New Financial Accounting Standards

By diamondcpas Business Accounting Comments Off on New Financial Accounting Standards

In an effort to delay the implementation date of four key accounting standards financial services experts use for certain groups, the Financial Accounting Standards Board (FASB) said it plans to propose postponing the effective dates.

In an effort to delay the implementation date of four key accounting standards financial services experts use for certain groups, the Financial Accounting Standards Board (FASB) said it plans to propose postponing the effective dates.

The new standards would change the way certain items have to be reported on financial statements.  Some of the changes are already in place for public entities.  Some were set to be effective 1/1/2020 for non-public entities.

The FASB cited the quickly approaching implementation date and the resulting burden the “ambitious standard-setting activities,” would cause preparers as among the reasons for proposing the delay, according to a recent article in The Journal of Accountancy. The new standards preparers will have to handle will apply to certain companies for their accounting for leases, credit losses, hedging, and long-duration insurance contracts. The long-duration insurance contracts implementation date is further in the future.

“What we’re doing here makes sense,” FASB member Gary Buesser said, “because these are major standards that are difficult to implement.”

Small businesses, already coping with other FASB “highly challenging” standards, said The Journal of Accountancy, typically have less financial reporting staff to deal with such complex changes. Time will also be needed to educate and train staff. The rules have “created significant difficulties,” agree accountants.

FASB staff has been asked to prepare an “ exposure draft” proposing the new effective dates for accounting for leases, credit losses, and hedging. A second exposure draft would propose new dates for long-duration insurance contracts, said the Journal. FASB’s proposal plans include changes for:

Lease accounting: The new effective date for calendar-year-end preparers that are not public business entities would be Jan. 1, 2021. The effective date for calendar-year-end public business entities, employee benefit plans, and not-for-profit conduit bond obligors is Jan. 1, 2019, and would remain unchanged.

Accounting for credit losses: The effective date for calendar-year-end SEC filers, excluding smaller reporting companies as defined by the SEC, would remain Jan. 1, 2020. The new effective date for all other calendar-year-end entities would be Jan. 1, 2023. This change would extend the effective date for smaller reporting companies, private companies, and other non-SEC filers. The proposed change would treat smaller reporting companies like SEC emerging growth companies for purposes of the standard.

Derivatives and hedging: The effective date for calendar-year-end public business entities is Jan. 1, 2019, and would remain unchanged. The new effective date for calendar-year-end preparers that are not public business entities would be Jan. 1, 2021, an extension of one year.

Long-duration insurance contracts: The new effective dates would be Jan. 1, 2022, for calendar-year-end public business entities and Jan. 1, 2024, for all other entities with a calendar year end.

If you have any questions about the implications of the delay in implementation of these accounting standards, please reach out to a tax advisor at Diamond & Associates, PC. We are here to help!

  • Share: