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In this edition of the quarterly communication, we have provided information about financial reporting and accounting issues. We have also compiled a list of items for consideration in your financial reporting and disclosures for the first quarter and a summary of recently issued accounting pronouncements (see Appendices for summary of recently issued accounting pronouncements and the related effective dates).
If you have any questions regarding any of the items within, or if there are other areas where we might be of assistance, please reach out to our financial services team. We would be happy to help in any way we can.
Here are the sections covered in this update:
[page_anchor link="frequent-topics-of-discussion-across-the-industry"]
With the implementation of the current expected credit loss (CECL) standard on the horizon for smaller reporting companies and private institutions, we have included our perspective and insights on how to effectively implement CECL. The timelines included below are for institutions with a January 1, 2023 implementation date.
Model validations – The model should be challenged regularly to test compliance with the standard, data integrity, and output accuracy. Model validations include three core elements: conceptual soundness of the model, ongoing monitoring, and reporting and outcome analysis. These may be performed internally or outsourced to third parties. However, not all validations are created equal. We recommend consulting with your auditors or other relevant outside parties to ensure the level and the scope of the validation will be sufficient for those third parties to use. We have seen cases across the industry where the level of validation performed does not meet regulatory or auditor expectations.
The work doesn’t stop at implementation date. Included below are items to consider post-implementation date:
Disclosures – Information concerning the adoption of ASC 326 is considered essential for fair presentation in accordance with Generally Accepted Accounting Principles (GAAP). Disclosures should be provided in the pre-adoption period (2022) with respect to the transition and expected magnitude. There are many new disclosure requirements at adoption and on an ongoing basis, as well as revisions to current allowance disclosures.
Ongoing monitoring – A consistent monitoring process will be important to ensure continued compliance with the standard. There should be a formally documented process that guides all aspects of the institution’s continued monitoring of the model. Model assumptions and conclusions should be challenged on a periodic basis as they are subject to change. Examples of key model assumptions include segmentation, contractual term, prepayment rates, loss drivers, and the composition of your peer group.
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In January 2022, the FASB voted 5 to 2 against deferring the effective date of the current expected credit losses (CECL) standard (FASB ASC 326, Credit Losses) for nonpublic entities a third time, stating a deferral would delay the inevitable and create uncertainty. The CECL standard takes effect in 2023 for small public companies, private companies, and nonprofits. Board members said while they were sympathetic to the challenges smaller financial institutions faced when applying the rules, a lot of simplifications have been made.
The discussions come after two years of petitions to the FASB from community banks and credit unions who asked for a deferral or a full exemption. The standard was issued in 2016 to require more timely reporting of credit losses in response to the 2008 global financial crisis. Companies and organizations that asked for a third deferral said elements of CECL are complex, require onerous data collection, and have punitive capital implications. However, FASB staff members said after extensive outreach over two years, no new information has come to light that the board did not previously consider, and which would justify changing the scope of entities subject to CECL at this time. The FASB board members all expressed full support for simplified methodologies put forth, including of the Federal Reserve Board’s (FRB) “SCALE” methodology. SCALE, which largely relies on peer allowance coverage ratios, was introduced by the FRB as a result of American Bankers Association (ABA) advocacy to make CECL scalable for community banks.
The FASB has been performing a post-implementation review of the CECL accounting standard. In February 2022, FASB met to review the feedback from the November 2021 exposure draft on troubled debt restructuring (TDR) accounting and new vintage disclosures. In addition, FASB started discussing purchased credit deterioration (PCD) accounting.
Vintage Disclosures
In April 2019, the FASB removed the gross write-off and gross recovery disclosure requirement for public business entities (PBEs) and created a project to conduct additional research on the matter. Financial statement users noted the gross write-off information to be decision-useful while the recovery information was less critical to evaluation processes. FASB voted to require PBEs to disclose current-period gross write-offs by year of origination for financing receivables and net investments in leases. Disclosure of recovery information is voluntary.
TDR Accounting
The FASB decided to remove the recognition and measurement criteria for TDRs while also requiring enhanced disclosures for entities. A final ASU will be drafted to formalize these changes. Instead of applying the recognition and measurement guidance for TDRs, an entity would apply the loan refinancing and restructuring guidance in ASC 310-20 to determine whether a modification results in a new loan or a continuation of an existing loan. The new ASU will require enhanced qualitative and quantitative disclosures reflecting the types of modifications provided, the expected financial effect of those modifications, and the performance of the loans after modification. We anticipate FASB to publish the final ASU related to TDR accounting in early April 2022. (The ASU may be issued prior to the release of this document).
PCD Accounting
Post-implementation feedback indicated widespread dislike of PCD accounting. There were a total of five PCD accounting-related issues presented and discussed. FASB voted on the following three items:
There were two additional items noted where FASB will need to do further research:
The potential changes to PCD accounting would have a very significant impact on the accounting for acquired loans as it would resolve the “double counting” issue currently in CECL where acquired non-PCD loans would require a Day 1 allowance, in addition to a Day 1 fair value mark. It is unlikely that FASB will be able to issue an exposure draft before the end of the year related to these PCD accounting-related matters.
