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Happy New Year! We hope you and your family were able to enjoy the holiday season. During the fourth quarter of 2022, we hosted a Risk Management, Compliance and Internal Audit Track Forum where our financial services experts addressed risk management, compliance, information technology, and internal audit topics to help your financial institution anticipate and respond to risks. We also hosted a Finance, Accounting, and Strategy Forum where we shared insights on regulatory hot topics, CECL from an auditor’s perspective, fintech investments and partnerships, and how to handle today’s interest rate environment. Both of these forums were recorded and you can view using the links above.
In this edition of the quarterly communication, we have provided information about financial reporting and accounting issues – some of which are currently being evaluated by regulatory agencies and not resolved at this time. We have also compiled a list of items for consideration in your financial reporting and disclosures for the fourth quarter and a summary of recently issued accounting pronouncements (see Appendices for summary of recently issued accounting pronouncements and the related effective dates).
This quarterly update is organized as follows:
There were no Accounting Standards Updates (ASUs) issued by the Financial Accounting Standards Board (FASB) during the fourth quarter applicable to financial institutions. A complete list of all ASUs issued or effective in 2022 is included in Appendix A. The following selected FASB proposals were issued during the fourth quarter.
On December 21, 2022, the FASB issued ASU 2022‐06 which defers the sunset date of ASC 848 from December 31, 2022 to December 31, 2024. In March 2020, the FASB issued ASC 2020‐04 to provide optional guidance to ease the burden in accounting for reference rate reform on financial reporting. At the time ASU 2020‐04 was issued, UK Financial Conduct Authority (FCA) announced that it would no longer need to persuade or compel banks to submit to LIBOR after December 31, 2021. To align with this announcement, the sunset provision in ASU 2020‐04 was set for December 31, 2022 – 12 months after the expected cessation date of all currencies and tenors of LIBOR. In March 2021, the FCA announced the intended cessation date of LIBOR in the United States would now be June 30, 2023. Accordingly, ASU 2022‐06 defers the expiration date of ASC 848 to December 31, 2024. The ASU became effective upon issuance.
In November 2022, the FASB issued a proposed ASU intended to improve accounting guidance for arrangements between entities under common control.
During the FASB’s post‐implementation review (PIR) of ASU 2016‐02, Leases, stakeholders expressed concerns with applying ASC 842 to related party arrangements between entities under common control. Specifically, those areas are (1) which terms and conditions should be considered when determining whether a lease exists and, if so, the classification and accounting for the lease and (2) the accounting for leasehold improvements associated with leases between entities under common control.
The proposed ASU would provide private companies and not‐for‐profit organizations that are not conduit bond obligors with a practical expedient that would allow those entities to use the written terms and conditions of an arrangement between entities under common control to determine whether a lease exists and, if so, the classification of and accounting for that lease.
The proposed ASU also would change the accounting for leasehold improvements associated with leases for all entities (that is, including public companies) under common control. Leasehold improvements associated with those leases would be amortized by the lessee over the economic life of the leasehold improvements as long as the lessee controls the use of the leased asset.
In October 2022, the FASB issued a proposed ASU that is intended to (1) provide investors and other allocators of capital (collectively, investors) with more decision‐useful information in a joint venture’s separate financial statements and (2) reduce diversity in practice in this area of financial reporting.
The proposed ASU would apply to the formation of entities that meet the definition of a joint venture (or a corporate joint venture) as defined in the FASB Accounting Standards Codification Master Glossary. While joint ventures are defined in the Master Glossary, there is no specific guidance in the Codification that applies to the formation accounting by a joint venture in its separate financial statements, specifically the joint venture’s recognition and initial measurement of net assets, including businesses contributed to it. Stakeholders noted that the lack of guidance has resulted in diversity in practice in how contributions to a joint venture upon formation are accounted for by a joint venture.
To reduce diversity in practice and provide decision‐useful information to a joint venture’s investors, the amendments in this proposed ASU would require that a joint venture apply a new basis of accounting. As a result, a newly formed joint venture would initially measure its assets and liabilities at fair value (with certain exceptions that are consistent with the business combinations guidance) upon formation.
In October 2022, the FASB issued a proposed ASU that would improve the disclosures about a public entity’s reportable segments and address requests from investors and other allocators of capital for additional, more detailed information about a reportable segment’s expenses.
