I love everything about weddings. They just make me so happy! And I can’t get enough of hearing the details of the big proposal because they are usually meaningful, creative, and thoughtful. Well, if you’re anything like me, you’re in luck because today we are going to summarize a few of the meaningful proposals issued by the FASB and the SEC. So hopefully after reading these details, you are feeling happy!
Delayed effective dates
The most exciting proposal issued by the FASB happened in August 2019 when the Board proposed to delay the effective dates for ASC 326, Financial Instruments—Credit Losses (referred to as CECL), ASC 842, Leases, and the recent amendments to ASC 815, Derivatives and Hedging (referred to as Hedging). The Board decided to adopt a two-bucket approach to stagger effective dates for major standards as follows:
- Bucket One—SEC Filers (GAAP definition), excluding smaller reporting companies (SRCs) as currently defined by the SEC
- Bucket Two—All other entities, which includes:
- All other public business entities (PBEs), including SRCs
- Private companies
- All not-for-profit organizations, including not-for-profit 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
- All employee benefit plans, including employee benefit plans that file financial statements with the SEC.
The Board decided that for CECL, Leases, and Hedging, entities within Bucket Two should be afforded an effective date of at least two years after the effective date for Bucket One! In summary (based on a calendar-year end entity):
- CECL: Bucket 1 entities are still required to adopt as of January 1, 2020 but the Board decided that for all other entities, CECL will be effective January 1, 2023
- Leases and Hedging: The Board decided that for all other entities that were not required to adopt as of January 1, 2019 now have until January 1, 2021
Simplifying the accounting for income taxes
In May, the FASB issued a proposal that aimed to reduce the overall complexity and improve the consistency of applying ASC 740, Income Taxes. The proposal eliminates the need to analyze whether the exceptions for intraperiod tax allocation, ownership changes in investments, and year-to-date losses that exceed anticipated losses apply in a given period. Additionally, the proposal would simplify aspects of the accounting for franchise taxes, transactions that result in a step up in the tax basis of goodwill, and enacted changes in tax laws or rates. And just last week, the Board decided the proposal should be effective for:
- PBEs: Fiscal years beginning on or after December 15, 2020, and interim periods within those fiscal years.
- All other entities: Fiscal years beginning on or after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022.
For more information on the FASB’s other proposals, click here. Some of the FASB’s other proposals relate to reference rate reform and accounting for long-duration contracts.
Changes to filer definitions
In the height of proposal season (May 2019), the SEC proposed to make all issuers that qualify as SRCs and have less than $100 million in annual revenue non-accelerated filers, meaning they would be exempt from the requirement to obtain an auditor’s report on internal control. The same proposal would also increase the public float threshold for exiting accelerated status to $60 million (from $50 million) and for exiting large accelerated status to $560 million (from $500 million).
Regulation S-K Modernization
Another proposal by the SEC came about in August 2019, which provided more enhancements to its May 2019 final rule to modernize and simplify certain Regulation S-K regulations. This August proposal modernizes the required disclosures for:
- the description of the business (Item 101): more principles-based approach and enhanced human capital disclosures;
- legal proceedings (Item 103): allows information to be hyperlinked or cross-referenced to other disclosures in the same filing; and
- risk factors (Item 105): report “material” factors (not “most significant”).
Click here for more information on other SEC proposals. We also can’t forget about the AICPA! They recently snuck in a proposal that will require specific risk assessment procedures for auditing accounting estimates that address the increasingly complex business environment.
As always, if you have any questions (or any proposal stories you’d like to share), please contact us!
This post is published to spread the love of GAAP and provided for informational purposes only. Although we are CPAs and have made every effort to ensure the factual accuracy of the post as of the date it was published, we are not responsible for your ultimate compliance with accounting or auditing standards and you agree not to hold us responsible for such. In addition, we take no responsibility for updating old posts, but may do so from time to time.