In March, the FASB issued ASU 2022-01, Fair Value Hedging—Portfolio Layer Method, which is intended to better align hedge accounting with an organization’s risk management strategies. In 2017, the FASB issued a new hedging standard to better align the economic results of risk management activities with hedge accounting. That standard increased transparency around how the results of hedging activities are presented, both on the face of the financial statements and in the footnotes, for investors and analysts when hedge accounting is applied. One of the major provisions of that standard was the addition of the last-of-layer hedging method. For a closed portfolio of fixed-rate prepayable financial assets or one or more beneficial interests secured by a portfolio of prepayable financial instruments, such as mortgages or mortgage-backed securities, the last-of-layer method allows an entity to hedge its exposure to fair value changes due to changes in interest rates for a portion of the portfolio that is not expected to be affected by prepayments, defaults, and other events affecting the timing and amount of cash flows.
Since issuing that standard, stakeholders have told the FASB that the ability to elect hedge accounting for a single layer is useful, but hedge accounting could better reflect risk management activities if expanded to allow multiple layers of a single closed portfolio to be hedged under the method. ASU 2022-01 expands the current single-layer method to allow multiple hedged layers of a single closed portfolio under the method. To reflect that expansion, the last-of-layer method is renamed the portfolio layer method.
Additionally, the ASU:
The ASU applies to all entities that elect to apply the portfolio layer method of hedge accounting.
Effective Date and Transition
For public business entities, ASU 2022-01 is effective for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. For all other entities, the ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. Early adoption is permitted.
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On March 21, 2022, the Securities and Exchange Commission (SEC) issued a proposal, The Enhancement and Standardization of Climate-Related Disclosures for Investors, that would require public companies to provide investors with more detailed disclosures on climate risk and greenhouse gas (GHG) emissions. Comments are due 30 days following publication in the Federal Register or 60 days following issuance and publication on the SEC’s website, whichever is later.
The proposal, which applies to domestic and foreign registrants, would require the new disclosures in annual reports and registration statements. The climate-related disclosures under Regulation S-K would be provided in a separate section in the registration statement or annual report, while the climate-related financial statement metrics and related disclosures under Regulation S-X would be included in a note to the consolidated financial statements.
The disclosure of GHG emissions would be required for the registrant’s most recent fiscal year and the prior fiscal year(s) included in the filing, if reasonably available. In practice, the most common reference point for the calculation of GHG emissions is the standards and guidance of the Greenhouse Gas Protocol (GHG Protocol). This is acknowledged in the proposal, which proposes the following definitions that are substantially the same as those of the GHG Protocol.
Accelerated and large accelerated filers would be required to obtain an attestation report that covers at least the disclosures of the company’s Scope 1 and Scope 2 emissions. All registrants would need to disclose separately those Scope 1 and Scope 2 emissions both by disaggregated constituent greenhouse gases and in the aggregate and in absolute and intensity terms. The proposal defines GHG intensity as a ratio expressing the impact of GHG emissions per unit of economic value or per unit of production. A registrant would need to disclose its Scope 3 emissions if that information is material, or if it has set emissions goals that include Scope 3 emissions. The companies would also be provided a safe harbor for liability for those Scope 3 disclosures.
Other disclosures required under the proposal include oversight and governance of climate-related risks by a company’s board and management; how identified climate risks have had or are likely to have a material impact on the business and consolidated financial statements; the processes for identifying, assessing, and managing climate risk; and the impact of climate-related events, such as severe weather, and transition activities on the line items of consolidated financial statements and related expenditures, among other information.
The SEC is proposing to phase in the new requirements over the next few years depending on filer status, beginning for fiscal year 2023 for large-accelerated filers for all proposed disclosures outside of the Scope 3 disclosures, which would in turn be required a year later.
Environmental and financial reform groups cheered the SEC’s move. Americans for Financial Reform issued in a statement calling the proposed mandatory climate disclosures “squarely within the SEC’s mandate and responsibility.” The Sierra Club praised the SEC for taking the “long-overdue step of proposing a solution to the problem of undisclosed climate risks.” However, the U.S. Chamber of Commerce, in its own statement, said it is “concerned that the prescriptive approach taken by the SEC will limit companies’ ability to provide information that shareholders and stakeholders find meaningful while at the same time requiring that companies provide information in securities filings that are not material to investors.”
In August 2020, the SEC revised the definition of an “accredited investor” by adding new categories of individuals who may qualify based on their professional knowledge, experience, or certifications. But current SEC Chair, Gary Gensler, wants to put a greater emphasis on investor protection than capital formation. Before the August 2020 change in Release No. 33-10824, Amending the “Accredited Investor” Definition, the definition was based solely on a person’s wealth. Those who have accredited investor status can put money in limited securities offerings that have less protection than offerings made to the wider public. An individual investor must have an income of $200,000, joint income of $300,000, or at least $1 million in net worth, excluding a primary residence. It is designed so that the investors can withstand financial losses.