Investors and other allocators of capital have observed that segment information is critically important in understanding a public entity’s different business activities. That information enables investors to better understand an entity’s overall performance and assists in assessing potential future cash flows. In addition, investors have observed that although information about a segment’s revenue and measure of profit or loss is disclosed in an entity’s financial statements, there generally is limited information disclosed about a segment’s expenses.
The amendments in the proposed ASU respond to feedback received from investors and other allocators and would improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The key amendments in the proposed ASU would:
The amendments in the proposed ASU would apply to all public entities that are required to report segment information in accordance with ASC 280.
In November, the Securities and Exchange Commission (SEC) issued its 2022‐2026 strategic plan. The commission cites efforts to modernize its rules, including disclosures of climate change, cybersecurity and human capital management. The strategic plan for fiscal years 2022 to 2026 also echoes what SEC Chairman, Gary Gensler, has been saying in public speaking engagements in the past year and a half. The SEC’s new five‐year plan establishes three primary goals:
The SEC issued a proposal on climate disclosure in March in Release No. 33‐11042, The Enhancement and Standardization of Climate‐ Related Disclosures for Investors. It contains disclosure requirements inside and outside the financial statements, including information on greenhouse gas emissions. The commission originally wanted to finalize the rules by the end of the year, but it is unclear if it will meet its initial goal given the high volume of comment letters and a recent internet glitch that forced the SEC to open up the comment period for a brief period on certain proposals, including this one. A summary of the proposed climate‐related disclosures are included in our First Quarter 2022 Financial Services Report.
As for cybersecurity, a proposal was also issued in March in Release No. 33‐11038, Cybersecurity Risk Management, Strategy, Governance, and Incident Disclosure, and the market regulator wants to finalize the rules in the spring of 2023. The proposal would require public companies to disclose material cybersecurity breaches in a timely manner. Companies must, among other things, periodically report information about policies and procedures to manage cybersecurity risks as well as updates about previously disclosed incidents.
The SEC has not issued a workforce disclosure proposal yet, but the staff is working on a proposed recommendation for the commission’s consideration in the coming months.
On October 3, 2022, the FFIEC issued an update to the FFIEC’s 2018 Cybersecurity Resource Guide for Financial Institution. The Cybersecurity Resource Guide is designed to help financial institutions meet their security control objectives and prepare to respond to cyber incidents. The 2022 updated guide now includes ransomware‐specific resources that can be accessed in combating this ongoing, evolving threat. The updated guide also includes revisions to update resource links for the assessment, exercise, information sharing, and response and reporting categories. The programs and initiatives in the guide are voluntary and designed for use by
institutions of all asset sizes and charters.
The Federal Reserve released its semiannual Supervision and Regulation Report. The Federal Reserve Board publishes its semiannual Supervision and Regulation Report to inform the public and provide transparency about its supervisory and regulatory policies and actions, as well as current banking conditions. The Fed noted the banking industry entered 2022 in sound financial condition, but institutions are beginning to prepare for potentially weaker economic conditions. This report focuses on developments in three areas: 1) banking system conditions which provides a summary of current financial conditions in the industry; 2) regulatory developments which outlines recent regulatory policy work and 3) supervisory developments which provides an overview of priorities and supervisory programs of the Federal Reserve.
In October 2022, the FDIC adopted a final rule to increase initial base deposit insurance assessment rate schedules uniformly by 2 basis points, beginning in the first quarterly assessment period of 2023. This rule applies to all FDIC insured institutions. The final rule is unchanged from the proposal. The rapid growth in insured deposits during the first half of 2020 caused the Deposit Insurance Fund (DIF) reserve ratio, calculated by dividing the DIF balance by the dollar amount of insured deposits in the banking system, to decline below the statutory minimum of 1.35% to 1.30% as of June 30, 2020. The FDIC estimates that the increase in deposit insurance assessment rates should increase the likelihood that the DIF will meet its statutory minimum ratio of 1.35% prior to the statutorily mandated date of September 2028.
The OCC announced it is launching an Office of Financial Technology in early 2023 to strengthen the agency’s financial expertise and ability to adapt to the ever‐changing banking landscape. The Office of Financial Technology will incorporate the Office of Innovation, which the regulator created in 2016.
“Financial technology is changing rapidly and bank‐fintech partnerships are likely to continue growing in number and complexity. To ensure that the federal banking system is safe, sound, and fair today and well into the future, we need to have a deep understanding of financial technology and the financial technology landscape,” said Acting Comptroller of the Currency Michael J. Hsu. “The establishment of this office will enable us to be more agile and to promote responsible innovation, consistent with our mission.”
