The quarter close

A look at this quarter's financial reporting issues

Fourth quarter 2020

With the results of the 2020 US election decided, it appears that Democrats will retake the White House and maintain control of the House - although control of the Senate will remain undecided until January 2021. While considering the potential tax, regulatory, and trade implications of the US election, many organizations continue to be challenged by the economic and human effects of the COVID-19 pandemic.

In this environment, many companies are looking to increase liquidity, including through restructuring programs, lease renegotiations, or strategic disposals of assets or businesses, and in some cases are considering the abandonment or sublease of unused real estate. We discuss accounting considerations for each of these in this edition.

In addition to these “one-off” initiatives, the recurring “blocking and tackling” of the year-end financial reporting process remains, which for many organizations will be performed remotely for the first time. On this front, we are providing reminders for Form 10-K reporting in the current environment, software and cloud-based offering accounting considerations as companies move to digitally transform their workforce, and year-end pension accounting reminders.

In this edition of The quarter close, we highlight these and other relevant accounting and reporting topics you should consider as we close-out 2020 and begin the year-end financial reporting season.

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Headlines

Fourth quarter 2020

Election 2020 and OECD blueprints: are regulatory changes on the horizon?

Although control of the US Senate will remain undecided until January 2021, the 2020 US election resulted in a change of administration in the White House and Democrats maintaining their House majority, albeit by a small margin. These results - coupled with the outcome of the January 2021 runoff elections for two Georgia Senate seats - have the potential to significantly impact the direction of US tax policy. In particular, businesses and individuals should examine and understand the Biden administration’s proposed tax policies, which may become a reality if Democrats win control of the Senate in January.

For our latest views on the impact the US election could potentially have on tax, trade, and regulatory policy, listen to our Post-election outlook: Policy, initiatives and business impacts podcast, read our Tax Insights, Tax policy direction may change with Biden win but Senate control remains key question for future legislation, and check out our Election 2020 microsite.

From a global perspective, the Organization for Economic Cooperation and Development (OECD) recently issued blueprints for profit allocation and nexus rules (Pillar One) and a global minimum tax (Pillar Two). Either of these pillars, if adopted by global consensus or on a unilateral basis, would result in significant consequences for many multinational companies. The path forward for obtaining political agreement by the nearly 140 participating countries seems narrow given continued US resistance to certain core elements. Nevertheless, although the OECD cannot enact tax law changes, various aspects of the proposals could be adopted in the coming years.

For more on how the OECD’s proposals could affect entities’ global business operations, including what the proposals mean for financial statement preparers, listen to our What global tax initiatives could mean for your company podcast.


Modernization of SEC Regulation S-K disclosure requirements, some now effective

The amendments to the Regulation S-K disclosure rules the SEC approved in August are now effective. As a reminder, these amendments modified the disclosures registrants are required to make about description of the business, legal proceedings, and risk factors, and added new requirements for disclosures about human capital resources.

On November 19, the SEC voted to adopt incremental amendments to Regulation S-K (the “November Amendments”), which include:

  • the elimination of Item 301 (Selected Financial Data);

  • the replacement of the current requirement for quarterly tabular disclosure with a principles-based requirement for material retrospective changes;

  • the codification of SEC guidance on critical accounting estimates;

  • the clarification and simplification of disclosure requirements for results of operations;

  • enhancements and clarification of the disclosure requirements for liquidity and capital resources; and

  • the elimination of the tabular disclosure of contractual obligations.

The November Amendments will be effective 30 days after they are published in the Federal Register. Registrants will be required to comply with them beginning with the first fiscal year ending on or after the date that is 210 days after publication. Although registrants will not be required to comply with the November Amendments in 2020 calendar year-end filings, they may voluntarily comply with the final amendments any time after the effective date, as long as they provide disclosure responsive to an amended item in its entirety.

For more information on the amendments, read our In the loop, New human capital disclosure rules: Getting your company ready, our In depths, Navigating the SEC’s amended Regulation S-K disclosure rules and SEC amends MD&A and eliminates selected financial data, and listen to our Understanding the new SEC Human Capital Disclosure requirements podcast.

Inside scoop

Insights from the frontlines

Here are some of the significant technical accounting trends we’re seeing during the fourth quarter of 2020:

10-K reporting reminders in a COVID-19 environment

Restructuring activities

Some companies have implemented, or are considering implementing, restructuring activities in response to the effects of COVID-19. With many continuing to operate remotely during the year-end close process, companies may need to place more emphasis on organization-wide communication, including outside of the accounting and finance functions, to identify restructuring plans or activities that could result in the recognition of expenses and related liabilities as of year end.