According to the SEC’s most recent rulemaking agenda, the staff is considering recommending that the SEC seek public comment on ways to further update the rules related to exempt offerings to more effectively promote investor protection, including updating the financial thresholds in the accredited investor definition, amendments to Rule 701, and amendments related to the integration framework for registered and exempt offerings. However, during a meeting in February, the small business advisory committee voted to reaffirm most of its previous June 2019, recommendations related to accredited investors. In 2019, the committee said that the agency should maintain the monetary thresholds but expand the categories of qualification for accredited investor status based on various types of sophistication, such as education, experience, and training. This should include, without limitation, individuals who hold Financial Industry Regulatory Authority (FINRA) licenses, or Certified Public Accountant (CPA) or Chartered Financial Analyst (CFA) designations, who passed a test that demonstrates sophistication, or who have managerial jobs affiliated with the issuer.
A bipartisan group of senators in a February 8, 2022, letter to SEC Chair, Gary Gensler, pushed for the commission to require public companies to disclose the cybersecurity expertise on their boards of directors. The senators signing on to the letter are the sponsors of S. 808, the Cybersecurity Disclosure Act, which would direct the commission to implement those disclosure requirements. Boards of directors would be encouraged to develop approaches that address their own needs. The goal is to encourage directors to play a more effective role in cybersecurity risk oversight.
The bill would amend the Securities Exchange Act of 1934 giving the SEC one year to finalize rules requiring companies to disclose, in annual reports or proxy filings, whether any member of its governing body (such as the board or general partner) possesses cyber expertise or experience, along with an accompanying description. Companies that lack that board expertise or experience would be required to explain what other aspects of the reporting company’s cybersecurity were taken into account by any person, such as an official serving on a nominating committee, that is responsible for identifying and evaluating nominees for membership to the governing body.
Democratic Senators Mark Warner of Virginia and Sherrod Brown of Ohio on February 4, 2022, urged the SEC to expand disclosures on independent contractors and subcontractors as part of its upcoming human capital management disclosure rulemaking. The letter comes as the SEC under Chair Gary Gensler has prioritized workforce disclosure rules, which is among the proposals commission staff hopes to have ready for consideration in the first part of this year.
Brown, chairman of the Senate Banking Committee, and Warner pressed Gensler to ensure that companies report on the numbers of their workers who are not classified as full-time employees, including independent contractors, as well as the entire workforce that is material to the company and its investors (the “material workforce”) such as subcontracted workers. The Senators said they agreed that investors need disclosures that include quantifiable and comparable datasets that clearly articulate a company’s human capital management, such as metrics on turnover, skills and development training, compensation, benefits, workforce demographic, and health and safety. But those disclosures would be incomplete without requiring companies to disclose the number of independent contractors they regularly use and the entire workforce that is material to their business strategy, citing custodial workers, food services workers, security personnel, janitors, and housekeepers for both hotels and lodging real estate investment trusts (REITs) as examples of subcontracted labor that would be material to investors.
The letter follows other progressive calls for the SEC to include contractors as part of its human capital disclosure rules. In August 2021, the Center for American Progress (CAP) urged the SEC to mandate prescriptive line-item disclosures on topics that include baseline full- and part-time workers and contractors disaggregated by race, gender, and ethnicity and separately by occupation and pay band.
The SEC staff has issued about 430 comment letters related to non-GAAP measures in the past year. And commission officials are having to repeat themselves during speaking engagements about the importance of properly following the established rules. Regulation G, the rules that govern non-GAAP measures, was adopted 19 years ago. During that time, the SEC has sought to crack down on especially abusive practices. Companies have incentives to use non-GAAP measures because they often paint a better financial picture than U.S. GAAP financial statements. Analysts also find them useful because they can often get a better understanding of the company’s unique operations and financial conditions.
Regulation G states that companies cannot present their non-GAAP measures more prominently than their audited U.S. GAAP financial statements. The rule requires companies to reconcile the differences between the non-GAAP measures with the most directly comparable financial measurement from the financial statements. The regulation also requires a statement about why management believes that presenting non-GAAP measures provides useful information to investors regarding the company’s financial condition and results of operations, among other requirements.
The SEC’s Division of Corporation Finance (CorpFin) has issued a staff guide intended to help small companies comply with a new rule that modernizes disclosures related to filing fees and payment methods. The rule was adopted in October 2021 in Release No. 33-10997, Filing Fee Disclosure and Payment Methods Modernization. The final rule amends most fee forms, schedules, statements, and related rules to require companies and funds to include all required information for filing fee calculation in a separate exhibit using Inline eXtensible Business Reporting Language (XBRL). The rule change also gives filers the option to pay the fees via Automated Clearing House (ACH) and debit and credit card payment. It eliminates the option to pay by paper checks and money orders, which were infrequently used. Payment by wire transfer will also remain available. The SEC assesses and collects filing fees for certain corporate filings, securities offerings, tender offers, and merger or acquisition transactions, as well as offerings by investment companies.
