FASB may delay CECL, insurance, leases and hedging standards

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In brief , PwC US Jul 17, 2019

The FASB has voted to propose a delay in the effective dates for certain companies for the credit losses, insurance, leases, and hedging standards.

What happened?

At its July 17th meeting, the FASB voted to propose a deferral of the effective date for several of its recent standards. In most cases, the deferral would provide at least an additional year to companies that have not yet adopted the standards. It would also increase the additional time historically given to entities other than public business entities (PBEs). The proposal is expected to create two new “buckets”: (1) SEC filers other than smaller reporting companies (SRCs, as defined by the SEC) and (2) all other entities, allowing at least a two year difference in the effective date between the buckets. For the standards that have already been issued, this may result in a deferral of up to three years for SRCs, which previously had been required to adopt with other SEC filers.

The following standards have been issued but are not yet mandatory for adoption:

  • ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“CECL”)
  • ASU 2018-12, Financial Services—Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts (“Insurance”)

If adopted as discussed, the effective date of the CECL and Insurance standards would be as follows:

The following standards have not yet been adopted by all entities (i.e., they are already effective for public business entities and certain other entities):

  • ASU 2017-12, Derivatives and Hedging (Topic 815):Targeted Improvements to Accounting for Hedging Activities (“Hedging”)
  • ASU 2016-02, Leases (Topic 842) (“Leases”)

If adopted as discussed, the effective date of the Hedging and Leases standards would be as follows:

* For purposes of the Leases standard, PBEs include (1) employee benefit plans that file or furnish financial statements with or to the SEC, and (2) 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.

(!)

Why is this important?

The FASB’s reconsideration of its philosophy on establishing effective dates is responsive to the result of outreach that revealed that the difficulties transitioning to a new standard are magnified for SRCs and nonpublic entities. The FASB expects to use this “two-bucket approach” as a guideline for future standard setting.

What's next?

The FASB staff will draft the proposed amendments to existing standards and provide them to the Board to vote by written ballot, after which they are expected to be exposed for a public comment period of 30 days. The FASB expects to issue the final amendments later this year.

 

To have a deeper discussion, please contact:

David Schmid

International Accounting Leader, National Professional Services Group, PwC US

Email

Ashleigh Pierce

Director, National Professional Services Group, PwC US

Email

Joscelyn Carlin

Director, National Professional Services Group, PwC US

Email

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David Schmid

International Accounting Leader, National Professional Services Group, PwC US

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