Financial statement disclosures for restructuring activities are outlined in ASC 420, Exit or Disposal Cost Obligations, with additional guidance for public companies in SAB Topic 5P, Restructuring Charges. This guidance includes disclosure requirements beginning with the period in which the plan is initiated and in subsequent periods (including interim periods) until the plan is completed. These disclosures should provide details regarding the nature and amount of costs incurred or expected to be incurred, where those costs are recognized in the financial statements, and whether there are anticipated future cash outflows relating to the restructuring activities. In addition, material changes in previously recognized liabilities, as well as the cumulative costs expected to be incurred under the restructuring plan, should be disclosed each period.

Companies contemplating restructuring activities should also consider the requirements of Regulation S-K Item 303 for MD&A disclosure of future events that are reasonably expected to affect earnings. Finally, disclosures within MD&A of the expected timing and impact on future earnings and cash flows of restructuring activities should be considered.

Management’s Discussion & Analysis

In addition to restructuring activities and discussing the overall results of operations, it is also important for companies to highlight known trends or uncertainties within MD&A. For example, companies with one or more reporting units with goodwill that may be at risk of future impairment should consider foreshadowing and other guidance in SEC FRM 9510. Companies should also consider disclosures about other assets that may be at risk of impairment or for which recoverability may be uncertain (e.g., long-lived assets, including right-of-use assets, intangible assets, and deferred tax assets).

In addition, consistent with the guidance within SEC CF Disclosure Guidance Topic No. 9A, companies should consider disclosures related to the impact of COVID-19 on liquidity and operations, including the impact on non-financial areas such as health and safety measures.

Companies should also keep in mind, as applicable, the impact of supply chain financing programs on liquidity and cash flows. The structure of these programs varies and companies should consider whether the impact of actions taken with vendors or other third parties (e.g., financial institutions) to extend payment terms or otherwise alter cash flows associated with vendor payables should be disclosed, in addition to evaluating any statement of cash flows impacts.

Risk factors

Within the Form 10-K, companies should continue to evaluate new information and refine risk factors to highlight risks that are specific to the company’s facts and circumstances and have more than a remote risk of occurring. Examples of such risks may include the impacts of COVID-19, which, in addition to the financial matters noted above, may include changes in the IT environment, remote working arrangements, and cybersecurity.


Navigating the accounting models when abandoning or subleasing right-of-use assets

As the COVID-19 pandemic continues, many companies continue to operate in a remote work environment and plan to do so for the foreseeable future, anticipating that this shift may last well beyond the pandemic. As a result, some companies are reassessing their real estate footprint and considering their needs for leased space. Such plans to sublease or abandon leased space carries accounting complexities that can be easily overlooked.

When a lessee decides to cease using a leased asset under an operating lease either immediately or in the future, it will need to consider whether the right-of-use (ROU) asset is or will be abandoned. For leased space, the ROU asset is generally not abandoned until the date the space is fully vacated and the lessee has no intention to further benefit from the leased asset. Temporarily idling an ROU asset - for example, leaving leased space unoccupied with plans to return at a future date - is not considered an abandonment. Additionally, vacating leased space with plans to sublease the space in the future does not constitute an abandonment of the ROU asset.

In many situations, a lessee may be uncertain as to whether it will sublease the vacated leased space. In these situations, the ROU asset is not considered abandoned because the lessee could potentially economically benefit from the ROU asset in the future - either through the lessee’s use or sublease. As a result, the related ROU asset should continue to follow the ASC 360 long-lived asset “held and used” accounting guidance, including for impairment considerations.

Alternatively, a lessee may assert that, despite having the contractual ability to do so, it has no plans to sublease the ROU asset. In this scenario, judgment is required to support an abandonment conclusion. For example, when a lessee has a significant remaining lease term, it may be difficult to support abandonment, especially when a market participant would likely attempt to economically benefit from the leased space at some point in the future (e.g., through subleasing or alternative use). On the other hand, when there is an insignificant remaining lease term and the lessee can support that the leased space will not be used or subleased for the remainder of the lease term, abandonment accounting may be appropriate.

