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
Information provided on this web site “Site” by Thompson Greenspon is intended for reference only. The information contained herein is designed solely to provide guidance to the user, and is not intended to be a substitute for the user seeking personalized professional advice based on specific factual situations. This Site may contain references to certain laws and regulations which may change over time and should be interpreted only in light of particular circumstances. As such, information on this Site does NOT constitute professional accounting, tax or legal advice and should not be interpreted as such.
Although Thompson Greenspon has made every reasonable effort to ensure that the information provided is accurate, Thompson Greenspon, and its shareholders, managers and staff, make no warranties, expressed or implied, on the information provided on this Site, or about any other website which you may access through this Site. The user accepts the information as is and assumes all responsibility for the use of such information. Thompson Greenspon also does not warrant that this Site, various services provided through this Site, and any information, software or other material downloaded from this Site, will be uninterrupted, error-free, omission-free or free of viruses or other harmful components.
Information contained on this Site is protected by copyright and may not be reproduced in any form without the expressed, written consent of Thompson Greenspon. All rights are reserved.
Ready to talk to one of our specialists?
Our specialists are all seasoned professionals who have years of experience working within your industry. Reach out to us today to schedule a consultation.