The OCC published its assessment rates for the 2023 calendar year. The general assessment fee schedule shows a reduction in the rates while the independent trust and independent credit card fee schedules maintain the 2022 assessment rates. The changes include reductions by 40% for all banks on their first $200 million in total balance sheet assets, and a 20% reduction for balance‐sheet assets above $200 million and up to $20 billion. The calendar year 2023 assessment rates will be in effect as of January 1, 2023, and will be reflected in assessments paid on March 31, 2023, and September 30, 2023.
In December, the OCC issued its Semiannual Risk Perspective for Fall 2022 which includes key issues facing banks, focusing on those that pose threats to the safety and soundness of banks and their compliance with applicable laws and regulations. The OCC noted while banks are currently well capitalized with sufficient liquidity and sound credit quality, there is concern about the macroeconomic environment. The report presents information in five main areas: the operating environment, bank performance, a special section on emerging risks relating to crypto‐assets, trends in key risks, and supervisory actions. The Fall 2022 report highlights the following items:
On October 6, 2022, the OCC issued its fiscal year 2023 bank supervision operating plan. The operating plan provides the foundation for policy initiatives and supervisory strategies as applied to individual national banks, federal savings associations, federal branches, federal agencies and technology service providers. The 2023 plan notes examiners will focus on impacts of volatile economic conditions such as high inflation, increasing recession possibilities, and rising interest rates. They will also consider geopolitical events that may have adverse financial, operational, and compliance implications. The OCC will provide periodic updates about supervisory priorities, emerging risks, and horizontal risk assessments in the Semiannual Risk Perspective report.
In November, the Department of Labor (DOL) finalized its environmental, social and governance (ESG) investing rules for retirement plan fiduciaries. The final rule, entitled “Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights,” walks back two Trump‐era rules that had been widely criticized as restricting fiduciaries from making ESG‐based investment decisions or casting proxy votes on ESG‐related matters. The Labor Department’s Employee Benefits Security Administration (EBSA), which crafted the latest changes, had already implemented a non‐enforcement policy on those two rules.
The final rule under the Employee Retirement Income Security Act (ERISA) stems from a Biden administration executive order in May 2021 on mitigating climate‐related financial risk. The rule is designed to clarify the application of ERISA’s fiduciary duties of prudence and loyalty in picking investments and investment courses of action and exercising shareholder rights, which the DOL stated is necessary due to the chilling effect and other potential negative consequences caused by the current regulation with respect to the consideration of climate change and other ESG factors in connection with these activities.
Among other changes, the final rules alter the current regulations to make it clear that a fiduciary’s determination with respect to an investment or investment course of action must be based on factors that the fiduciary reasonably determines are relevant to a risk and return analysis and that such factors may include the economic effects of climate change and other environmental, social, or governance factors on the particular investment or investment course of action.
Republicans on the House Education and Labor Committee, which has oversight responsibilities over the DOL, blasted the rule as jeopardizing the financial security of many retirement savers, especially workers and retirees who may be put into ESG investments by default. The sentiment is part of a broader ESG backlash that is expected to intensify under a Republican majority in the next Congress. Republicans have already taken aim at the SEC’s proposed rules in Release No. 33‐11042, The Enhancement and Standardization of Climate‐Related Disclosures for Investors, which sets out a broad new set of public company disclosure mandates around climate risk and greenhouse gas (GHG) emissions.
The SEC acting Chief Accountant, Paul Munter, emphasized the SEC’s focus on auditor responsibility for fraud detection in a statement issued on October 11, 2022. This statement and other statements from various regulators, such as the PCAOB, indicate heightened awareness and focus on fraud risk. The statement addressed the following: (1) auditor’s responsibilities with respect to fraud, including observations of some auditor shortcomings; (2) how the auditor’s responsibilities are incorporated currently in the PCAOB standards, including the PCAOB’s quality control standards; and (3) reminders on good practices. Mr. Munter’s comments were a reminder for auditors to exercise “professional skepticism when determining which types and amount of audit procedures to apply.” Auditors should include unexpected, new audit procedures over high‐risk areas and consider how technology can assist in applying the “fraud lens”.