When a lessee contemplates abandoning or subleasing an asset in an asset group, this may be an indication that the asset group is impaired. Once a decision to abandon or sublease an ROU asset is made, the lessee should first consider whether changes to lease components (e.g., in the case of a partial abandonment of leased space) or asset groups are necessary. Next, regardless of whether asset groups change, the lessee should consider whether its assets (asset groups) are impaired. Finally, after considering impairment of the asset (asset group), the useful life of the ROU asset should be reconsidered, with the ROU asset amortized to its salvage value as of the cease-use date.

For more on ROU asset impairment, abandonment, and sublease considerations, listen to our Right-of-use asset impairment: Your FAQs, answered podcast and read our In depth, FAQ: Lessee accounting for right-of-use assets in operating leases. Chapters 5 and 6 of our Property, plant, equipment and other assets guide also include guidance and illustrative examples on these topics.


Reminders when modifying lease agreements due to the economic effects of COVID-19

Due to the ongoing effects of the COVID-19 pandemic, some tenants are attempting to renegotiate their lease agreements with landlords. ASC 842, the leases standard, requires companies to evaluate modifications to the terms and conditions of a lease agreement that results in a change in the scope of, or the consideration for, a lease. When a modification is not accounted for as a separate contract, companies are required to reassess whether the contract is or contains a lease. If it does, a lessee is required to reallocate contract consideration, reassess the lease classification, remeasure the lease liability, and adjust the right-of-use asset. 

Assumptions required to classify the lease, including fair value, economic life, and discount rate assumptions, are also reconsidered as of the modification date. Additionally, any initial direct costs, lease incentives, and any other payments made or received in connection with a modification to the lease would be accounted for as if they are in connection with a new lease.

The economic and tactical challenges of the pandemic prompted the FASB staff to provide relief for certain concessions granted in response to the pandemic. Under a Staff Q&A, lessees and lessors are permitted to make an accounting election for COVID-19-related rent concessions to either (1) account for the concession as a modification to the lease agreement or (2) account for the concession as if it is an existing contractual right within the lease agreement. To apply the relief to account for the concession as an existing contractual right, the cash flows must remain substantially the same or less than before the concession. 

The COVID-19 relief published in the Staff Q&A has no specific end date. As a result, we believe the guidance may continue to be applied by lessees and lessors, provided the requirements outlined in the Q&A continue to be met. 

In addition, the FASB issued an exposure draft on October 20, 2020 on proposed Targeted Improvements to ASC 842. If adopted, one of the proposed improvements would be to not require the application of modification accounting for the partial termination of a lease when the economics of the continuing lease components are unchanged. See the “On the horizon” section of this publication for more information on the FASB’s proposal.

For more information on applying the FASB’s COVID-19 lease relief, see our In depth, FAQ on accounting for COVID-19 and market volatility and listen to our COVID-19: Leasing questions, answered podcast. For more on lease modifications, see Chapter 5 of our Leases guide.


Evaluating a strategic disposal? Reminders when navigating the discontinued operations model

In an effort to raise capital and increase liquidity, there has been an increase in the number of companies evaluating strategic sales of assets and businesses. Depending on the significance of these dispositions, such a transaction — or plans to consummate such a transaction — may require an analysis of whether held-for-sale accounting and discontinued operations presentation within the financial statements is required.

For a disposal to be accounted for as a discontinued operation, the operations must represent a component - that is, the operations and cash flows must be clearly distinguishable from the rest of the entity. Additionally, (1) the component must meet the held-for-sale criteria as of the balance sheet date, and (2) the disposal must represent a “strategic shift” that is expected to have a “major effect” on the entity’s financial results.

Although there are no bright lines, the discontinued operations guidance provides a number of helpful examples of what may represent a strategic shift (e.g., disposal of a major geographical area; or a major line of business). Additionally, when evaluating the “major effect” criterion, companies should focus on the effects to the financial metrics that are most prominently presented in the financial statements and most frequently communicated to investors.

When a disposal meets the discontinued operations criteria, presentation as such is required for all periods presented. If only the held-for-sale criteria are met (i.e., the disposal does not meet the strategic shift and/or major effect criteria), adjustment to prior-period balance sheet presentation is not required.

Discontinued operations presentation requires (1) separately presenting the current and noncurrent assets and liabilities of the discontinued operation as held for sale on the balance sheet, (2) presenting the results of the discontinued operation (including income tax effects) separate from continuing operations in the income statement, and (3) separately presenting certain activities in the statement of cash flows. There are also a number of disclosure requirements, including in scenarios when there is significant continuing involvement by the seller in the discontinued operation, such as through a transition services agreement or similar arrangement. 

