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Pursuant to a philosophy developed by the Board for establishing effective dates for major Updates, the Board decided that, generally, a major Update will first be effective for public business entities (per the Master Glossary) that are Securities and Exchange Commission (SEC) filers (per the Master Glossary), excluding entities eligible to be smaller reporting companies (SRCs) under the U.S. Securities and Exchange Commission’s definition. Those entities are bucket-one entities. All other entities (bucket two), including entities eligible to be SRCs, all other public business entities, and all nonpublic business entities (private companies, not-for-profit organizations, and employee benefit plans) compose bucket two. For those entities, it is anticipated that the Board will consider requiring an effective date staggered at least two years after bucket one for major Updates. Generally, it is expected that early application would continue to be permitted for all entities. The Board applied this philosophy to the effective dates for the following major Updates (including amendments issued after the issuance of the original Update):
  1. 1
    Accounting Standards Update No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (Credit Losses), and, as a consequential amendment, Accounting Standards Update No. 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment (Goodwill)
  2. 2
    Accounting Standards Update No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities (Hedging)
  3. 3
    Accounting Standards Update No. 2016-02, Leases (Topic 842) (Leases).
The Board addressed the application of the philosophy to Accounting Standards Update No. 2018-12, Financial Services—Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts (Insurance), in a separate project.
For Credit Losses and Goodwill, the amended mandatory effective dates are as follows:
  1. 1
    Public business entities that meet the definition of an SEC filer, excluding entities eligible to be SRCs as defined by the SEC, for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years
  2. 2
    All other entities for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.
For Hedging, because the Update already is effective for all public business entities, the Board retained the existing effective date for those entities, including SRCs. Consistent with having bucket two be at least two years after the initial effective date, the Board deferred the mandatory effective date for all other entities by an additional year. Therefore, Hedging is now effective for entities other than public business entities for fiscal years beginning after December 15, 2020, and interim periods within fiscal years beginning after December 15, 2021. Early application continues to be allowed.
For Leases, because the Update already is effective for (a) public business entities; (b) 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; and (c) employee benefit plans that file or furnish financial statements with or to the SEC, the Board retained the existing effective date for those entities, including SRCs. Consistent with having bucket two be at least two years after the initial effective date, the Board deferred the mandatory effective date for all other entities by an additional year. Therefore, Leases is now effective for those entities for fiscal years beginning after December 15, 2020, and interim periods within fiscal years beginning after December 15, 2021. Early application continues to be allowed.
This Accounting Standards Update is the final version of Proposed Accounting Standards Update 2019-750—Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842), which has been deleted.
Accounting Standards Update No. 2019-10
Issued: November 15, 2019
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