The amendments in Release No. 33-10997 became effective on January 31, 2022, except for changes to payment options, which become effective on May 31, 2022. Large-accelerated filers must begin complying starting from July 31, 2024. These companies have a public float of $700 million or more as of the last business day of their most recently completed second fiscal quarter. All other filers have until July 31, 2025, to comply.
On March 9, 2022, the SEC proposed new rules that would enhance disclosure requirements related to cybersecurity, risk management, strategy, and governance. The proposed amendment would require reporting of material cybersecurity incidents (within 4 business days of the determination of a material cybersecurity breach) by adding new Item 1.05 to Form 8-K. In addition, the proposal requires disclosure in quarterly and annual reports of material changes, additions, or updates to information of the cybersecurity incident pursuant to the Form 8-K filing.
The proposed rule also seeks to provide more information related to the following:
Comments are due 30 days after publication in the Federal Register or May 9, 2022, whichever is later.
In January 2022, the AICPA published an updated Practice Aid, Accounting for and Auditing of Digital Assets to include derivatives and mining. The nonauthoritative guide also adds a topic on crypto asset lending. The AICPA first issued the practice aid in December 2019, which first focused on accounting matters in the digital asset market. The practice aid is based on professional literature and experience from members of the Digital Assets Working Group and gives specific scenarios in a question-and-answer format.
In July 2020, the AICPA updated the practice aide to include guidance on auditing digital assets. Three months later in October, the practice aid was updated to address stable coins and fair value. In May 2021, the practice aid was updated to include information on risk assessments for auditors.
On March 27, 2020, the FDIC issued Financial Institution Letter (FIL-30-2020), Statement on Part 363 Annual Reports in Response to the Coronavirus, which provided an additional 45 days for insured depository institutions (IDIs) subject to Part 363 of the FDIC’s regulations to file their Part 363 Annual Reports and Other Reports and Notices. The FDIC, in consultation with federal and state financial regulators, is rescinding FIL-30-2020.
The rescission is effective for fiscal years beginning after December 31, 2021. The deadline for filing the annual report for fiscal years beginning after December 31, 2021 reverts to either 90 or 120 days after the end of the IDI’s fiscal year, depending on the IDI’s status as a public filer.
On February 4, 2022, Martin Gruenburg took over as acting chair for the FDIC following the resignation of Chair Jelena McWilliams. On February 7, 2022, Chairman Gruenburg released a list of priorities for the FDIC for the coming year which include:
Subsequent requests for comments on climate change at large institutions, as well as the bank merger process were issued in late March 2022.
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The following selected FASB exposure drafts and projects are outstanding as of March 31, 2022.
In September 2021, the FASB issued a proposal that would improve financial reporting for investors and other financial statement users by increasing comparability of financial information across reporting entities that have investments in equity securities measured at fair value that are subject to contractual restrictions preventing the sale of those securities.
ASC 820, Fair Value Measurement, states that when measuring the fair value of an asset or a liability, a reporting entity should consider the characteristics of the asset or liability, including restrictions on the sale of the asset or liability, if a market participant also would take those characteristics into account. Key to that determination is the unit of account for the asset or liability being measured at fair value.
Some stakeholders noted that ASC 820 contains conflicting guidance on what the unit of account is when measuring the fair value of an equity security. This has resulted in diversity in practice on whether the effects of a contractual restriction that prohibits the sale of an equity security should be considered in measuring that equity security’s fair value.
To address this, the amendments in the proposed ASU would clarify that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value.
The Emerging Issues Task Force met on March 24, 2022, and deliberated the following topic:
At this meeting, the FASB staff provided a summary of the research and outreach activities related to the potential expansion of the proportional amortization method of accounting to investments in tax credit structures beyond LIHTC investments. If the Task Force reaches a consensus-for-exposure on this Issue, the staff would then proceed to drafting a proposed ASU and discuss ratification with the FASB at a future meeting.
The Private Company Council (PCC) did not meet during the first quarter. The next meeting is scheduled for April 21-22, 2022.
EITF Agenda Items
The Emerging Issues Task Force met on November 11, 2021, and deliberated the following topic:
At this meeting, the FASB staff held an educational session on this Issue. During the meeting, the FASB staff gathered initial feedback from the Task Force on any technical topics on which additional research is needed as well as on any additional stakeholder outreach that the staff should perform. In addition, the Task Force discussed several tax credit structures, including the New Market Tax Credit Program, the Historic Rehabilitation Tax Credit Program, and the Renewal Energy Tax Credit (RETC) Program. The Task Force provided the FASB staff with substantial feedback on the RETC Program because of the timing, amount, and potential variability of the cash flows received by the investor from this tax credit structure.
PCC Activities
The Private Company Council (PCC) did not meet during the first quarter. The next meeting is scheduled for April 21-22, 2022.
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The following table contains significant implementation dates and deadlines for standards issued by the FASB and others.
For the Quarter Ended March 31, 2022
The illustrative disclosures below are presented in plain English. Please review each disclosure for its applicability to your organization and the need for disclosure in your organization’s financial statements.
{Please give careful consideration to appropriateness of italicized text.