For more information on applying the discontinued operations model, listen to our Discontinued operations, your reporting questions answered podcast and read Chapter 27 of our Financial statement presentation guide. For FAQs on evaluating the held-for-sale accounting model, read Chapter 5 of our Property, plant, equipment and other assets guide.


How the effects of COVID-19 may impact your year-end pension measurements

Throughout the course of 2020, companies have addressed a number of accounting and estimation challenges resulting from the economic impacts of COVID-19. However, the accounting for pension and other post-employment benefits (OPEB) presents several unique challenges, some the result of restructuring activities being undertaken by companies, and others because of remeasurements required for the first time during the fourth quarter of 2020.

The following are several pension and OPEB considerations to keep in mind as companies prepare their year-end reporting. As a general reminder, the unit of accounting for pension and OPEB benefits is the individual plan, so these considerations should be assessed separately for each individual plan.

Remeasurements

Unlike most areas of US GAAP that require updates each interim period, companies are only required to remeasure pension and OPEB assets and obligations annually, as of fiscal year-end, in the absence of a significant interim event, such as a curtailment or settlement. There are a number of critical financial, actuarial, and demographic assumptions inherent in these annual remeasurements, which may have experienced higher-than-usual volatility in the current environment. As a result, companies should carefully evaluate their key assumptions, including considering whether any changes are necessary in the current year to reflect the impacts of COVID-19.

Curtailments

If a company is terminating a significant number of employees, it will need to consider whether it has triggered a curtailment of its pension or OPEB plans. Curtailments occur when there is a significant reduction in the expected years of future service of present employees. While GAAP does not define “significant,” the determination is based on plan-related employee information, not the potential impact of the event on net income. Curtailment calculations can be complicated, and the timing of recognition depends on whether the curtailment will result in a gain or loss. A curtailment loss should be recognized when it is probable that a curtailment will occur and the amount of the loss is reasonably estimable. Conversely, curtailment gains are not recognized until the related employees are terminated.

Settlements

If a company is terminating employees, it may be considering higher levels of “buy-outs” or lump-sum payments out of its pension plans compared to past practice. These actions could require the application of settlement accounting, which can be complex. Although lump-sum payments to departing employees may be part of the normal operation of the plan, the accounting guidance considers such payments to be a form of settlement of participant benefits. As a result, if the level of all such payments for a plan during the fiscal year, together with more “traditional” buy-outs and annuity purchases, is greater than the sum of the service and interest cost components of net periodic pension cost for the year, settlement accounting is required for all such payments during the year - not just the excess. With low interest rates and many plans frozen, the aggregate amount of service and interest cost may not be significant, resulting in a relatively low threshold for settlement accounting.

For more in-depth analysis on pension and OPEB accounting, refer to Chapter 2 and 4 in our Pensions and employee benefits guide.

In transition

Practical reminders for new standards

Investing in digital transformation: accounting for software and cloud-computing costs

As highlighted by our recent CFO Pulse Survey, investing in digital transformation remains a top priority for finance leaders, and the timeline has accelerated as a result of COVID-19 and the resulting shift to remote work. When accounting for costs to acquire or develop software, a critical first step is to identify the appropriate accounting model.

The accounting model determines whether costs should be initially recognized as either a capital expenditure or an expense and, for costs qualifying for capitalization, how those costs should be subsequently considered for impairment. Determining the appropriate accounting model also determines how these costs should be presented in the financial statements. In addition to the existing guidance for software costs, companies should not lose sight of new guidance governing implementation costs for cloud-computing arrangements, which is effective in 2020 for public companies. When implementing software, the related costs typically fall into one of three categories: 

  • Software to be sold, leased, or marketed (ASC 985-20) includes costs to purchase or develop software that will be licensed to customers or embedded within a product sold to customers. This guidance follows an inventory-like model. 

  • Internal-use software (ASC 350-40) includes software purchased or developed solely to meet internal needs, including software used to provide a service to customers. These costs are accounted for similar to other long-lived assets.

  • Cloud-computing arrangements (ASC 350-40) are service arrangements when software is only accessed remotely (e.g., software-as-a-service). Under the new guidance effective this year, certain implementation costs related to these arrangements are required to be capitalized.

