by: George M. Wilson & Carol A. Stacey, SEC Institute<\/p>\n
We have all heard about the major projects the FASB has completed in recent years. Together with their implementation dates for public companies and allowed transition methods they are:<\/p>\n
Revenue recognition: January 1, 2018. (F\/Y\u2019s beginning after December 15, 2017)<\/strong><\/p>\n Early adoption is allowed to the original effective date, F\/Y\u2019s beginning after 12\/15\/16). Either a retrospective or modified retrospective with a cumulative effect adjustment transition may be used. Early adoption is allowed. A retrospective transition must be used. The retrospective approach includes several practical accommodations.<\/p>\n Financial Instrument Impairment: January 1, 2020 (F\/Y\u2019s beginning after December 15, 2019)<\/strong><\/p>\n Early adoption to years beginning after December 15, 2018 is allowed. The transition method is essentially a \u201cmodified retrospective approach with a cumulative effect adjustment\u201d with adjustments for certain types of financial instruments. There are strong incentives to move diligently on these transitions and to tell investors where you are in the process. And, anyway, who really wants to look unprepared?<\/strong> <\/p>\n As always, your thoughts and comments are welcome!<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":" by: George M. Wilson & Carol A. Stacey, SEC Institute We have all heard about the major projects the FASB has completed in recent years. Together with their implementation dates for public companies and allowed transition methods they are: Revenue recognition: January 1, 2018. (F\/Y\u2019s beginning after December 15, 2017) Early adoption is allowed to … Continue reading Three Years of Fun – Planning the \u201cBig Three\u201d New FASB Statement Transitions<\/span>
\nLeases: January 1, 2019. (F\/Y\u2019s beginning after December 15, 2018)<\/strong><\/p>\n
\nThe revenue recognition and lease changes have been widely discussed, but the financial instruments impairment change has not been as \u201chot\u201d a topic. It could be problematic for some companies as it will apply to all financial instruments, including accounts receivable. Many companies could face significant challenges gathering the information to move from the current incurred loss model to the new expected loss model.
\nWhile the impact of each new standard will vary from company to company, every company needs to think about how to manage these three transitions. Will it be best for your company to adopt all three at once, or will it be best to adopt them sequentially? Or perhaps mix and match a bit?
\nThere are several considerations in these implementation date decisions. How they will affect investor relations is a major issue. The time and other resources required, systems issues and ICFR impact are among the other inputs to this decision. Each company has to evaluate these considerations based on their own circumstances.
\nGiven the potential magnitude of these changes and their widespread discussion in the reporting environment, disclosures about these changes have become more and more important to users. With the recent SEC Staff Announcement<\/u><\/a> at the September EITF meeting about SAB 74 (SAB Codification Topic 11-M) disclosures, disclosing where you are in this process has become almost required. The more or less simple \u201cstandard\u201d disclosures about \u201cwe have not selected a transition method\u201d and \u201cwe do not yet know the impact\u201d may not be enough. Qualitative information about where you are in the process may be a required disclosure.<\/p>\n
\nThree years of sequential fun or big change? Spread it out or rip off the Band-Aid? Slow burn or big bang? We all get to decide what will be best for our company and our investors, the key issue is to make this decision on a timely basis!<\/p>\n