How to Make the Most of FASB's Effective Date Delays

Published on September 19, 2019

Delays FASB has proposed for effective dates for certain preparers for three major accounting standards represent an opportunity for company finance departments to implement the standards more thoroughly, review public company filings, and make process and business improvements. 

FASB proposed delays in the effective dates for accounting standards for leases, credit losses, and derivatives and hedging. A delay in the effective date for long-duration insurance contracts also has been proposed. Depending on the standard, these proposed delays will affect private companies, small reporting companies, and not-for-profits. 

This additional time can provide great benefits to companies that were struggling with how to implement multiple standards at the same time, including the new revenue recognition standard. 

FASB has proposed an Accounting Standards Update (ASU) that would provide more time for adoption in the following circumstances: 

  • SEC filers: The hedge accounting and lease accounting effective dates would remain January 2019, and the credit loss effective date would remain January 2020, except for smaller reporting companies, whose credit loss effective date would be extended to January 2023.
  • All other public business entities: The hedge accounting and lease accounting effective dates would remain January 2019, while the credit loss effective date would change from January 2021 to January 2023. The January 2019 effective date for lease accounting would also apply to employee benefit plans and not-for-profit conduit bond obligors that file or furnish financial statements with or to the SEC.
  • Private companies and all others: The hedge accounting and lease accounting effective dates would change from January 2020 to January 2021. The credit loss effective date would change from January 2021 to January 2023. 

An additional proposed ASU would extend the effective dates for long-duration insurance contracts to Jan. 1, 2022, for calendar-year-end public business entities and Jan. 1, 2024, for all other entities with a calendar year-end. 

Here’s how companies can take advantage of delays for the three standards that will be addressed in the first proposed ASU, if the delays are approved. 


For companies that do not have large accounting staffs, it is very challenging to adopt accounting changes. There may only be a few people involved in implementation efforts. 

A major challenge in implementing the lease standard is the amount of work needed to review lease contracts and identify what qualifies as a lease. Many companies that have started this effort are realizing there is a lot more work to do than they thought to capture all the lease data. 

In addition, although software vendors have come up with lease accounting solutions, the extra time will help them and their customers.  Also, companies will have more time to choose the best software for their needs. 

the leasing standard is somewhat different from the other standards that FASB has proposed for deferral because application of the accounting to normal transactions is not an issue. Private companies may use their extra time to consult with auditors on complex transactions, along with looking at SEC filing disclosures for guidance. 

Lease accounting processes and controls will likely need to change. Having additional time gives companies the opportunity to focus on this critical area. 

Overall, practical application of the new lease accounting standard can take longer and require more resources than expected. Many companies are still in the initial stages. 

Derivatives and hedging

There is a major distinction between the hedging standard and leases and CECL, because hedging is optional, an election,

Far fewer people are aware of the requirements of the hedging standard compared with a standard like leases. People should use the additional time to break down the standard into its pieces and make sure they understand it. 

The standard is intended to address complexities in the current model for hedging activities and provides welcome relief in key areas, including what can be hedged and furthering the ability to carry out subsequent effectiveness assessments qualitatively if certain conditions are met, but it is still not a simple standard.


Since the revised standard provides targeted relief, it may be beneficial to deploy resources to assess and determine whether it makes sense to apply the revised standard, especially if it is for the first time. Related processes and documentation may have to change, and there are requirements for timing of the documentation and when hedge effectiveness assessments must be completed and updated.


There is less availability of third-party assistance in this area as compared with leases or CECL because it is elective. It is recommended that companies use the extra time to review, reflect, and consider performing dry runs. While FASB may provide additional implementation guidance and clarification through additional ASUs and stakeholder outreach, there is no formal Transition Resource Group like the one for CECL.


Companies should also use this time to evaluate how they can take advantage of the amendments provided in the revised standard to better align their financial reporting with management objectives and risk management strategies. They should educate their audit committee and board about the changes in what can be hedged, along with the accounting and internal control changes that will be required. 


The CECL standard has implications for all companies, not just banks. It requires complex financial modeling. To address many implementation questions and concerns, FASB has a CECL Transition Resource Group, has provided implementation Q&A’s on its website, and has promised more educational assistance. 

Some companies are very well versed on the standard and are farther up the learning curve. But others, like some smaller banks, may not be as far along. This delay allows companies to catch up on the standard itself, attend industry conferences where CECL is a big part of the agenda, and listen to experts and their peers. In addition, attend roundtables offered by accounting firms, which may include their clients that have already implemented CECL. 

The allowance for loan losses is already a critical accounting policy. External auditors must be comfortable with how it is recorded, and you must have the right controls. There may be a heightened focus from CECL, but controls should be rigorous already. 

Delays provide additional time for design of changed processes and internal controls. 

Companies must evaluate and choose the models that make the most sense, and the models should rely on valid source data. 

Some banks are using vendors for modeling. There could be some backlog related to use of vendors. The delay in the effective date will help banks affected by the vendor backlog and will give vendors additional time to work out any kinks in their models. 

FASB agrees that the delays will enable smaller companies, their auditors, and other stakeholders to benefit from seeing what SEC registrants that have implemented CECL have done. Voluntary disclosures beyond those mandated by the standard are probably going to be provided by some companies because stakeholders need to understand the impact of the new standard on the financial statements. 

The additional time should also be used to further educate internal and external stakeholders on the impact of the standard. These internal stakeholders include the board, senior management, internal audit, IT, and operational departments that supply the data to populate the models. Externally, shareholders and analysts will need to understand changes to the loan loss reserve and other changes upon the adoption of the CECL standard. 

Although a few publicly traded banks may be providing disclosures, detailed disclosures are not out there yet because the standard is not effective. When registrants start reporting, including providing voluntary disclosures, there could be a trickledown effect from analysts and publicly traded banks may find it helpful to provide additional disclosures.

 (Source:  AICPA – CPA Letter Daily - Journal of Accountany – August 29, 2019)