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FASB Proposes Delayed Effective Dates of Certain Standards

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By Tammy Ricciardella, CPA

This article originally appeared in BDO USA, LLP’s “Nonprofit Standard” newsletter (Fall 2019). Copyright © 2019 BDO USA, LLP. All rights reserved. www.bdo.com

On Aug. 15, 2019, the Financial Accounting Standards Board (FASB) issued an exposure draft that would grant private companies and nonprofit organizations additional time to implement FASB standards. Comments on the exposure draft were due by Sept. 16, 2019.

The exposure draft describes a new FASB philosophy that extends and simplifies how effective dates for major standards would be staggered using a two-bucket approach. Bucket one would be only Securities and Exchange Commission (SEC) filers. Bucket two would encompass all other entities, including all nonprofit organizations, as well as nonprofit entities that have issued, or are conduit bond obligors for, securities that are traded, listed or quoted on an exchange or an over-the-counter market.

Under the proposed philosophy, a major standard would be effective for larger public companies first. For all other entities, FASB would establish an effective date that would be staggered at least two years later. Early adoption would still be permitted for all entities.

FASB is proposing that the two-bucket approach be applied to the effective dates of the following Accounting Standards Updates (ASU) if they have not yet been adopted by entities:

  1. ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (Credit Losses)
  2. ASU 2016-02, Leases (Topic 842) (Leases)

Under the proposal, the effective dates of the aforementioned standards would be as follows for entities with calendar year ends:

Credit Losses:

  • Fiscal years beginning after Dec. 15, 2022 for all nonprofit entities.

Leases:

  • Fiscal years beginning after Dec. 15, 2018 for nonprofit entities that have issued, or are conduit bond obligors for, securities that are traded, listed or quoted on an exchange or an over-the-counter market. These nonprofits are still in bucket one because the Leases standard as currently written is effective for these types of entities.
  • For all other nonprofit entities, Leases will be effective for fiscal years beginning after Dec. 15, 2020.

The effective dates for entities with fiscal year ends would be the first year that begins after the dates noted above.

The FASB believes that the proposed change in establishing effective dates for standards will permit smaller stakeholders to have additional time to implement major standards.

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