FASB:  Additional Year to Prepare for Implementation of Most Major Pending Accounting Standards


Did you say delay?

Yes.  The FASB has proposed a delay in the effective date for several major accounting standards (Hedge Accounting, Lease Accounting, CECL and Insurance Accounting).  This delay in standard implementation is not for everyone.  Generally, the delay applies to non-public entities (private entities, not for profit entities and employee benefit plans) and smaller reporting companies (SRCs).  In addition, FASB has determined that these other entities, including the SRCs, should generally have two additional years to comply with major accounting standards beyond the effective date for SEC filers. 


Why the change in course? 

Transitioning to these new major accounting standards has been difficult for the larger entities but those challenges are magnified for smaller public business enterprises (PBEs) and non-public entities.  The delay will permit smaller, less sophisticated entities to benefit from lessons learned by SEC filers and SEC comment letters, additional clarity and education on practical implementation issues, and access to tested implementation technology and IT solutions. 


FASB proposes two bucket approach for standard implementation

What does this mean?  For major accounting standards with effective dates in the future, FASB has proposed two categories for determining when the standard is effective for your company.  The first category (bucket 1) includes SEC filers but excludes SRCs.  The second category (bucket 2) encompasses all other entities (private companies, all not for profits, all employee benefit plans and SRCs).  Generally, all entities classified in bucket two would be afforded a two-year delay in major accounting standard transition as compared to most larger SEC filers.

The most significant point to reinforce here is the change in how the FASB has proposed to consider smaller reporting companies (SRCs).  What are smaller reporting companies? 

  • An entity with public float of less than $250 million or (public float equates to common equity shares outstanding multiplied by the price of those common shares)
  • An entity with no public float or public float less than $700 million and revenues of less than $100 million

The benefit to qualifying as an SRC today is that the entity qualifies for scaled SEC disclosure accommodations designed to provide some regulatory relief for these smaller companies. 

Currently, SRCs are included among all SEC filers when transitioning to a new major accounting standard.  The SEC Commission estimated last year that nearly 1,000 additional companies would be eligible for SRC status.      

Under this FASB proposal, these SRCs would have additional time to prepare for transition to the major accounting standards.  Consider your company or your clients and determine whether they meet the definition of an SRC and would thus be provided additional time to implement the remaining new major accounting standards.


Proposed revised transition dates for CECL, Insurance, Hedge Accounting and Lease Accounting


What does this mean for you?  The most significant benefit will be for non-SEC and SRCs filers that have not yet adopted CECL.  Under the new proposal, there will be no change for SEC filers who must adopt CECL by 1/1/2020, with the exception of SRCs.  SRCs and all other entities will not have to transition to CECL until 1/1/2023.  This proposed delay provides an additional year for most non-SEC filers to comply and an additional three years for SRCs to transition to CECL.

Summary Impacts for Calendar Year-End Reporting Entities:

Accounting Standard

SEC filers, excluding SRCs

All other entities[1]

Topic 326 CECL



Topic 944 Insurance



Topic 815 Hedge accounting



Topic 842 Lease accounting





This FASB proposal will be issued for comment during the third quarter with a short comment period. 


[1] Early adoption will still be permitted where applicable.

[2] These standards are already effective for SEC filers and PBEs, including SRCs.

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