FASB Votes to Defer the Effective Dates for Recent Accounting Standards

The FASB  voted to defer the effective date for several of its recent accounting standards.

The FASB voted to adopt a two-bucket approach to stagger effective dates for major standards as follows:

Effective Dates

  1. Bucket One—SEC Filers (GAAP definition), excluding smaller reporting companies (SRCs) as currently defined by the SEC.
  2. Bucket Two—All other entities, which includes:
    1. All other public business entities (PBEs), including SRCs.
    2. Private companies.
    3. All not-for-profit organizations, including not-for-profit entities that have issued, or are conduit bond obligors for, securities that are traded, listed, or quoted on an exchange or an over-the-counter market.
    4. All employee benefit plans, including employee benefit plans that file financial statements with the SEC.

The FASB decides that for CECL, Leases, and Hedging, entities within Bucket Two should be afforded an effective date of at least two years after the effective date for Bucket One. The FASB agrees with the following application of the two-bucket approach:

CECL

CECL—The FASB decided that CECL will be effective for PBEs that are SEC Filers, excluding SRCs as currently defined by the SEC, for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. For calendar-year-end companies, this will be January 1, 2020.  The determination of whether an entity is an SRC will be based on an entity’s most recent assessment in accordance with SEC regulations.  For all other entities, the FASB decided that CECL will be effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. For all entities, early adoption will continue to be permitted; that is, early adoption is allowed for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years (that is, effective January 1, 2019, for calendar-year-end companies).

Hedging

Hedging—The FASB decided to retain the existing effective date for Hedging for PBEs, which is for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years; that is, effective January 1, 2019, for calendar-year-end companies. The FASB decided to defer the mandatory effective date for Hedging for all other entities by an additional year. Therefore, Hedging will be effective for entities other than PBEs for fiscal years beginning after December 15, 2020 (effective January 1, 2021, for calendar-year-end companies), and interim periods within fiscal years beginning after December 15, 2021 (January 1, 2022, for calendar-year-end companies). Early adoption will continue to be allowed.

Leases

Leases—The FASB decided to retain the existing effective date for Leases for (1) all PBEs, (2) not-for-profit bond obligors, and (3) employee benefit plans that file or furnish financial statements with the SEC, which is for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years (effective January 1, 2019, for calendar-year-end companies). The FASB decided to defer the mandatory effective date for Leases for all other entities by an additional year. Therefore, Leases will be effective for all other entities beginning after December 15, 2020 (January 1, 2021, for calendar-year-end companies), and interim periods within fiscal years beginning after December 15, 2021 (January 1, 2022, for calendar-year-end companies). Early adoption will continue to be allowed.

Insurance

Insurance—The FASB decided to provide PBEs with at least one additional year to transition to Insurance and to apply the two-bucket approach.

Therefore, the FASB decided that Insurance will be effective for PBEs that are SEC Filers, excluding SRCs as currently defined by the SEC, for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years. For calendar-year companies, this will be January 1, 2022.  The determination of whether an entity is an SRC would be based on an entity’s most recent assessment in accordance with SEC regulations.  For all other entities, the FASB decided that Insurance will be effective for fiscal years beginning after December 15, 2023 (January 1, 2024, for calendar-year-end companies), and interim periods within fiscal years beginning after December 15, 2024 (January 1, 2025, for calendar-year-end companies). Early adoption will continue to be allowed.

The FASB directed the staff to draft a proposed Accounting Standards Update for vote by written ballot on the proposed amendments regarding the effective dates for CECL, Hedging, Leases, and Insurance.

The FASB decides that the comment period for the proposed ASUs would be 30 days.

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