On July 17, the Financial Accounting Standards Board (FASB) voted to issue a proposal that would delay several landmark accounting rules for certain companies. If finalized, the deferral would apply to new guidance for reporting leases, hedging transactions, credit losses and long-term insurance contracts.

Summary of the changes

The following table summarizes key implementation date changes that the FASB unanimously voted to propose:

Accounting Standards Update (ASU)	Types of entities affected by the proposed date changes	Current effective date for calendar-year entities	Proposed effective date for calendar-year entities
No. 2016-02, Leases	Private companies and not-for-profits	2020	2021
No. 2017-12, Derivatives and Hedging	Private companies and not-for-profits	2020	2021
No. 2016-13, Financial Instruments — Credit Losses	Smaller reporting companies	2021	2023
	Private companies and not-for-profits	2022	2023
No. 2018-12, Financial Services — Insurance	Public companies	2021	2022
	Smaller reporting companies, private companies and not-for-profits	2022	2024

The term “smaller reporting companies” refers to those that have either 1) a public float of less than $250 million, or 2) annual revenue of less than $100 million and no public float or a public float of less than $700 million.

Unexpected delays

Private companies and nonprofits often receive an extra year to implement major accounting standards updates, compared to the effective dates that apply to public companies. In a shift in its philosophy for setting reporting dates on major new accounting standards, the FASB wants to give certain entities even longer to implement the changes.

Why are these delays needed? Many entities continue to struggle with implementing the new revenue recognition guidance that went into effect in 2018 for public companies and 2019 for other entities. A possible deferral of other new accounting rules would also allow smaller entities to learn from public companies how to implement the changes — and it would give accounting software providers extra time to update their packages to support the new reporting models.

Proposal is coming soon

The FASB is expected to issue its proposal as soon as possible. Then it will be subject to a 30-day comment period.

These deferrals, if finalized, would be welcome news for many organizations. But they’re not an excuse to procrastinate. Depending on your industry and the nature of your transactions, implementing the changes and educating stakeholders could take significant resources. Contact us before the implementation deadline to come up with a realistic game plan.

© 2019