FASB Tentatively Delays Effective Dates of Major Accounting Standards

7/18/2019
At its July 17, 2019, public meeting, the Financial Accounting Standards Board (FASB) tentatively decided to delay the effective dates of three accounting standards for certain Securities and Exchange Commission (SEC) filers, public business entities (PBEs), and private companies. These are the affected Accounting Standards Updates  (ASUs):
  • ASU 2016-02, “Leases (Topic 842)”
  • ASU 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities”
  • ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”

The FASB also voted to delay the effective date of ASU 2018-12, “Financial Services – Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts,” for all entities.

The FASB’s decisions result from recent constituent feedback suggesting that, due to the significant number of accounting changes occurring over the next few years accompanied by related resource constraints and implementation challenges, certain entities would benefit from additional time to adopt some of the more recently issued major accounting standards.

Exhibits 1 and 2 outline the tentative decisions reached by the FASB on delayed effective dates, including which entities would qualify for the delayed effective dates for each relevant accounting standard.

exhibit 1
exhibit 2
To simplify the application of the transition relief, the FASB decided not to create new classifications for entities in determining which entities would and would not qualify for the delayed effective dates. Instead, the FASB decided to use classifications currently existing within the Accounting Standards Codification (ASC) and SEC guidance.

Under SEC guidance (Item 10(f)(1) of Regulation S-K), a smaller reporting company (SRC) generally is defined as a filer with either 1) a public float of less than $250 million, or 2) annual revenues of less than $100 million and either no public float or a public float of less than $700 million. To determine if an entity qualifies as an SRC, and therefore qualifies for the delayed effective dates for the credit impairment standard and insurance accounting standard, an entity would use its status as of its most recent testing under SEC guidance upon issuance of the codification change.

The FASB plans to issue two proposed ASUs in the near future to expose the tentative decisions for public comment. The comment period is expected to last 30 days.

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