The presentation of capitalized costs and subsequent expense recognition differs between these three models. These differences can impact key metrics such as EBITDA, gross margin, and cash flows from operations. Generally, software costs will be presented as follows:

Category

Balance sheet

Income statement

Statement of cash flows

Software to be sold, leased, or marketed

Inventory or intangible asset

Depreciation / amortization expense (cost of revenue)

Operating activity

Internal-use software

Fixed or intangible asset

Depreciation / amortization expense*

Investing activity

Cloud-computing arrangements - implementation costs

Prepaid or other asset**

Operating expense**

Operating activity

*  Presentation of this expense depends on whether the company utilizes the software to support internal processes (e.g., general and administrative) or directly used to provide a service to customers (cost of revenue)

**  Presented in the same line item as fees for the associated cloud-computing service   

The above highlights only touch the surface of considerations when accounting for software costs. For further insights, check out our Buying or developing new software? Know which guidance to use podcast and read our In the loop, Moving to the cloud? Better check the new cost guidance. Chapter 7 of our Property, plant, equipment and other assets guide also includes detailed guidance and illustrative examples for applying the software and cloud-computing cost guidance.

Ask the National Office

Perspectives from our professionals

Practical reminders for presenting certain transactions in the statement of cash flows

Tom Barbieri

Deputy Chief Accountant, National Professional Services Group, PwC US

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Question: Many companies have frequent receipts and payments occurring throughout the reporting period relating to a single arrangement, such as a revolving line of credit with daily borrowings and repayments. Should these transactions be presented as separate line items (“gross”) or as a single line item (“net”) within the statement of cash flows?

Tom: As a general principle, gross cash flow presentation is required for most transactions, as this presentation is typically more useful to financial statement users. Net cash flow presentation is allowed when the transactions have a quick turnover, occur in large volumes, and have short-term maturities (i.e., less than 90 days). However, cash flows relating to revolving lines of credit rarely qualify for net reporting because the contractual maturity of each individual borrowing is typically greater than 90 days. A company’s intent to repay or history of repaying within 90 days does not impact the reporting, since the determining factor is the contractual maturity. As a result, borrowings and repayments on most revolving lines of credit should be presented on a “gross” basis.

Question: If a company uses an agent to facilitate a cash flow transaction on their behalf, should the related activity be presented within the statement of cash flows, even if no cash passes through the company’s account?

Tom: Yes, despite the fact that cash is not actually passing through the reporting entity’s bank account, these transactions should be presented within the statement of cash flows based on the substance, rather than the form, of the transaction. For example, when a company instructs a bank to transfer debt proceeds directly to a vendor to satisfy a trade payable, a financing cash inflow, representing the borrowing from the bank, and an operating cash outflow, representing the payment of the payable to the vendor, should be presented within the statement of cash flows, as this reflects the substance of the transaction.

Question: How should lender fees and third-party fees associated with a term debt restructuring be presented in the statement of cash flows?

Tom: The cash flow presentation and classification of such fees depends on the accounting for the debt restructuring itself. Specifically, if the debt restructuring is accounted for as an extinguishment, all fees, inclusive of lender and third-party fees, should be presented as a financing cash outflow. This is the same treatment as an extinguishment outside of the debt restructuring model. 

If the debt restructuring is accounted for as a modification, any lender fees are also presented as a financing cash outflow because the lender fees paid on the modification date are capitalized as a debt discount. However, any third-party fees should be presented as operating cash outflows because these payments are expensed and not considered debt issuance costs since there is no new issuance of debt.  

Question: How should a lessee present cash flows associated with operating leases in the statement of cash flows?

Tom: Although all payments associated with operating leases are classified as operating cash flows, determining the presentation of these cash flows can be challenging. Generally, we believe separately presenting right-of-use asset amortization as a non-cash reconciling item and changes in the lease liability relating to the "principal" portion of the cash lease payments is the clearest and most representative presentation. However, in the absence of specific guidance, combining these two amounts as a single line item in the statement of cash flows is also acceptable. Any non-cash changes to the lease liability and right-of-use asset, aside from the change to the single lease expense, should also be disclosed as a non-cash transaction. 

For more information on presentation and classification in the statement of cash flows, see Chapter 6 of our Financial statement presentation guide.