ASU 2016-02 ― Applicable to lessee and lessor entities:
In February 2016, the FASB amended the Leases topic of the Accounting Standards Codification to revise certain aspects of recognition, measurement, presentation, and disclosure of leasing transactions. The amendments will be effective for [fiscal years beginning after December 15, 2018, including interim periods within those fiscal years.-public business entities] [fiscal years beginning after December 15, 2020, and interim periods within fiscal years beginning after December 15, 2021.-all other entities]. Early adoption is permitted.
We expect to adopt the guidance using the modified retrospective method and practical expedients for transition. The practical expedients allow us to largely account for our existing leases consistent with current guidance except for the incremental balance sheet recognition for lessees. We have started an initial evaluation of our leasing contracts and activities. We have also started developing our methodology to estimate the right-of use assets and lease liabilities, which is based on the present value of lease payments (the December 31, 2019 future minimum lease payments were $____ million). We do not expect a material change to the timing of expense recognition, but we are early in the implementation process and will continue to evaluate the impact. We are evaluating our existing disclosures and may need to provide additional information as a result of adoption of the ASU.
ASU 2016-13 ― Applicable to entities that hold financial assets and net investment in leases that are not accounted for at fair value through net income:
In June 2016, the FASB issued guidance to change the accounting for credit losses and modify the impairment model for certain debt securities. The guidance requires a financial asset (including trade receivables) measured at amortized cost basis to be presented at the net amount expected to be collected. Thus, the income statement will reflect the measurement of credit losses for newly-recognized financial assets as well as the expected increases or decreases of expected credit losses that have taken place during the period. The amendments will be effective for the Company for [fiscal years beginning after December 15, 2019, including interim periods within those fiscal years.-public business entities that meet the definition of an SEC filer, excluding entities eligible to be SRCs as defined by the SEC] [fiscal years beginning after December 15, 2022 including interim periods within those fiscal years.-all other entities] Early adoption is permitted for all organizations for periods beginning after December 15, 2018. The Company is currently in the process of evaluating the impact of adoption of this guidance on the financial statements.
ASU 2017-04 ― Applicable to all entities:
In January 2017, the FASB amended the Goodwill and Other Topic of the Accounting Standards Codification to simplify the accounting for goodwill impairment for public business entities and other entities that have goodwill reported in their financial statements and have not elected the private company alternative for the subsequent measurement of goodwill. The amendment removes Step 2 of the goodwill impairment test. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The effective date and transition requirements for the technical corrections will be effective for the Company for [reporting periods beginning after December 15, 2019.-public business entities that are SEC filers] [reporting periods beginning after December 15, 2020.-public business entities that are not SEC filers] [reporting periods beginning after December 15, 2021.-all other entities] Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company does not expect these amendments to have a material effect on its financial statements.
ASU 2017-12 ― Applicable to entities that elect to apply hedge accounting:
In August 2017, the FASB amended the requirements of the Derivatives and Hedging Topic of the Accounting Standards Codification to improve the financial reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in its financial statements. The amendments will be effective for the Company for [interim and annual periods beginning after December 15, 2018.-public business entities] [fiscal years beginning after December 15, 2020 and interim periods within fiscal years beginning after December 15, 2021.-entities other than public business entities] Early adoption is permitted. The Company does not expect these amendments to have a material effect on its financial statements.
ASU 2018-10 ― Applicable to lessee and lessor entities:
In July 2018, the FASB amended the Leases Topic of the Accounting Standards Codification to make narrow amendments to clarify how to apply certain aspects of the new leases standard. The amendments are effective for [reporting periods beginning after December 15, 2018.-public business entities] [annual periods beginning after December 15, 2019, and interim periods within annual reporting periods beginning after December 15, 2020-all other entities]. The Company does not expect these amendments to have a material effect on its financial statements.
ASU 2018-11 ― Applicable to lessee and lessor entities:
In July 2018, the FASB amended the Leases Topic of the Accounting Standards Codification to give entities another option for transition and to provide lessors with a practical expedient. The amendments will be effective for the Company for [reporting periods beginning after December 15, 2018.-public business entities] [annual periods beginning after December 15, 2019, and interim periods within annual reporting periods beginning after December 15, 2020-all other entities]. The Company does not expect these amendments to have a material effect on its financial statements.
ASU 2018-12 ― Applicable to insurance entities that issue long-duration contracts:
In August 2018, the FASB amended the Financial Services—Insurance Topic of the Accounting Standards Codification to make targeted improvements to the existing recognition, measurement, presentation, and disclosure requirements for long-duration contracts issued by an insurance entity. The amendments will be effective for the Company for [fiscal years beginning after December 15, 2021, and interim periods within those fiscal years.-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, 2023, and interim periods within fiscal year beginning after December 15, 2024.-all other entities] The Company does not expect these amendments to have a material effect on its financial statements.
