Support Learning and Insight

It’s more important than ever to understand the challenges facing financial executives. Support the Financial Education & Research Foundation today.

Financial Reporting and Regulatory Update

Second Quarter 2020

ASU Effective Dates Checklist

Public Business Entities (PBEs)

 

Accounting Standards Update (ASU)

Effective dates for Dec. 31 year-end PBEs

Early adoption

Leases

(ASU 2016-02)

Revises recognition and measurement for lease contracts by lessors and lessees; operating leases are recorded on the balance sheet for lessees. Replaces Topic 840 with Topic 842.

Clarifying standards:

ASU 2018-01 – Provides a practical expedient in transition to not evaluate existing or expired land easements under Topic 842 that were not previously accounted for as leases under Topic 840.

ASU 2018-10 – Provides 16 improvements and clarifications to the guidance in Topic 842.

ASU 2018-11 – Provides an optional transition method for adopting Topic 842 that will eliminate comparative period reporting under the new guidance in the adoption year. Provides a practical expedient for lessors to not separate nonlease components from the associated lease component in specified circumstances.

ASU 2018-20 – Provides improvements specific to lessors for evaluating sales taxes, recording reimbursed costs, and allocating variable payments to lease and nonlease components.

ASU 2019-01 – Provides improvements in determining fair value of underlying assets by lessors that are not manufacturers or dealers, presentation of the statement of cash flows for sales-type and direct financing leases, and transition disclosures.

March 31, 20191 2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For ASU 2019-01, March 31, 2020, except for transition disclosure amendments which are consistent with ASU 2016-02

Permitted 

Goodwill Impairment Testing (ASU 2017-04)

Removes step two – the requirement to perform a hypothetical purchase price allocation when the carrying value of a reporting unit exceeds its fair value – of the goodwill impairment test.

ASU 2019-10 – Deferral of effective dates.

For SEC filers, excluding smaller reporting companies, tests performed on or after Jan. 1, 2020

For all other PBEs, including smaller reporting companies, tests performed on or after Jan. 1, 2023

Permitted for interim or annual goodwill impairment tests performed on testing dates on or after Jan. 1, 2017

Codification Updates to SEC Sections

(ASU 2020-02)

Modifies FASB codification to reflect previously issued SEC interpretations (SAB 119) on accounting for loan losses by registrants engaged in lending activities subject to Topic 326. Modifies FASB codification to include SEC staff announcement within Topic 842 that SEC staff would not object to a PBE that otherwise would not meet the definition of a PBE except for a requirement to include or the inclusion of its financial statements or financial information in another entity’s filing with the SEC from adopting Topic 842 for fiscal year Dec. 31, 2021, annual financial statement for calendar year-end entities in accordance with ASU 2019-10.

Upon issuance, January 2020

Not applicable

Codification Improvements to Financial Instruments
(ASU 2020-03)
Clarifies and improves various financial instruments topics including: applicability of portfolio exception in measuring fair value for nonfinancial items accounted for as derivatives; disclosure requirements in Topic 320 apply to disclosure requirements in Topic 942 for depository and lending institutions; adds cross-reference to line-of-credit or revolving-debt arrangements guidance to guidance in accounting for fees between debtor and creditor and third-party costs directly related to exchanges or modifications of debt instruments in Subtopic 470-50; and fair value measurement disclosure requirements do not apply to entities using the net asset value per share practical expedient.
 
(Also contains clarification and improvements to ASU 2016-13, which is included as clarifying standard.)

March 31, 2020

Permitted 

Optional Guidance in Accounting for Impacts of Reference Rate Reform
(ASU 2020-04)
Provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The optional guidance does not apply to contract modifications made and hedging relationships entered into or evaluated after Dec. 31, 2022, except for hedging relationships existing as of Dec. 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship.
March 31, 2020 Not applicable

Credit Losses (ASU 2016-13)

Replaces the incurred loss model with the current expected credit loss (CECL) model for financial assets, including trade receivables, debt securities, and loan receivables.

Clarifying standards:

ASU 2018-19 – Clarifies that impairment of operating lease receivables is in the scope of ASC Topic 842, “Leases,” and not the CECL model.

ASU 2019-04 – Provides specific improvements and clarifications to the guidance in Topic 326. Addresses accrued interest, transfers between classifications or categories for loans and debt securities, recoveries, vintage disclosures, and contractual extensions and renewal options.

ASU 2019-05 – Targeted transition relief provides an option to irrevocably elect the fair value option, on an instrument-by-instrument basis, for certain financial assets (excluding held-to-maturity debt securities) previously measured at amortized cost.

ASU 2019-10 – Deferral of effective dates.

ASU 2019-11 – Provides specific improvements and clarifications to the guidance in Topic 326. Addresses expected recoveries for purchased financial assets with credit deterioration, transition relief for troubled debt restructurings, disclosures related to accrued interest receivables, financial assets secured by collateral maintenance provisions, and conforming cross-references to Subtopic 805-20.

ASU 2020-03 – Aligns contractual term to measure expected credit losses for a net investment in a lease to be consistent with the lease term determined under Topic 842. Clarifies that when an entity regains control of financial assets sold, an allowance for credit losses should be recorded.

