Firms Offered More Time To Adopt New Accounting Standards

The Financial Accounting Standards Board (FASB), which establishes accounting standards in the U.S., is offering corporates more time to adopt some revised standards, The Wall Street Journal said on Thursday (Oct. 17).

According to reports, the FASB approved a proposal earlier this week to give businesses more time to adopt new standards related to hedging and leases, after voting in July to delay implementation deadlines by between one and three years. The FASB said it would issue documents on those deadline changes next month.

The extension will impact private businesses and nonprofits, reports noted, which now have until Dec. 15, 2020 to adopt changes in the way they report on hedging and leases.

Other extensions will impact lenders, which are facing changes to standards in how they record expected future losses at the time a loan is issued, known as CECL, as well as a change that requires adjustments to how these lenders value long-term insurance contracts, reports said. Small public lenders, and lenders that aren’t required to provide SEC filings, will have until Dec. 15, 2022 to adopt CECL.

In addition to the extended deadlines, the FASB said it will continue to provide workshops for smaller lenders to prepare them for the CECL accounting standard changes. The Dec. 15, 2019 deadline for large public lenders has not changed.

“What we discovered in revenue recognition and leases is that smaller companies have the opportunity to learn from larger companies,” said Russell Golden, the FASB’s chairman, according to the WSJ.

Similarly, the FASB noted that private companies are looking to public firms for guidance on how to adopt lease accounting standards. According to Golden, public firms largely underestimated the challenge of adopting those new standards.

In a statement, American Bankers Association CEO Rob Nichols said the industry group is “deeply disappointed” that the FASB has not halted adoption of these accounting standards outright, and called for a “rigorous quantitative impact study” to assess its impact on corporates and lenders.