On the horizon

Standard setting developments

Here are some significant standard-setting developments that you need to know as we approach 2020 year-end:

FASB issues proposed accounting standards update for targeted improvements to leases standard

On October 20, the FASB issued an exposure draft of three proposed amendments to the leases standard to address preparer concerns with how the underlying economics for certain transactions are reflected and the implementation cost and complexity of existing guidance. The solutions proposed by the FASB will impact the pattern and timing of revenue and cost recognition of affected preparers and will make implementation less costly and complex. The proposed changes are: 

  • Loss recognition for sales-type leases with variable lease payments. Lessors would classify and account for a lease with predominantly variable lease payments that do not depend on an index or rate as an operating lease instead of a sales-type lease and recognize income from variable lease payments in the period earned. 
  • Lessee option to remeasure lease liabilities. Lessees would have an entity-wide accounting policy election to remeasure a lease liability prospectively at the date a change in a rate or index on which future lease payments are based takes effect.

  • Modifications that reduce the scope of a lease contract. Lessors and lessees would be exempt from applying modification accounting to an amendment in a lease contract that early terminates the lease of an individual leased asset or component but does not economically impact the remaining leased assets or components in the same contract.

Comments on the exposure draft were due by December 4, 2020, with a final accounting standard update expected early in 2021. For more on the proposed amendments, read our In brief, FASB issues proposal to resolve certain lease accounting issues.


FASB adds project on recognition and measurement of revenue contracts in a business combination

At its September 23 meeting, the FASB voted to add a project to its technical agenda to address the recognition and measurement of revenue contracts with customers acquired in a business combination. Decisions made in connection with the project include:

  • An acquirer should recognize a liability for a customer contract assumed in a business combination if it represents a performance obligation, as defined in ASC 606. This is a change from current business combination practice, which is to recognize assumed liabilities for customer contracts if they represent a legal obligation to the acquirer.

  • Assets and liabilities arising from revenue contracts acquired in a business combination should be recognized and measured by the acquirer in accordance with ASC 606. This is a change from current business combination guidance, which requires that such amounts are recognized at fair value as of the acquisition date. 

Given the changes to current practice, the proposal has the potential to impact the recognition and measurement of customer contract balances in acquisition accounting. An exposure draft is expected to be released prior to year-end, with a 90-day comment period.

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Appendix

Effective dates

Calendar year-end

PBEs

Nonpublic companies

2020

Cloud computing

Collaborative arrangements

Consolidation: VIE related party

Credit losses (a)

Defined benefit plan disclosure requirements Definition of collections

Episodic television series

Fair value measurement disclosure requirements

Goodwill impairment (a)

Reference rate reform

Share-based consideration to a customer

Definition of collections

Down round features

Fair value measurement disclosure requirements

Nonemployee share-based payments

Not-for-profit entities: accounting for contributions

Premium amortization on callable debt securities

Reference rate reform

Revenue from contracts with customers (c)

Share-based consideration to a customer

2021

Equity securities, equity method, and derivatives

NFP entities: contributions of non-financial assets

Simplifying accounting for income taxes

Cloud computing

Collaborative arrangements

Consolidation: VIE related party

Defined benefit plan disclosure requirements

Episodic television series

Hedging

NFP entities: contributions of non-financial assets

2022

Convertible debt and contracts in own equity (b)

Equity securities, equity method, and derivatives

Leases (d)

Simplifying accounting for income taxes

2023

Insurance: long-duration contracts (e)

Credit losses (a)

Goodwill impairment (a)

2024

 

Convertible debt and contracts in own equity (b)

2025

 

Insurance: long-duration contracts (e)

a) Effective in 2020 for SEC filers other than smaller reporting companies (SRCs); effective in 2023 for all other companies, including SRCs.

b) Effective in 2022 for SEC filers other than SRCs; effective in 2024 for all other companies, including SRCs.

c) Effective in 2020 for nonpublic entities that had not yet issued financial statements or made financial statements available for issuance reflecting the adoption of ASC 606 as of June 3, 2020.

d) Effective in 2022 for “all other” entities that have not yet issued financial statements or made financial statements available for issuance reflecting the adoption of ASC 842 as of June 3, 2020.

e) In November, the FASB issued ASU 2020-11, providing an additional one-year deferral of the Insurance: long-duration contracts standard for all entities. The standard is now effective in 2023 for SEC filers other than SRCs, and effective in 2025 for all other entities, including SRCs. 

For further information on the new accounting guidance for public and nonpublic companies, including available PwC resources, refer to the Effective dates for new FASB guidance page on CFOdirect and see our In depth, How to apply the FASB’s deferral of effective dates.

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Heather Horn

US Strategic Thought Leader, National Professional Services Group, PwC US

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Steve Dolph

Director, National Professional Services Group, PwC US

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