FASB Delays Effective Dates for New Accounting Standards
Last month, FASB unanimously agreed to defer three significant accounting updates involving Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842) for private companies as well as certain other entities. It was noted by FASB that there are comprehensive transition requirements involved with these three standards.
The new standards for hedge accounting and lease accounting effective dates will be delayed one year until fiscal years starting after December 15, 2020. The new standards for credit losses will be delayed two years until fiscal years starting after December 15, 2022.
Deferring the implementation for certain entities will allow these entities to develop or acquire needed business solutions and internal controls, as well as gain better data and improve their estimation processes.
FASB also acknowledged implementation issues encountered by larger companies and the ability of smaller companies to learn from what larger companies have done with their implementations.
While listening to feedback from its stakeholders, FASB developed a philosophy to extend and simplify how effective dates are staggered between entities in the future, by segregating entities into two “buckets.”
Bucket One entities are SEC filers, excluding entities eligible to be smaller reporting companies (SRCs) under the SEC’s definition. All other entities will be considered Bucket Two entities. The expectation is the Board will require adoption of new accounting standards for Bucket Two entities at least two years after adopting standards for Bucket One entities.
For additional information on how these standards will impact your organization, contact your Whittlesey Advisor.
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