Summary: On November 15, 2019, the FASB issued ASU 2019-09, Financial Services—Insurance (Topic 944) and 2019-10, Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842), to extend the deadline to implement FASB standards on current expected credit losses (CECL), leases, hedging, and insurance that are not yet effective for some or all companies.
Background
The FASB issued ASU 2019-09, Financial Services – Insurance (Topic 944) and ASU 2019-10, Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842), in November 2019 to defer effective dates of certain major accounting standards that are not yet effective for some or all entities, specifically:
- CECL (ASC 326 Financial Instruments – Credit Losses),
- Hedging (ASC 815 Derivatives and Hedging),
- Leases (ASC 842 Leases), and
- Insurance (ASC 944 Insurance)
The FASB’s ASU to defer effective dates varied by accounting standards and company type, adopting a two-bucket approach for staggering the effective dates of these standards. The two buckets included:
- Bucket One – SEC Filers (GAAP definition), excluding smaller reporting companies (SRCs) as defined by the SEC.
- Bucket Two – All Other Entities, including:
- SRCs,
- Private companies,
- All not-for-profit organizations, including not-for-profit entities that have issued, or are conduit bond obligors for, securities that are traded, listed, or quoted on an exchange or an over-the-counter market,
- Employee benefit plans, including those that file financial statements with the SEC.
Some exceptions to the two-bucket approach had been proposed for certain major standards already effective, such as hedging and leases.
With the issuance of ASU 2019-09 and ASU 2019-10, the final effective dates for CECL, leases, hedging and insurance are as follows:
Effective Dates (Calendar Year-End Companies) utilizing new bucket approach:
Early application will continue to be permitted for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years.
For CECL, an entity will determine its effective date based on its most recent SRC determination as of November 15, 2019 in accordance with SEC regulations. The effective date for that entity will not change even if the entity subsequently loses its SRC status.
The FASB also decided to align the effective dates of ASU 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, with the amended Credit Losses effective dates.
Effective Dates (Calendar Year-End Companies):
Early application will continue to be permitted.
For leases, the SEC had previously announced that a public business entity (“PBE”) that otherwise would not meet the definition of a PBE except for a requirement for its financial statements or financial information to be included in another entity’s filing with the SEC could adopt leases for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. It is expected that the SEC will make an announcement to conform the effective dates described in that prior announcement to the new effective dates affirmed by the FASB.
Effective Dates (Calendar Year-End Companies) utilizing new bucket approach:
Early application will continue to be permitted.
Like CECL, an entity will determine its effective date based on its most recent SRC determination as of November 15, 2019 in accordance with SEC regulations.
1 For Leases and Hedging, Bucket One remains all PBEs because these standards are currently effective for these entities.
2 Also includes certain Employee Benefit Plans and NFP Conduit Bond Obligors that file or provide financial statement with or to the SEC.