Non‐GAAP measures have continued to be a hot topic the past few years. In response to persistent problems with non‐GAAP measures, the SEC’s Division of Corporation Finance (CorpFin) issued an update to Non‐GAAP Financial Measures Compliance and Disclosure Interpretations on December 13, 2022. The Compliance and Disclosure Interpretations (CDIs) were originally issued in May 2016. The SEC noted may have misled or abused non‐GAAP that may obfuscate or confuse investors who are trying to better understand a company’s financial health and operations. The latest updates are related to specific questions (Questions 100.01, 100.04—100.06 and 102.10(a)(b)(c)) to provide additional transparency into how the staff approaches non‐GAAP measures when reviewing company documents.
The Federal Reserve Board (FRB), FDIC, and OCC issued an interagency statement on December 22, 2022 which states that the federal banking agencies will continue to exercise discretion to not take enforcement action against either an asset manager that is a principal shareholder of a bank, or a bank for which an asset manager is a principal shareholder, with respect to extensions of credit by the bank to the related interests of such asset manager that otherwise would violate Regulation O. The prior interagency statement was issued on December 17, 2021 and was set to expire on January 1, 2023. This Statement extends the expiration of the no‐action position previously provided until the sooner of January 1, 2024, or the effective date of a final FRB rule having a revision to Regulation O that addresses the treatment of extensions of credit by a bank to fund complex‐controlled portfolio companies that are insiders of the bank.
The following includes updates to FASB exposure drafts and projects outstanding as of December 31, 2022.
In August 2022, the FASB began deliberating its project on the accounting for and disclosure of digital assets. Specifically, the Board tentatively decided that a digital asset held by an entity that meets all the following criteria would be within the scope of the project:
The Board also tentatively decided that the scope of the project would apply to all entities. However, the Board acknowledged that it may need to address industry‐specific issues in the future. Given its decision to limit the scope of the project to certain digital assets, the Board decided to change the name of the project to the “Accounting for and Disclosure of Crypto Assets.” The accounting for crypto assets, including potential measurement alternatives for such assets, will be discussed at a future Board meeting. Because the FASB decided to include in the scope’s project only digital assets that are considered fungible crypto assets that meet the definition of an intangible asset, questions remain on the accounting for other digital assets that are not within the scope of the project. For example, the accounting for and disclosure of nonfungible tokens (NFTs) will be outside the scope of the project on crypto assets. As a result, financial statement preparers accounting for transactions involving NFTs will need to fully understand the rights represented and what has actually been transferred.
In August 2022, the FASB issued a proposed ASU on use of the proportional amortization method to account for investments in tax credit structures. The proposed ASU would permit reporting entities to elect to account for their tax equity investments, regardless of the program from which the income tax credits are received, using the proportional amortization method if certain conditions are met.
In 2014, the FASB issued a standard that introduced an option allowing reporting entities to elect to apply the proportional amortization method to account for investments made primarily for the purpose of receiving income tax credits and other income tax benefits. The guidance limited the proportional amortization method to investments in low‐income housing tax credit (LIHTC) structures. Under the proportional amortization method, an entity amortizes the initial cost of the investment in proportion to the income tax credits and other income tax benefits received and recognizes the net amortization and income tax credits and other income tax benefits in the income statement as a component of income tax expense (benefit). Investments in other tax credit structures are typically accounted for using the equity or cost method, which results in investment gains and losses and tax credits being presented gross on the income statement in their respective line items.
In recent years, stakeholders have asked the FASB to allow reporting entities to elect to apply the proportional amortization method to tax equity investments that generate tax credits through other programs, such as the New Markets Tax Credit (NMTC) program, the Historic Rehabilitation Tax Credit (HTC) program, and Renewable Energy Tax Credit (RETC) programs. These stakeholders noted that the proportional amortization method provides financial statement users with a better understanding of the returns from investments that are made primarily for the purpose of receiving income tax credits and other income tax benefits than the equity or cost methods.
The amendments in this proposed ASU would allow reporting entities to elect to account for their tax equity investments using the proportional amortization method if certain conditions are met, regardless of the program from which the income tax credits are received. The election would be on a program‐by‐program basis. The proposed amendments would also require disclosures to enable financial statement users to better understand the nature and effects of the entity’s investments that generate income tax credits and
other income tax benefits.
