On July 17, 2019, the Financial Accounting Standards Board (FASB) voted unanimously to move forward with delaying the effective start date for recent accounting changes to leases, CECL and hedges by one year for most non-SEC filers. The FASB directed its staff to draft a Proposed Accounting Standards Update (PASU) for formal vote and finalization at a future meeting.
This decision comes after the FASB discussed a change in philosophy on establishing effective dates for major projects for private companies, not-for-profit organizations and smaller public companies. After consultation with stakeholders, the FASB considered various challenges and related costs encountered by these entities when transitioning to a major standard, including the availability of resources, timing and source of education, ability to learn from the implementations of larger public companies, development of sufficient IT system changes and other such concerns.
This new philosophy would introduce a two-bucket approach to stagger effective dates for major accounting standard updates.
Bucket One – Includes SEC filers, but excludes smaller reporting companies (SRC) as currently defined by the SEC.
Bucket Two – Includes all other entities
Going forward, entities within Bucket Two would be afforded an effective date of at least two years after the effective date established for Bucket One on new major standards.
The FASB will continue researching this new two-bucket philosophy, but will also move forward with the PASU delaying the effective date of leases, CECL, and hedges. This PASU will include a 30-day comment period before the FASB formally votes on the delay. Schneider Downs will continue to keep you informed of ongoing developments related to these changes. For additional questions, please contact Schneider Downs.
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Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.