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Financial Reporting and Regulatory Update

First Quarter 2021

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, 2019 [1] [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

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

Amendments to Various SEC Paragraphs (ASU 2020-09)

Amends and supersedes various SEC paragraphs to reflect SEC Release No. 33-10762, which includes amendments to financial disclosure requirements applicable to registered debt offerings that include credit enhancements, such as subsidiary guarantees. SEC rules make it easier for a registrant to qualify for an exception to the requirement to file separate audited financial statements of a subsidiary issuer or guarantor of registered debt securities.

SEC rules are effective Jan. 4, 2021

Permitted 

Clarifying Reference Rate Reform

(ASU 2021-01)

Clarifies that certain optional expedients and exceptions in Topic 848 (reference rate reform) for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. If an entity elects certain provisions in Topic 848, those provisions apply to derivative instruments that use an interest rate for margining, discounting, or contract price alignment that is modified as a result of reference rate reform. Clarifies that the provisions in Topic 848 optionally apply to all entities that designate receive-variable rate, pay-variable-rate cross-currency interest-rate swaps as hedging instruments in net investment hedges that are modified as a result of reference rate reform.
Upon issuance on Jan. 7, 2021 Not applicable

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

Accounting for Purchased Callable Debt Securities (ASU 2020-08)

Clarifies amendments in ASU 2017-08, which amended the amortization period for certain purchased callable debt securities held at a premium by shortening the period to the earliest call date. The amendments require an entity to reevaluate whether a callable debt security that has multiple call dates is within the scope of paragraph 310-20-35-33 for each reporting period.

March 31, 2021 Not permitted

Various Codification Improvements (ASU 2020-10)

Amendments improve codification by having all disclosure-related guidance available in the disclosure sections of the codification. Prior to this ASU, various disclosure requirements or options to present information on the face of the financial statements or as a note to the financial statements were not included in the appropriate disclosure sections of the codification. Contains various other minor amendments to codification that are not expected to have a significant effect on current accounting practice.

March 31, 2021 Permitted, including in an interim period

Convertible Instruments and Contracts in an Entity’s Own Equity (ASU 2020-06)

Clarifies the accounting for certain financial instruments with characteristics of liabilities and equity. The amendments reduce number of accounting models for convertible debt instruments and convertible preferred stock. The cash conversion and beneficial conversion feature models were removed. Limiting the accounting models will result in fewer embedded conversion features being separately recognized from the host contract. Improves disclosure requirements for convertible instruments and earnings-per-share guidance. Revises derivatives scope exception guidance to reduce form-over- substance-based accounting conclusions driven by remote contingent events.

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

For all other PBEs, including smaller reporting companies, March 31, 2024

Permitted as of the fiscal years beginning after Dec. 15, 2020.

An entity must adopt the guidance as of the beginning of the fiscal year and not in a subsequent interim.

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.

ASU 2020-11 – Deferral of effective dates.

For SEC filers, excluding smaller reporting companies, March 31, 2023

For all other PBEs, including smaller reporting companies, Dec. 31, 2025
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 for calendar year-end entities.