companies will be fiscal years beginning after Dec. 15, 2021, and interim periods within those fiscal years. For all other entities, the long-term insurance contract effective date will be fiscal years beginning after Dec. 15, 2023, and interim periods within fiscal years beginning after Dec. 15, 2024.
FASB began considering the delays in response to concerns from overwhelmed preparers. Many of those concerns were voiced in a letter the AICPA’s Technical Issues Committee sent FASB in May requesting a delay in the effective date for private companies for the lease accounting standard.
— Ken Tysiac (Kenneth.Tysiac@aicpa-cima.com) is the JofA’s editorial director.
