Holy Smokes – Too Many New Standards

On its cfodirect website, PWC lists the effective dates for accounting standards becoming effective over the next few years.

Having read the list, I have real sympathy for financial statement preparers and accountants in practice that must adopt their practices and procedures for the standards effective for calendar year 2018, while still preparing their accounting systems (and adopting their assurance services methodology) for the other major standards that have calendar year 2019 and/or 2020 effective dates, such as the new leasing standard, the revised guidance on derivative financial instruments and hedging and the revised accounting for credit losses on financial instruments (commonly referred to as the “CECL” standard).

Fyi, here’s a partial list of the FASB standards with calendar year 2018 effective dates (please note that several of the FASB standards have effective dates that differ for public companies and for non-public companies.  When the effective date differs between public and non-public companies, the non-public companies tend to get an additional year before adoption is required):

Standards with a 2018 effective date

  • ASU 2014-09 and related updates – Revenue from Contracts with Customers (ASC 606), including the following related guidance:
    • ASU 2016-08 – ASC 606 Principals v Agents Considerations
    • ASU 2016-10 – ASC 606 Identifying Performance Obligations and Licensing
    • ASU 2016-12 – ASC 606 Narrow Scope Improvements and Practical Expedients
    • ASU 2017-05 – ASC 610-20 Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets.
    • ASU 2017-10 – ASC 853 Determining the Customer of the Operation Services

These “related” standards clarify the application of ASC 606 for specific issues or they address a related accounting issue.  All of these standards should be adopted concurrent with the adoption of ASC 606. (Please note that for ASU 2017-10, if the company has already adopted ASC 606, their ASU 2017-10 effective date is for fiscal years beginning after December 15, 2017).

But wait, that’s not all.  While companies struggle with the adoption of ASC 606, they must consider the following standards that, for some companies, are effective for calendar year 2018:

  • ASU 2016-01 Recognition and Measurement of Financial Assets and Financial Liabilities
  • ASU 2016-04 Extinguishments of Liabilities: Recognition of Breakage for Certain Prepaid Stored-Value Products
  • ASU 2016-15 Cash Flows: Classification of Certain Cash Receipts and Cash Payments
  • ASU 2016-16 Income Taxes: Intra-Entity Transfers of Assets Other than Inventories
  • ASU 2017-01 Business Combinations: Clarifying the Definition of a Business
  • ASU 2017-07 Retirement Benefits: Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.

The FASB also issued several technical corrections standards and more narrowly focused guidance that are also effective for calendar year 2018.

While working to adopt (or to  develop assurance methodology related to ASC 606), accounting practitioners and financial statement preparers should review the results of the meetings of the related transition resource group.  On its website, the FASB posted a summary of the transition resource group’s discussions and the guidance resulting from those meetings.

Speaking of transition resource group activities, the FASB regular convenes a transition resource group for the adoption of its CECL standard, i.e. ASC 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.  The CECL transition resource group has met 3 times, most recently on June 11th and 12th.  Information about its activities are available on the FASB website.

Clearly, the FASB’s very ambitious implementation schedule will keep financial statement preparers and accounting practitioners very busy for the next few years.

 

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