For SEC filers, excluding smaller reporting companies, March 31, 2020

For all other PBEs, including smaller reporting companies, March 31, 2023

 

 

For ASU 2019-04, ASU 2019-05, ASU 2019-11, and ASU 2020-03, March 31, 2020, for entities that have adopted ASU 2016-13; otherwise effective dates the same as ASU 2016-13
Permitted as of the fiscal years beginning after Dec. 15, 2018, including interim periods within
Fair Value Measurement Disclosure
(ASU 2018-13)

Removes, modifies, or adds certain fair value measurement disclosures related to financial instrument transfers and Level 3 instruments, among others.
March 31, 2020 Permitted

Implementation Costs for Cloud Computing Arrangements (CCAs) (ASU 2018-15)
 

Aligns accounting for implementation costs of CCAs with or without a license (that is, regardless of whether the CCA is a service contract) by capitalizing implementation costs during the application development stage and amortizing the costs over the term of the arrangement.
March 31, 2020 Permitted, including in an interim period

Variable Interest Entity (VIE) Model – Targeted Improvements for Related Parties (ASU 2018-17)

Revises the analysis for determining whether a decision-making fee paid by a VIE is a variable interest such that indirect interests in a VIE held through related parties in common control arrangements would be considered on a proportional basis (instead of as the equivalent to a direct interest).
March 31, 2020 Permitted, including in an interim period

Collaborative Arrangements (Topic 808) (ASU 2018-18)

Requires that Topic 606 be applied to collaborative arrangements when the arrangement participant is a customer and aligns the unit-of-account guidance in Topic 808 with Topic 606. Revenue in the scope of Topic 606 should be presented separately from revenue outside its scope.
March 31, 2020 Permitted, including in an interim period

Certain Costs in Media and Entertainment Industry (ASU 2019-02)

Applies to broadcasters and entities that produce and distribute films and episodic television series. Aligns the accounting of episodic television series with films, and provides more relevant financial reporting information to users of financial statements.
March 31, 2020 Permitted, including in an interim period

Improvements to Recognition and Measurement of Financial Instruments and Accounting for Hedging Activities

(ASU 2019-04)

Contains various improvements to ASU 2016-01, including scope, fair value measurement alternative, held-to-maturity debt securities fair value disclosures, and remeasurement of equity securities at historical exchange rates.

Provides specific improvements and clarifications to ASU 2017-12. Among other areas, addresses partial-term fair value hedges of interest-rate risk, amortization and disclosure of fair value hedge basis adjustments, and consideration of hedged contractually specified interest rate under the hypothetical derivative method.

(Also contains clarification and improvements to ASU 2016-13, which is included as a clarifying standard.)
March 31, 2020 Permitted, including in an interim period

Share-Based Consideration Payable to a Customer (ASU 2019-08)

Requires that an entity apply the guidance in Topic 718 to measure and classify share-based payment awards granted to a customer. The amount recorded as a reduction in the transaction price, and therefore revenue, should be based on the grant-date fair value of the share-based payment award.
March 31, 2020 Permitted, including in an interim period, but no earlier than the adoption of ASU 2018-17

Defined Benefit Plan Disclosure for Sponsors (ASU 2018-14)

Removes and clarifies certain disclosures for sponsors of defined benefit plans. Adds disclosure for weighted-average interest credit rates for certain plans, and the reasons for significant gains and losses in the benefit obligation.
Dec. 31, 2020 Permitted

Updating the Definition of Collections (ASU 2019-03)

Improves the definition of collections. Requires additional disclosure. Although the ASU primarily affects not-for-profits, it applies to all entities that maintain collections.
Dec. 31, 2020 Permitted, including in an interim period

Simplifying Accounting for Income Taxes (ASU 2019-12)

Simplifies the accounting for income taxes by removing certain exceptions in Topic 740. Improves consistent application of other areas of guidance within Topic 740 by clarifying and amending existing guidance.
March 31, 2021 Permitted, including in an interim period

Interaction Between Accounting for Equity Securities, Equity Method Investments, and Certain Derivative Instruments

(ASU 2020-01)

Clarifies the interaction of the accounting for equity securities under Topic 321 and investments accounted for under the equity method of accounting in Topic 323 and the accounting for certain forward contract and purchased options accounted for under Topic 815.

March 31, 2021 Permitted, including in an interim period

Long-Duration Insurance Contracts (ASU 2018-12)

Revises the accounting for life insurance and annuity contracts by eliminating the method of locking in liability assumptions and the premium deficiency test for traditional and limited-payment contracts, among other methodology changes. Requires additional disclosure.

Clarifying standards:

ASU 2019-09 – Deferral of effective dates.

For SEC filers, excluding smaller reporting companies, March 31, 2022

For all other PBEs, including smaller reporting companies, Dec. 31, 2024
Permitted
1 Codified in ASU 2020-02, an SEC staff announcement at the December 2019 AICPA National Conference on Current SEC and PCAOB Developments specifically related to PBEs that qualify as a PBE solely due to the requirement to include or the inclusion of its financial statements or financial information in another entity’s SEC filing (“certain PBEs”) states that the SEC will not object to it adopting Topic 842 for fiscal years beginning after Dec. 15, 2020, and interim period within fiscal years beginning after Dec. 15, 2021, in accordance with ASU 2019-10.
2 ASU 2020-05 defers, for one year, the required effective date for a not-for-profit entity that has issued or is a conduit bond obligor for securities that are traded, listed, or quoted on an exchange or an over-the-counter market that has not yet issued its financial statements (or made financial statements available for issuance) as of June 3, 2020. Those entities may elect to adopt the guidance for annual reporting periods beginning after Dec. 15, 2019, and for interim reporting periods within those fiscal years.