FASB issues proposed ASU extending implementation deadline for Leases, Credit Losses and Hedging Standards

On Aug. 15, the Financial Accounting Standards Board (FASB) issued a proposed Accounting Standards Update (ASU) which, if approved, would delay the effective dates of ASU No. 2016-02, Leases (Topic 842); ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326) (CECL); ASU No. 2017-12, Derivatives and Hedging (Topic 815) for private companies, not-for-profit organizations and certain smaller public companies. Comments related to the proposed delay are due by Sept. 16, 2019. If the proposed ASU is approved, the three ASUs’ new effective dates for private companies would be as follows:

• Leases* – Fiscal years beginning after Dec. 15, 2020 (i.e., Jan. 1, 2021 for calendar year-ends)
• CECL – Fiscal years beginning after Dec. 15, 2022 (i.e., Jan. 1, 2023 for calendar year-ends)
• Hedging – Fiscal years beginning after Dec. 15, 2020 (i.e., Jan. 1, 2021 for calendar year-ends)

For SEC filers, the effective dates would not change, other than for entities defined as smaller reporting companies (SRCs) by the SEC, for which the effective date of CECL would be extended to fiscal years beginning after Dec. 15, 2022 (i.e., Jan. 1, 2023 for calendar year-ends).

For all other public business entities, the effective dates would also not change, other than for CECL, for which the effective date would also be extended to fiscal years beginning after Dec. 15, 2022 (i.e., Jan. 1, 2023 for calendar year-ends).

As a part of the proposed ASU the FASB outlines a new philosophy that would extend and simplify how effective dates are determined for major standards. This new philosophy would separate entities into two groups, large public companies and all other entities. The all other entities group would include private companies, smaller public companies, not-for-profit organizations and employee benefit plans. Under this new philosophy, the FASB would consider allowing the all other entities group at least two additional years to adopt major standards. The FASB will be considering how to apply this new philosophy to ASU No. 2018-12, Financial Services-Insurance (Topic 944) as part of a separate project.

* For employee benefit plans and not-for-profit conduit bond obligors that file or furnish financial statements with or to the SEC, the lease standard effective date would not change (i.e., would continue to be fiscal years beginning after Dec. 15, 2018).