In May 2022, the FASB added a project to its technical agenda on the recognition, measurement, presentation and disclosure of environmental credits that are legally enforceable and tradeable, following a review of the staff’s initial research on accounting for environmental credits, including feedback that there is diversity in practice in this area. The project will address the accounting by participants in compliance and voluntary programs, as well as by creators of environmental credits. In addition, the FASB added a project on consolidation for business entities to its research agenda after removing its project on consolidation reorganization and targeted improvements from the technical agenda. The new project will explore whether a single consolidation model could be developed for business entities. In response to feedback received on the FASB’s Invitation to Comment, Agenda Consultation, the FASB also added a project on financial key performance indicators to the research agenda to explore standardizing the definitions of financial key performance indicators.
In 2016, the FASB issued a proposed ASU that would modify existing and add new income tax disclosure requirements. After passage of the Tax Cuts and Jobs Act in December 2017, the FASB, in 2019, issued a revised proposed ASU. The revised proposed ASU would (1) remove disclosures that no longer are considered cost beneficial or relevant and (2) add disclosure requirements identified as relevant to financial statement users. On March 23, 2022, the FASB discussed the project’s next steps.
The Emerging Issues Task Force met on December 1, 2022 and deliberated the following topic:
The FASB meeting to consider ratification of the final consensus on Issue 21‐A is tentatively scheduled for January 2023.
The Private Company Council (PCC) met on September 22 and September 23, 2022. Below is a summary of topics addressed by the
PCC at the meeting:
The following table contains significant implementation dates and deadlines for standards issued by the FASB and others.
For the Quarter Ended December 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, 2021, and interim periods within fiscal years beginning after December 15, 2022.‐all other entities]. We adopted the standard on January 1, 2022 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. Upon adoption, the Company recorded a right‐of‐use asset and lease liability on the balance sheet; however, it does not have a material impact on the Company’s financial statement See additional disclosure in Note X.
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 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. [For entities that have adopted ASC 842, the amendments are effective upon issuance, and the transition requirements are the same as those in ASC 842.] [For entities that have not adopted ASC 842, the effective date and transition requirements will be the same as the effective date and transition requirements in ASC 842.] 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 2018‐17 ― 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 [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 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, 2021, and interim periods within fiscal years beginning after December 15, 2022.‐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 he 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 2020‐07 ― Applicable to not‐for‐profit entities:
In September 2020, the FASB issued guidance to improve financial reporting on contributed nonfinancial assets, also known as gifts in‐kind donations. The amendments will be effective for annual periods after June 15, 2021 and interim periods within fiscal years after June 15, 2022. Early adoption is permitted. The Organization 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 entities that elect to apply the portfolio layer method of hedge accounting
In March 2022, the FASB issued amendments which are intended to better align hedge accounting with an organization’s risk management strategies. 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]. Early adoption is permitted. The Company does not expect these amendments to have a material effect on its financial statements.
ASU 2022‐02 ― Applicable to entities that hold financial assets and net investment in leases that are not accounted for at fair value through net income:
In March 2022, the FASB issued amendments which are intended to improve the decision usefulness of information provided to investors about certain loan re‐financings, restructurings, and write‐offs. The amendments are effective for [fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. ‐ entities that have adopted the amendments in ASU 2016‐13] [fiscal years beginning after December 15, 2022 including interim periods within those fiscal years.‐entities that have not yet adopted the amendments in ASU 2016‐13]. Early adoption is permitted. The Company does not expect these amendments to have a material effect on its financial statements.
ASU 2022‐03 ― Applicable to all entities:
In June 2022, the FASB issued amendments to clarify the guidance on the fair value measurement of an equity security that is subject to a contractual sale restriction and require specific disclosures related to such an equity security. The amendments are effective for [fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. ‐ public business entities] [fiscal years beginning after December 15, 2024 including interim periods within those fiscal years. ‐ all other entities]. Early adoption is permitted. The Company does not expect these amendments to have a material effect on its financial statements.
ASU 2022‐06 ― Applicable to all entities:
In December 2022, the FASB issued amendments to extend the period of time preparers can use the reference rate reform relief guidance under Accounting Standards Codification (ASC) Topic 848 from December 31, 2022, to December 31, 2024, to address the fact that all London Interbank Offered Rate (LIBOR) tenors were not discontinued as of December 31, 2021, and some tenors will be published until June 2023. The amendments are effective immediately for all entities and applied prospectively. 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 December 31, 2022, the FASB has issued the following Accounting Standard Updates during the year.
The information provided in this communication is of a general nature and should not be considered professional advice. You should not act upon the information provided without obtaining specific professional advice. The information above is subject to change.
