Committees : Audit

New Effective Dates for Major Accounting Standards Following FASB Vote

The Financial Accounting Standards Board (FASB) has approved a sweeping change to its philosophy of establishing effective dates for major new accounting standards, delaying the dates for small firms.

These updates came after outcry from small public companies and private entities, who said they needed more time to adopt major changes to the accounting rules than larger public ones. In a unanimous vote on Oct. 16, the FASB chose to delay the effective dates of its lease accounting, hedge accounting and credit losses (or current expected credit losses, or CECL) standards. Separately, the FASB voted to delay the effective date of its standard for accounting for insurance companies issuing long-term insurance contracts.

The FASB issued these proposals to defer the effective dates of its standards in August, particularly for private companies, nonprofits and small public companies, which all received more time to implement the new rules. The number of defined groups, dates and different standards may create confusion for small firms eligible for the new effective dates. Executives will want to confirm with their accountants which filing dates they must follow.

The decision finalizes the effective dates that had been tentatively approved earlier and will not be revised. Changes under the new Accounting Standards Update (ASU) are:

  • SEC filers: The hedge accounting and lease accounting effective dates would remain for fiscal years beginning after Dec. 15, 2018, and the credit loss effective date would remain for fiscal years beginning after Dec. 15, 2019. The exception would be smaller reporting companies, whose credit loss effective date would be extended to fiscal years beginning after Dec. 15, 2022.

  • All other public business entities: The hedge accounting and lease accounting effective dates would remain for fiscal years beginning after Dec. 15, 2018; the credit loss effective date would change from fiscal years beginning after Dec. 15, 2020, to fiscal years beginning after Dec. 15, 2022.

    The effective date of fiscal years beginning after Dec. 15, 2018, for lease accounting would also apply to employee benefit plans that file or furnish financial statements with or to the SEC as well as nonprofit entities that have issued or are conduit bond obligors for securities that are traded, listed or quoted on an exchange or over-the-counter market.

  • Private companies and all others: The hedge accounting and lease accounting effective dates would be delayed by a year to fiscal years beginning after Dec. 15, 2020. The credit loss effective date would be delayed two years to fiscal years beginning after Dec. 15, 2022.

Early-adoption options for the standards are unchanged. The FASB expects to issue a final ASU with these decisions in November.

The FASB also voted to align the effective date of ASU No. 2017-04, Intangibles — Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, with the amended effective dates for the credit loss standard. The new effective date for the long-term insurance contract standard for SEC filers (excluding eligible smaller reporting companies) will be fiscal years beginning after Dec. 15, 2021, and interim periods within those fiscal years. For all other entities, the long-term insurance contract effective date will be fiscal years beginning after Dec. 15, 2023, and interim periods within fiscal years beginning after Dec. 15, 2024.