By Colin Hannifin, CPA | Business Assurance & Advisory Services Manager
Update: On Tuesday, April 21, 2020, the Financial Accounting Standards Board (“FASB”) issued an exposure draft of a proposed Accounting Standards Update that would grant a one-year effective delay for certain entities implementing the new lease and revenue recognition standards.
FASB to Consider Delaying Implementation of New Lease Standard and Others
For the past several years, business entities have been preparing to implement several major standards that the Financial Accounting Standards Board (“FASB”) has issued, including the new leasing standard (Accounting Standard Update 2016-02). Recently, the FASB has indicated that they plan to propose delaying the effective dates for four key standards for certain non-public entities. The standards relate to accounting for leases, credit losses, hedging, and long-duration insurance contracts.
Under the planned proposal, the new lease accounting standard will now be effective January 1, 2021, for non-public business entities with calendar year-ends. This year-long delay will give entities more time to work through the potentially significant impact of implementation. The effective date for public business entities, employee benefit plans, and not-for-profit conduit bond obligors will remain unchanged.
Other standards that will be impacted under the planned proposal include the following:
- Accounting for credit losses: For non-public entities and smaller reporting companies (as defined by the SEC) with calendar year-ends, the new effective date will be January 1, 2023, a delay of one year.
- Accounting for derivatives and hedging: for non-public entities with calendar year-ends, the new effective date will be January 1, 2021, a delay of one year.
- Accounting for long-duration insurance contracts: for non-public entities with calendar year-ends, the new effective date will be January 1, 2024, a delay of one year.
The official proposal is set to be introduced in August and is a response to requests and concerns voiced by the AICPA and non-public business entities that the efforts required to implement revenue recognition (for which the implementation dates are unchanged) and the above standards are overwhelming accounting department resources. The intent is to allow the impacted entities more time to become educated about the new standards and adapt their business processes accordingly.
Keiter will keep you up to date about the extensions of effective implementation dates as the proposal is officially introduced, comments collected, and a FASB vote held.
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The information contained within this article is provided for informational purposes only and is current as of the date published. Online readers are advised not to act upon this information without seeking the service of a professional accountant, as this article is not a substitute for obtaining accounting, tax, or financial advice from a professional accountant.