AAFCPAs is excited to inform you that the Financial Accounting Standards Board (FASB) voted to extend the effective dates of four key accounting standards at their latest July 17, 2019 meeting.
The proposed delay to the effective dates for certain companies affects accounting for leases, credit losses, hedging, and long-duration insurance contracts. This is FASB’s response to the burden placed on companies having to adopt various complex accounting standards in the short period of time.
FASB is planning to issue two exposure drafts proposing the new effective dates for accounting for leases, credit losses and hedging (in the first exposure draft) and long-duration insurance contracts (in the second exposure draft). There will be a 30-day comment period for each draft. The proposed extended effective dates are as follows:
- Lease accounting: The new effective date for calendar-year-end preparers that are not public business entities would be Jan. 1, 2021 (or after for fiscal year end preparers). The effective date for calendar-year-end public business entities, employee benefit plans, and not-for-profit conduit bond obligors did not change (Jan. 1, 2019).
- Accounting for credit losses: The new effective date for all non-SEC entities and smaller reporting companies as defined by the SEC, with calendar-year-end would be Jan. 1, 2023 (or after for fiscal year end preparers). The effective date for calendar-year-end SEC filers, excluding smaller reporting companies as defined by the SEC, would remain Jan. 1, 2020.
- Derivatives and hedging: The new effective date for calendar-year-end preparers that are not public business entities would be Jan. 1, 2021, an extension of one year. The effective date for calendar-year-end public business entities is Jan. 1, 2019, and would remain unchanged.
- Long-duration insurance contracts: The new effective dates would be Jan. 1, 2022, for calendar-year-end public business entities and Jan. 1, 2024, for all other entities with a calendar-year-end.
FASB is not planning to change any early adoption options. Those who have early adopted any of the four standards can use this time to improve the processes developed during the implementation.
AAFCPAs feels that the extension to the lease accounting standard is significant and positive news for our client base. This standard represents substantial work to locate and analyze the lease agreements to then extract the necessary data for performing the new accounting.
AAFCPAs would like to remind our clients that these changes to implementation dates do not affect those that follow GASB as their financial reporting framework (e.g. charter schools).