The end of calendar year 2019 means the beginning of calendar year 2020! The following Accounting Standards Updates (ASU) are effective for all December 31, 2020* engagements. Look to see if there are any changes you need to make to your financial statements for the upcoming year.
2019-08 Compensation—Stock Compensation (Topic 718) and Revenue from Contracts with Customers (Topic 606): Codification Improvements—Share-Based Consideration Payable to a Customer. The effective date of this ASU is closely aligned to the adoption of ASU 2018-07 (see below). This ASU requires companies to measure and classify (on the balance sheet) share-based payments to customers by applying the guidance in Topic 718, Compensation—Stock Compensation. As a result, the amount recorded as a reduction in revenue would be measured based on the grant-date fair value of the share-based payment.
2019-03 Not-for-Profit Entities (Topic 958): Updating the Definition of Collections. This ASU modifies the definition of the term collections and requires that a collection-holding entity disclose its policy for the use of proceeds from when collection items are deaccessioned. If a collection-holding entity has a policy that allows proceeds from deaccessioned collection items to be used for direct care, it should disclose its definition of direct care.
2018-17 Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities. This ASU is effective for organizations other than private companies for fiscal years beginning after December 15, 2019. This ASU is effective for a private company for fiscal years beginning after December 15, 2020. Early adoption is permitted. This guidance in this ASU supersedes the private company alternative for common control leasing arrangements and expands it to all qualifying common control arrangements. A private company can make an accounting policy election to not apply VIE guidance to legal entities under common control (including common control leasing arrangements) when certain criteria are met. A private company electing the alternative is required to provide detailed disclosures about its involvement with, and exposure to, the legal entity under common control. This ASU also amends guidance relating to whether a decision-making fee is a variable interest, and it requires organizations to consider indirect interests held through related parties under common control on a proportional basis rather than as the equivalent of a direct interest in its entirety.
2018-13 Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement. This ASU includes significant disclosure changes for Level 3 investments. Other changes relate to disclosures for transfers between Level 1 and Level 2 investments and investments in certain entities that calculate net asset value.
2018-07 Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. This ASU expands the scope of Topic 718, Compensation—Stock Compensation (which currently only includes share-based payments to employees) to include share-based payments issued to nonemployees for goods or services, resulting in alignment of the accounting for share-based payments to nonemployees and employees.
2017-11 Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception. This ASU simplifies the accounting for certain financial instruments with down round features.
2017-08 Receivables—Nonrefundable Fees and Other Costs (Subtopic 310-20), Premium Amortization on Purchased Callable Debt Securities. This ASU shortens the amortization period for certain callable debt securities held at a premium to require the premium to be amortized to the earliest call date. There is no change to securities held at a discount.
Delayed Effective Dates for Upcoming Standards
The Financial Accounting Standards Board has also delayed the effective dates for several upcoming standards. While they may be delayed, there is still much to be done to prepare for the upcoming changes.
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, nonprofit organizations, and certain smaller reporting companies applying the credit losses (CECL), leases, and hedging standards.
Check out our tips for how you can begin planning for the new lease standard now.
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.
* Unless otherwise noted, the effective dates are based on the effective dates for all other entities (entities that do not have accelerated filing dates).
Why You Need to Care About the ASUs
The impact of the ASU updates is far reaching to a variety of organizations. It’s important to stay current and maintain compliance.
Our National Assurance Office continues to keep an eye on how these standards will impact you.