Updated for ASU 2018-08.
7/18/19 Update: FASB voted on 7/17 to postpone the effective date for leases and credit losses.
While you have been sitting on the beach enjoying life this summer, have you noticed that dark, odd horizontal line out there on the horizon?
It isn’t a figment of your imagination. There really is a tsunami wave out there in the distance of the accounting ocean and it is going to hit the shore where you are sun bathing.
As if that wasn’t bad enough, there will be fresh waves of water hitting the beach over four years.
The good news? Maybe one or two or three of the waves will miss your organization.
Here is a quick glance of what’s on the horizon:
- Overhaul NFP financial statement presentation
- Restricted cash on cash flow statement
- Revenue recognition for all entities
- Grant and contribution recognition for NFPs
- Most leases brought onto the statement of financial position
- Credit losses on loans and receivables
Update: Comments added whether early adoption is or is not allowed.
Here is just a bit more detail:
ASU 2016-14 — Not-for-Profit Entities (Topic 958): Presentation of Financial Statements of Not-for-Profit Entities – Effective for fiscal years beginning after December 15, 2017. For most NFPs that will be 12/31/18, or 6/30/19 for fiscal year entities. Update: Early application is allowed.
ASU 2016-18 – Statement of Cash Flows (Topic 230) – Restricted Cash — for nonpublic entities effective years beginning after December 15, 2018. For most that will be 12/31/19, or 6/30/20 for many fiscal year entities. Update: Early application is allowed.
ASU 2014-09 – Revenue from Contracts with Customers (Topic 606) (Referred to as “Rev Rec”)– for nonpublic entities effective years beginning after December 15, 2018. For most that will be 12/31/19, or 6/30/20 for many fiscal year entities (including deferral by 1 year from ASU 2015-14). Update: Early application is not permitted.
Although it is early in the pipeline, expect to see another ASU on revenue recognition for grants and contributions of NFPs, likely to be effective at same time as Rev Rec.
Update: ASU 2018-08, Not-for-Profit Entities (Topic 958): Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made. ASU 2018-08 will be implemented using either the modified prospective basis or retrospective application. For non-public NFPs it will be effective for fiscal years beginning after December 15, 2018. That means it will first be required 12/31/19 for most entities, or a fiscal year such as 6/30/20. Early adoption is permitted.
ASU 2016-02 – Leases (Topic 842) – for nonpublic entities effective years beginning after December 15, 2019. For most that will be 12/31/20, or 6/30/21 for many fiscal year entities. Update: Early application is allowed.
Update: On 7/17/19 the FASB directed staff to develop a document to extent the effective date of ASU 2016-02 to 12/31/21 for non-public companies. That is a one year delay.
ASU 2016-13—Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (Referred to as CECL, pronounced “Cecil”)- For nonpublic entities this will be effective for years beginning after December 15, 2020. For most NFPs this will be 12/31/21, or 6/30/22 for fiscal years. In one sentence, the impact will be on NFPs with loan portfolios, such as colleges, regional headquarters of denominations, and obviously extension funds. Will likely have minimal or no impact on most NFPs. Update: Early application is allowed but only for years beginning after December 15, 2018, which means early adoption would be possible for years ending 12/31/19 or 6/30/20.
Update: On 7/17/19 the FASB directed staff to develop a document to extend the effective date of ASU 2016-13 to 12/31/23 for non-public companies. That is a two year delay. That will be particularly nice since this will be rather painful for those charities to whom this ASU applies. I am discussing this with one of my clients – it is going to be messy.