On Wednesday, FASB made the additional one-year deferral of the new Lease Accounting standard, as well as two others, official. These delays had long been sought by private companies as they attempted to implement the complex revised standards.
Effective dates will be delayed for private companies and certain other entities for FASB’s standards on accounting for leases, credit losses (known as CECL) and hedging after a unanimous vote Wednesday by FASB.
FASB directed its staff to draft an Accounting Standards Update (ASU) that will change the effective dates and be issued following a formal written ballot by the board, which is expected to take place in November.
“At this point, almost all public companies have already adopted the new lease standard. In our experience, when it came to actually implementing the standard, teams had way underestimated the level of time, effort, documentation and judgment required to be applied before conclusions could be reached. This delay will be a welcome relief for our private company clients and friends, but the reality still does not change,” explains Michael Dukes, Partner and Practice Director at Bennett Thrasher. “It is a significant undertaking and waiting until the last minute and hoping it will be easy is not an effective strategy. Bennett Thrasher encourages companies to include execution of this standard adoption in their work plans over the next year. Find your technology solution which is the best fit, arrange for consulting assistance, and get it behind you.”
Under the ASU, effective dates for the lease accounting, as well as the hedge accounting and accounting for credit losses standards, will be affected as follows:
- SEC filers: The hedge accounting and lease accounting effective dates would remain for fiscal years beginning after Dec. 15, 2018, and the credit loss effective date would remain for fiscal years beginning after Dec. 15, 2019, except for smaller reporting companies, whose credit loss effective date would be extended to fiscal years beginning after Dec. 15, 2022.
- All other public business entities: The hedge accounting and lease accounting effective dates would remain for fiscal years beginning after Dec. 15, 2018, while the credit loss effective date would change from fiscal years beginning after Dec. 15, 2020, to fiscal years beginning after Dec. 15, 2022. The effective date of fiscal years beginning after Dec. 15, 2018, for lease accounting would also apply to employee benefit plans that file or furnish financial statements with or to the SEC as well as not-for-profit entities that have issued or are conduit bond obligors for securities that are traded, listed, or quoted on an exchange or over-the-counter market.
- Private companies and all others: The hedge accounting and lease accounting effective dates would be delayed one year to fiscal years beginning after Dec. 15, 2020. The credit loss effective date would be delayed two years to fiscal years beginning after Dec. 15, 2022.
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For more information, please contact Michael Dukes or Lindsey Sykes at 770.396.2200.