ASU 2018-14 ― Applicable to employers that sponsor defined benefit pension or other postretirement plans:
In August 2018, the FASB amended the Compensation—Retirement Benefits—Defined Benefit Plans Topic of the Accounting Standards Codification. The amendments remove, modify, and add certain disclosure requirements for employers that sponsor defined benefit pension plans or other postretirement plans. The amendments are effective [fiscal years ending after December 15, 2020.-public business entities] [fiscal years ending after December 15, 2021-all other entities]. Early adoption is permitted. The Company does not expect these amendments to have a material effect on its financial statements.
ASU 2018-15 ― Applicable to all entities:
In August 2018, the FASB amended the Intangibles—Goodwill and Other Topic of the Accounting Standards Codification to align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The amendments will be effective for the Company for [fiscal years beginning after December 15, 2019.-public business entities] [fiscal years beginning after December 15, 2020, and interim periods within fiscal years beginning after December 15, 2021-all other entities]. Early adoption is permitted. The Company does not expect these amendments to have a material effect on its financial statements.
ASU 2018-17 ― Applicable to all entities:
In October 2018, the FASB amended the Consolidation topic of the Accounting Standards Codification for determining whether a decision-making fee is a variable interest. The amendments require organizations to consider indirect interests held through related parties under common control on a proportional basis rather than as the equivalent of a direct interest in its entirety. [The amendments will be effective for the Company for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years.-public business entities] [The amendments also provide a nonpublic entity with the option to exempt itself from applying the variable interest entity consolidation model to qualifying common control arrangements. The amendments will be effective for the Company for annual periods beginning after December 15, 2020, and interim periods within annual reporting periods beginning after December 15, 2021.-all other entities] Early adoption is permitted. The Company will apply a full retrospective approach in which financial statements for each individual prior period presented and the opening balances of the earliest period presented are adjusted to reflect the period-specific effects of applying the amendments. [The Company does not expect these amendments to have a material effect on its financial statements.] [The Company is currently evaluating the effect that implementation of the new standard will have on its financial statements.]
ASU 2018-18 ― Applicable to all entities:
In November 2018, the FASB amended the Collaborative Arrangements Topic of the Accounting Standards Codification to clarify the interaction between the guidance for certain collaborative arrangements and the new revenue recognition financial accounting and reporting standard. The amendments will be effective for the Company for [fiscal years beginning after December 15, 2019, and interim periods within those fiscal years.-public business entities] [fiscal years beginning after December 15, 2020, and interim periods within fiscal years beginning after December 15, 2021.-all other entities] Early adoption is permitted. The Company does not expect these amendments to have a material effect on its financial statements.
ASU 2018-19 ― Applicable to entities that hold financial assets and net investment in leases that are not accounted for at fair value through net income:
In November 2018, the FASB issued guidance to amend the Financial Instruments—Credit Losses topic of the Accounting Standards Codification. The guidance aligns the implementation date of the topic for annual financial statements of nonpublic companies with the implementation date for their interim financial statements. The guidance also clarifies that receivables arising from operating leases are not within the scope of the topic, but rather, should be accounted for in accordance with the leases topic. The amendments will be effective for the Company for [reporting periods beginning after December 15, 2019, including interim periods within those fiscal years.-SEC filers] [reporting periods beginning after December 15, 2020, including interim periods within those fiscal years.-public business entities that are not SEC filers] [fiscal years beginning after December 15, 2021, including interim periods within those fiscal years.-all other entities] Early adoption is permitted for all organizations for periods beginning after December 15, 2018. The Company is currently in the process of evaluating the impact of adoption of this guidance on the financial statements.
ASU 2019-05 ― Applicable to entities that hold financial instruments:
In May 2019, the FASB issued guidance to provide entities with an option to irrevocably elect the fair value option, applied on an instrument-by-instrument basis for eligible instruments, upon adoption of ASU 2016-13, Measurement of Credit Losses on Financial Instruments. The amendments will be effective for the Company for [fiscal years beginning after December 15, 2019, including interim periods within those fiscal years.-entities that have adopted ASU 2016-13] {For entities that have not yet adopted ASU 2016-13: [reporting periods beginning after December 15, 2019.-SEC filers] [reporting periods beginning after December 15, 2020.-public business entities that are not SEC filers] [fiscal years beginning after December 15, 2021, including interim periods within those fiscal years.-all other entities]}. The Company does not expect these amendments to have a material effect on its financial statements.
ASU 2019-09 ― Applicable to insurance entities that issue long-duration contracts:
In November 2019, the FASB issued guidance to defer the effective date of ASU 2018-12, Financial Services—Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts. The new effective date will be [for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years.-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, 2023, and interim periods within fiscal year beginning after December 15, 2024.-all other entities] The Company does not expect these amendments to have a material effect on its financial statements.
