Today, the Financial Accounting Standards Board (FASB) met to discuss comments received on the August 2019 proposed Accounting Standards Update (ASU) on effective dates for major projects.
Based upon the results of the meeting, the FASB made the following decisions and directed the staff to draft a final ASU.
- Aligned effective dates of ASU No. 2017-04, Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, with the amended Credit Losses effective dates.
- Affirmed that the one-time determination of whether an entity is eligible to be a smaller reporting company (SRC) will be based on an entity’s most recent assessment in accordance with U.S. Securities and Exchange Commission (SEC) regulations as of the date that a final Update on effective dates is issued.
The FASB expects the final ASU to be issued during November 2019. As a reminder, the proposed ASUs introduced the following two bucket approach to stagger effective dates:
- Bucket One includes SEC Filers, as defined by U.S. Generally Accepted Accounting Principles (GAAP), excluding SRCs as defined by the SEC.
- Bucket Two includes all other entities, such as SRC, public business entities (PBE) that are not SEC filers, private companies, all not-for-profit entities – including conduit bond obligors – and all employee benefit plans.
The proposals address the following major standards that are not yet effective:
- For Leases and the Derivatives and Hedging standards, PBEs have already adopted and will not be provided additional time for implementation. However, the effective date for non-public business entities will be extended an additional year to January 1, 2021, for calendar year-end entities.
- For Credit Losses (CECL), Bucket One entities will still remain effective for annual reporting and interim reporting periods beginning January 1, 2020, for calendar year-end entities. However, Bucket Two entities will be granted additional time, with an effective date beginning January 1, 2023, for calendar year-end entities.
- For Long-Duration Insurance Contracts, Bucket One entities will be granted an additional year, with an effective date beginning January 1, 2022, for calendar year-end entities. For Bucket Two entities, the effective date will extend out to January 1, 2024, for calendar year-end entities.
DHG is supportive of FASB’s effort to provide additional time for entities to evaluate impact and effectively implement these significant accounting standards. However, despite the additional time, entities should not slow down or delay their implementation efforts. This additional time should be utilized to enhance entities’ efforts to implement a robust approach in adopting these accounting standards that meets all their compliance and system needs.
For more information or questions regarding implementation efforts of these new accounting standards, reach out to us at firstname.lastname@example.org.