2019 Effective Dates for Year-End Assurance and Tax Updates

December 30, 2019 | Article

Calendar year 2019 is quickly coming to an end! Do you know what Accounting Standards Updates (ASU) are effective this year? The following ASUs are effective for all December 31, 2019* engagements. Look to see if there are any changes you need to make as you are planning for your year-end assurance and tax work.

*Unless otherwise noted, the effective dates are based on the effective dates for all other entities (entities that do not have accelerated filing dates).

2019-06 Intangibles – Goodwill and Other (Topic 350), Business Combinations (Topic 805), and Not-for-Profit Entities (Topic 958): Extending the Private Company Accounting Alternatives on Goodwill and Certain Identifiable Intangible Assets to Not-for-Profit Entities. This ASU was effective when it was issued on May 30, 2019, and extends the scope of two private company alternatives to not-for-profits (NFP). An NFP electing the accounting alternatives will amortize goodwill over 10 years or less, on a straight-line basis; test for impairment upon a triggering event; and have the option to elect to test for impairment at the entity level. An NFP also has the option to subsume certain customer-related intangible assets and all noncompete agreements into goodwill, which it subsequently must amortize.

2018-08 Not-for-Profit Entities (Topic 958): Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made. This ASU clarifies and improves the scope and accounting guidance around contributions of cash and other assets received and made by NFPs and businesses by improving guidance about whether a transfer of assets, or the reduction, settlement, or cancellation of liabilities, is a contribution or an exchange transaction and by providing criteria for determining whether the resource provider is receiving commensurate value in return for the resources transferred, a determination that impacts whether the organization follows contribution guidance or exchange transaction guidance. This ASU provides a more robust framework for determining whether a contribution is conditional or unconditional and whether a contribution has a donor-imposed condition or a donor-imposed restriction, a determination that affects the timing of contribution revenue and expense recognition. The ASU is not effective for resource providers until periods beginning after December 31, 2019, unless the entity is either a public business entity or an NFP that has issued, or is a conduit bond obligor for, securities that are traded, listed, or quoted on an exchange or an over-the-counter market. This ASU does not apply to transfers of assets from governments to businesses.

2018-02 Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. This ASU provides financial statement preparers with an option to reclassify stranded tax effects within AOCI to retained earnings in each period in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act (or portion thereof) is recorded. This ASU also implements several additional disclosure requirements.

ASU 2017-10 Service Concession Arrangements (Topic 853): Determining the Customer of the Operation Services. This ASU clarifies that the grantor in a service concession arrangement is the customer of the operation services in all cases for those arrangements.

ASU 2017-07 Compensation — Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. This ASU requires an employer to report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented. If a separate line item or items are used to present the other components of net benefit cost, that line item or items must be appropriately described. If a separate line item or items are not used, the line item or items used in the income statement to present the other components of net benefit cost must be disclosed. This ASU also allows only the service cost component to be eligible for capitalization when applicable.

2017-06 Plan Accounting: Defined Benefit Pension Plans (Topic 960); Defined Contribution Pension Plans (Topic 962); Health and Welfare Benefit Plans (Topic 965): Employee Benefit Plan Master Trust Reporting. This ASU requires a plan’s interest in a master trust and any change in that interest be presented in separate line items in the statement of net assets available for benefits and in the statement of changes in net assets available for benefits, respectively. It also removes the requirement to disclose the percentage interest in the master trust for plans with divided interests and requires all plans to disclose the dollar amount of their interest in each of those general types of investments, among other disclosure changes.

2017-01 Business Combinations (Topic 805): Clarifying the Definition of a Business. This ASU clarifies the definition of a business, which affects many areas of accounting, including acquisitions, disposals, goodwill, and consolidation.

2017-05 Other Income – Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets. The ASU defines the term in substance nonfinancial asset and clarifies that a financial asset is within the scope of Subtopic 610-20 if it meets the definition of an in substance nonfinancial asset. This ASU also clarifies that nonfinancial assets within the scope of Subtopic 610-20 may include nonfinancial assets transferred within a legal entity to a counterparty and that an entity should identify each distinct nonfinancial asset or in substance nonfinancial asset promised to a counterparty and derecognize each asset when a counterparty obtains control of it.

2016-18 Statement of Cash Flows (Topic 230): Restricted Cash. This ASU requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. The amendments do not provide a definition of restricted cash or restricted cash equivalents.

2016-16 Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory. This ASU requires an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs and eliminates the exception for an intra-entity transfer of an asset other than inventory.

2016-15 Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and CashPayments. This ASU provides cash flow statement classification guidance for the following types of transactions: debt prepayment or extinguishment costs; settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; contingent consideration payments made after a business combination; proceeds from the settlement of insurance claims and corporate-owned life insurance policies, including bank-owned life insurance policies; distributions received from equity method investees; beneficial interests in securitization transactions; and separately identifiable cash flows and application of the predominance principle.

2016-04 Liabilities —Extinguishments of Liabilities (Subtopic 405-20): Recognition of Breakage for Certain Prepaid Stored-Value Products. This ASU applies to entities that offer certain prepaid stored value products (e.g., prepaid gift cards issued on a specific payment network and redeemable at network-accepting merchant locations) and clarifies that liabilities related to the sale of prepaid stored-value products are financial liabilities. The amendments provide a narrow scope exception to the guidance in Subtopic 405-20 to require that breakage for those liabilities be accounted for consistent with the breakage guidance in Topic 606 Revenue from Contracts with Customers.

2016-01 Financial Instruments ─ Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities and a related amendment in ASU 2018-03 providing clarifying guidance. This ASU requires equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income; requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (i.e., securities or loans and receivables); and eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost.

2014-09 Revenue from Contracts with Customers (Topic 606) and all related amendments, additions, and technical clarifications. This ASU affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards (e.g., insurance contracts or lease contracts). This ASU supersedes most industry-specific guidance and creates a Topic 606 Revenue from Contracts with Customers. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity should apply a five-step process for recognizing revenue.

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Upcoming Delays
The Financial Accounting Standards Board has also delayed the effective dates for several upcoming standards. They might be delayed, but there is no better time to start preparing!

ASU 2019-10 Financial Instruments —Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates. This ASU finalizes various effective date delays for standards on current expected credit losses (CECL), leases, and hedging for private companies, not-for-profit organizations, and certain smaller reporting companies applying the credit losses (CECL), leases, and hedging standards.

ASU 2019-09 Financial Services—Insurance (Topic 944): Effective Date. This ASU No. 2019-09, finalizes insurance standard effective date delays for all insurance companies that issue long-duration contracts, such as life insurance and annuities.

Revised Effective Dates
Accounting Standard Public Business Entities (PBEs) Private and All Others
SEC Filers All Other PBEs
Hedging January 2019* January 2019* January 2021
Leases January 2019* January 2019** January 2021
January 2020* (Excludes smaller reporting companies as definied by the SEC) January 2023 (Includes smaller reporting companies as defined by the SEC) January 2023
Insurance January 2022 (Excludes smaller reporting companies as definied by the SEC) January 2024 (Excludes smaller reporting companies as defined by the SEC) January 2024

* No change in effective date

** No change in effective date; includes employee benefit plans and not-for-profit conduit bond obligators that file or furnish financial statements with or to the SEC.

There’s a lot to consider for ASU updates this year and more to come in 2020. Stay current on all the changes by visiting our Insightsfor new articles on Accounting Standards Updates and other timely topics as well as ourEvents page for upcoming webinars and seminars that take a deep dive into the issues that impact you.

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