ASU 2019-10 ― Applicable to all entities:
In November 2019, the FASB issued guidance to defer the effective dates for private companies, not-for-profit organizations, and certain smaller reporting companies applying standards on current expected credit losses (CECL), leases, hedging. The new effective dates will be CECL: [fiscal years beginning after December 15, 2019, including interim periods within those fiscal years.-public business entities that meet the definition of an SEC filer, excluding entities eligible to be SRCs as defined by the SEC] [fiscal years beginning after December 15, 2022 including interim periods within those fiscal years.-all other entities]; Hedging: [fiscal years beginning after December 15, 2020 and interim periods within fiscal years beginning after December 15, 2021.-entities other than public business entities]; Leases: [fiscal years beginning after December 15, 2020, and interim periods within fiscal years beginning after December 15, 2021.-all entities other than public business entities; 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 employee benefit plans that file or furnish financial statements with or to the SEC] The Company does not expect these amendments to have a material effect on its financial statements.
ASU 2019-11 ― Applicable to all entities:
In November 2019, the FASB issued guidance that addresses issues raised by stakeholders during the implementation of ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The amendments affect a variety of Topics in the Accounting Standards Codification. [For entities that have adopted the amendments in ASU 2016-13, the amendments are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years] [For entities that have not yet adopted the amendments in ASU 2016-13, the amendments are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years-public business entities that meet the definition of an SEC filer, excluding entities eligible to be SRCs as defined by the SEC] [fiscal years beginning after December 15, 2022 including interim periods within those fiscal years-all other entities]. Early adoption is permitted in any interim period as long as an entity has adopted the amendments in ASU 2016-13. The Company does not expect these amendments to have a material effect on its financial statements.
ASU 2019-12 ― Applicable to entities within the scope of Topic 740, Income Taxes:
In December 2019, the FASB issued guidance to simplify accounting for income taxes by removing specific technical exceptions that often produce information investors have a hard time understanding. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. The amendments are effective for [fiscal years beginning after December 15, 2020, including interim periods within those fiscal years.-public business entities] [fiscal years beginning after December 15, 2021, and interim periods within annual reporting periods beginning after December 15, 2022-all other entities]. Early adoption is permitted. The Company does not expect these amendments to have a material effect on its financial statements.
ASU 2020-01 ― Applicable to all entities:
In January 2020, the FASB issued guidance to address accounting for the transition into and out of the equity method and measuring certain purchased options and forward contracts to acquire investments. The amendments are effective for [fiscal years beginning after December 15, 2020, and interim periods within those fiscal years.-public business entities] [for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years-all other entities]. Early adoption is permitted, including early adoption in an interim period. The Company does not expect these amendments to have a material effect on its financial statements.
ASU 2020-03 ― Applicable to all entities:
In March 2020, the FASB issued guidance that makes narrow-scope improvements to various aspects of the financial instrument guidance, including the current expected credit losses (CECL) guidance issued in 2016. The amendments related to conforming amendments: For public business entities, the amendments are effective upon issuance of this final ASU. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years beginning after December 15, 2020. Early application is permitted. The effective date of the amendments to ASU 2016-01 is for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. For the amendments related to ASU 2016-13, public business entities that meet the definition of an SEC filer, excluding eligible smaller reporting companies (SRCs) as defined by the SEC, should adopt the amendments in ASU 2016-13 during 2020. All other entities should adopt the amendments in ASU 2016-13 during 2023. Early adoption will continue to be permitted. For entities that have not yet adopted the guidance in ASU 2016-13, the effective dates and the transition requirements for these amendments are the same as the effective date and transition requirements in ASU 2016-13. For entities that have adopted the guidance in ASU 2016-13, the amendments are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. For those entities, the amendments should be applied on a modified-retrospective basis by means of a cumulative-effect adjustment to opening retained earnings in the statement of financial position as of the date that an entity adopted the amendments in ASU 2016-13.The Company does not expect these amendments to have a material effect on its financial statements.
ASU 2020-04 ― Applicable to all entities:
In March 2020, the FASB issued guidance to provide temporary optional guidance to ease the potential burden in accounting for reference rate reform. The amendments are effective as of March 12, 2020 through December 31, 2022. The Company does not expect these amendments to have a material effect on its financial statements.
ASU 2020-05 ― Applicable to all entities:
In June 2020, the FASB issued guidance to defer the effective dates for certain companies and organizations which have not yet applied the revenue recognition and leases guidance by one year. The new effective dates will be: Revenue Recognition: annual reporting periods beginning after December 15, 2019, and interim reporting periods within annual reporting periods beginning after December 15, 2020; Leases: fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. The Company does not expect these amendments to have a material effect on its financial statements.
ASU 2020-06 ― Applicable to all entities:
In August 2020, the FASB issued guidance to improve financial reporting associated with accounting for convertible instruments and contracts in an entity’s own equity. The amendments are effective for [fiscal years beginning after December 15, 2021, including interim periods within those fiscal years – public business entities that meet the definition of a SEC filer, excluding entities eligible to be smaller reporting companies as defined by the SEC] [fiscal years beginning after December 15, 2023, including interim periods within those fiscal years – all other entities]. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company does not expect these amendments to have a material effect on its financial statements.
ASU 2020-08 ― Applicable to all entities:
In October 2020, the FASB issued guidance to clarify the FASB’s intent that an entity should reevaluate whether a callable debt security that has multiple call dates is within the scope of FASB Accounting Standards Codification (FASB ASC) 310-20-35-33 for each reporting period. The amendments will be effective for [fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020 – public business entities] [fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. Early application is permitted for all other entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020 - all other entities]. The Company does not expect these amendments to have a material effect on its financial statements.
