The Financial Accounting Standards Board formally issued a
The delay would defer the effective date for SEC public company filers other than smaller reporting companies from January 2021 until January 2022. Smaller reporting companies (those with a public float of less than $250 million, or annual revenue of less than $100 million and either no public float or a public float of less than $700 million) and all other public business entities would have until January 2024 to implement the standard, instead of the original effective date of January 2021. For private companies and nonprofits, the effective date would move from January 2022 to January 2024.
The FASB board members voted at a meeting earlier this month to propose extending the effective dates after hearing complaints that the insurance standard and other standards involving leases, credit losses and hedging were proving to be difficult to implement, particularly for private companies, smaller public companies and nonprofits (see
Traditionally, FASB gives private companies and nonprofits an extra year after the effective date for public companies to implement major standards. Last week, FASB issued a formal proposal for deferring the effective dates of the leases, credit losses (also known as CECL) and hedging standards (see
The insurance accounting standard was one of the major convergence projects that FASB had been working on with the International Accounting Standards Board to harmonize U.S. GAAP with International Financial Reporting Standards. U.S. GAAP has long provided detailed rules for insurance accounting, whereas the IFRS principles for insurance were perceived as relatively undeveloped. However, the two boards eventually decided to go their separate ways, and FASB decided to make substantial changes in only the standards for long-duration insurance contracts. Last August, FASB issued
Since then, FASB received requests to delay the effective date of the standard by one extra year. In response, FASB members and staff reached out to various insurance companies that issue or reinsure long-duration contracts to better understand the challenges they were facing in implementing the new standard and the progress they were making.
Last week, as part of the accounting standards updates proposing a delay for the leases, credit losses and hedging standards, FASB described a new philosophy for determining how effective dates for major standards should be staggered between larger public companies and all other entities. Under this philosophy, a major standard would first take effect for larger public companies, while effective dates for all other public and private companies and organizations would be staggered at least two years later. In general, FASB expects that early application would still be permitted for all entities.
“Based on what we observed while monitoring implementation of the long-duration insurance standard — and consistent with our new philosophy to stagger effective dates between large publicly traded companies and all other companies and organizations — the FASB has proposed to grant all insurance companies at least one additional year to apply the standard,” stated FASB Chairman Russell Golden. “We believe it will result in a higher quality implementation for all.”
FASB is asking for comments on the
