FASB officially issued an exposure draft on August 15, 2019 which proposes a one year delay for implementing three new accounting standards. Two of these proposed delays will affect many charities.
Effective date for SEC filers would not be changed.
I won’t discuss any changes for public business entities (PBE). Readers of my blog who fall into that category would be non-profits that are considered to be conduit bond obligors and EBPs that file their financials with the SEC.
You can find the exposure draft here.
The proposed delays for not-for-profit entities and private companies:
ASU 2016-02, Leases (Topic 842) (Leases).
Currently effective for fiscal years beginning after December 15, 2019. Proposed effective date is fiscal years beginning after December 15, 2020. That is a one year delay. (ASC 842-10-65-1 b.)
That would be a delay from 12/31/20 financial statements to required implementation for 12/31/21 financials.
This will affect many charities, if not almost all.
ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (Credit Losses).
Currently effective for fiscal years beginning after December 15, 2021. Proposed effective date is fiscal years beginning after December 15, 2022. That is a one year delay. (ASC 326-10-65-1 a.)
That would be a delay from 12/31/22 financial statements to first time required for 12/31/23 financials.
This will affect some charities.
ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities (Hedging)
Currently effective for fiscal years beginning after December 15, 2019. Proposed effective date is fiscal years beginning after December 15, 2020. That is a one year delay. (ASC 815-20-65-3 b.)
That would be a delay from 12/31/20 financial statements to first time required for 12/31/21 financials.
My perception is this ASU will affect few charities.
The board will separately consider whether to delay implementation of ASU 2018-12, Financial Services—Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts (Insurance).
New approach for effective dates
With this exposure draft, FASB is introducing a new plan for implementation dates. Recognizing the burden major ASUs create for private companies and not-for-profit entities, the board will start using a two year delay. This is in contrast to the current approach of a one year delay for non-public companies.
The board is defining this as a “two bucket” approach. SEC filers are in the first bucket. Public business entities along with private companies and not-for-profit entities are in bucket two. The board decided against a “three bucket” approach which would have put private companies and NFPs into bucket three.
For major ASUs, the effective date for bucket two will be two years after bucket one. In the three bucket approach, there would have been a year delay for bucket two and two years for bucket three.
If you are pondering why it seems like everything is getting more complicated, consider that the exposure draft is 26 pages long. Granted there are five pages used for formatting and introduction plus another three pages with only a few lines of comment. So that leaves about 18 pages of text to fully explain an issue as simple as postponing the effective date of three major ASUs.