The votes are in: Private companies and smaller reporting public companies are getting more time to work through some complex accounting changes, including the updates to lease accounting.

On October 16, the Financial Accounting Standard Board affirmed its decision to delay the leasing, credit loss impairment, and hedge accounting standards for private companies, smaller reporting companies, and not-for-profit organizations. The effective dates below will become official when the FASB releases a written ballot (which is expected sometime in November):

  • Leasing (ASC Topic 842) - Financial reporting years beginning after Dec. 15, 2020 for private companies (Generally calendar year 2021). Leases is already effective for public companies.
  • Financial Instruments - Credit Losses (ASC Topic 326) - Financial reporting years beginning after Dec. 15, 2019 for SEC filers except for smaller reporting companies. Financial reporting years beginning after Dec. 15, 2022 for all other companies (Calendar year 2023).
  • Hedging (ASC Topic 815) - Financial reporting years beginning after Dec. 15, 2020 for private companies (Calendar year 2021). Hedging is already effective for public companies.

Large public company implementation dates will remain the same. The FASB voted to delay the accounting standard in large part because the accounting standards proved difficult to implement for public companies. U.S. Securities and Exchange Commission (SEC) filers (including designated smaller reporting companies) are adopting the leasing standard in the 2019 calendar year and found the lease-by-lease evaluation needed to apply the standard to be time intensive. Software and other technology solutions that could help expedite the review are still emerging. Financial services organizations had also asked for more time for the changes to credit loss accounting. The current expected credit loss (CECL) model in the accounting change will be particularly complex for financial institutions.

With the effective date delay, it might be tempting to put the lease, credit loss, and hedging accounting standards on the back burner. Your organization should resist that urge, particularly when it comes to the changes to lease accounting. The implementation date delay can only help with adopting the leasing standard if your organization can put the extended time to use. Here’s what you can do to make sure your leasing standard implementation stays on track.

Lease Accounting Timeline

Changes to ASC Topic 842 move lease accounting to a principles-based standard that will require more robust disclosures than legacy U.S. Generally Accepted Accounting Principles (U.S. GAAP) and add an asset and liability for operating leases for lessees. To make the adoption of the lease accounting standard easier, lessee companies may want to break it down into smaller components. One approach would be to divide the full leasing standard adoption into a three-year effort.




- Train employees

- Take inventory of your leases

- Evaluate the impact

- Educate financial statement users about the impact

- Modify loan agreements

- Create policies and controls

- Determine transition adjustments

- Gather disclosure information

- Adopt the new standard

Companies — particularly organizations that are leasing large amounts of space or equipment — should be using the remainder of 2019 to get a clear picture of the impact the lease accounting changes. Lessor companies will also be affected by the changes but it is expected that lessors will experience less of a financial statement impact than lessee companies.

For More Information

If you have specific comments, questions, or concerns about what the delay to the leasing standard or any of the other complex accounting standards means for your organization, please contact us

Why Change Auditors

Published on October 22, 2019