ASU 2020-10 ― Applicable to all entities:
In October 2020, the FASB issued amendments to clarify the Accounting Standards Codification and make minor improvements that are not expected to have a significant effect on current accounting practice or create a significant administrative cost to most entities. The amendments are effective for [annual periods beginning after December 15, 2020. Early application is permitted for any annual or interim period for which financial statements have not been issued - public business entities] [annual periods beginning after December 15, 2021, and interim periods within annual periods beginning after December 15, 2022. Early application is permitted for any annual or interim period for which financial statements are available to be issued - all other entities]. The Company does not expect these amendments to have a material effect on its financial statements.
ASU 2020-11 ― Applicable to insurance entities that issue long-duration contracts:
In November 2020, the FASB issued guidance to defer the effective dates for insurance entities which have not yet applied the long duration contracts guidance by one year. The new effective dates will be [fiscal years beginning after December 15, 2022, and interim periods within those fiscal years.-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, 2024, and interim periods within fiscal year beginning after December 15, 2025.-all other entities] The Company does not expect these amendments to have a material effect on its financial statements.
ASU 2021-04 ― Applicable to Entities that issue freestanding written call options that are classified in equity
In May 2021, the FASB issued amendments that clarify an issuer’s accounting for certain modifications or exchanges of freestanding equity-classified written call options that remain equity classified after modification or exchange. The amendments are effective for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years. Early adoption is permitted. The Company does not expect these amendments to have a material effect on its financial statements.
ASU 2021-05 ― Applicable to lessor entities
In July 2021, the FASB issued amendments to require lessors to classify and account for a lease with variable payments as an operating lease if (a) the lease would have been classified as a sales-type lease or a direct financing lease and (b) the lessor would have otherwise recognized a day-one loss. The amendments are effective for [fiscal years beginning after December 15, 2021 – all entities] [interim periods within fiscal years beginning after December 15, 2021 – public business entities] [interim periods within fiscal years beginning after December 15, 2022 – all other entities]. The Company does not expect these amendments to have a material effect on its financial statements.
ASU 2021-07 ― Applicable to private companies and not-for-profit entities that elect the accounting alternative
In October 2021, the FASB issued guidance that provides the option to elect a practical expedient to determine the current price input of equity-classified share-based awards issued as compensation using the reasonable application of a reasonable valuation method.
The practical expedient is effective prospectively for all qualifying awards granted or modified during fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. The Company does not expect these amendments to have a material effect on its financial statements.
ASU 2021-08 ― Applicable to all entities that enter into a business combination
In October 2021, the FASB amended the Business Combinations topic in the Accounting Standards Codification to require entities to apply guidance in the Revenue topic to recognize and measure contract assets and contract liabilities acquired in a business combination. The amendments are effective for [fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. - public business entities] [fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. - all other entities] The amendments are applied prospectively to business combinations occurring on or after the effective date of the amendments. Early adoption of the amendments is permitted, including adoption in an interim period. The Company does not expect these amendments to have a material effect on its financial statements.
ASU 2021-09 ― Applicable to lessees that are private companies or not-for-profit entities
In November 2021, the FASB amended the Leases topic in the Accounting Standards Codification to allow lessees that are not public business entities to make an accounting policy election to use a risk-free rate as the discount rate by class of underlying asset, rather than at the entity-wide level. The amendments are effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. The Company does not expect these amendments to have a material effect on its financial statements.
ASU 2021-10 ― Applicable to all entities except for not-for-profit entities and employee benefit plans
In November 2021, the FASB added a topic to the Accounting Standards Codification, Government Assistance, to require certain annual disclosures about transactions with a government that are accounted for by applying a grant or contribution accounting model by analogy to other accounting guidance. The guidance is effective for financial statements issued for annual periods beginning after December 15, 2021. The Company does not expect these amendments to have a material effect on its financial statements.
ASU 2022-01 ― Applicable to all entities all entities that elect to apply the portfolio layer method of hedge accounting
In March 2022, the FASB issued guidance which is intended to better align hedge accounting with an organization’s risk management strategies by expanding the current single-layer method to allow multiple hedged layers of a single closed portfolio under the method. To reflect that expansion, the last-of-layer method is renamed the portfolio layer method The guidance is effective for for public business entities, ASU 2022-01 is effective for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. For all other entities, the ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. Early adoption is permitted. The Company does not expect these amendments to have a material effect on its financial statements.
Applicable to all:
Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies are not expected to have a material impact on the Company’s financial position, results of operations or cash flows.
NOTE: The disclosures in the previous appendix are not intended to be all inclusive. All pronouncements issued during the period should be evaluated to determine whether they are applicable to your Company. Through March 31, 2022, the FASB had issued the following Accounting Standard Updates during the year.
ASU 2022-01 – Fair Value Hedging—Portfolio Layer Method
