Changes in Effective Dates of Upcoming GAAP Accounting Standards

August 2019 | Article

Businesses looking to implement four new accounting standards will have a brief reprieve. During July 2019, the Financial Accounting Standards Board (FASB) voted to propose delaying the effective dates of four upcoming standards. This was a result of the large burden placed on preparers in relation to the new standards.

The new standards, which focused on lease accounting, derivatives and hedging, long-duration insurance contracts and accounting for credit losses, were significant in nature. The impact and implementation of these new standards represented a major shift in accounting methods for several organizations.

New Dates for Accounting Standard Implementation
The FASB’s proposal is as follows (all effective dates noted below are based on calendar-year-end entities):

  • Lease accounting The proposal will delay the effective date for the new lease standard by one year for nonpublic entities, changing the effective date to be January 1, 2021. The effective date for public business entities, employee benefit plans and not-for-profit conduit bond obligors remains unchanged as January 1, 2019.
  • Accounting for credit losses: The proposal will delay the effective date by one year for nonpublic entities, changing the effective date to January 1, 2023. The proposal will also delay the effective date by two years for smaller reporting companies (SRC) as defined by the SEC, changing the effective date to January 1, 2023 as well. The effective date for public business entities, excluding SRCs, would remain as January 1, 2020.
  • Derivatives and hedging: The proposal will delay the effective date by one year for nonpublic entities, changing the effective date to January 1, 2021. The effective date for public business entities would remain unchanged as January 1, 2019.
  • Long-duration insurance contracts: The proposal will delay the effective date by one year for public business entities excluding SRCs, changing the effective date to January 1, 2022, and by two years for SRCs and nonpublic entities, changing the effective date to January 1, 2024.

While the exposure draft has not yet been released, it is expected to have a short comment period and is unlikely to have significant objections.

Why Your Organization Should Care About the New Accounting Standards
While several of these standards are delayed, it is still important to prepare your business in advance. These standards affect a vast majority of industries and companies of all sizes.

Many of these standards, once finalized, will have significant impact to an organization’s accounting and finance policies. The additional time given by FASB is meant to allow organizations to not only implement, but also improve their approach to the new accounting standards.

If you have any questions or would like more information, contact your Eide Bailly professional.

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Even though the standard is delayed, there’s still plenty to do to prepare for the new lease standard. Learn more at our webinar.