9.1 Effective Dates
ASC 326-10
65-1 The following represents the
transition and effective date information related to
Accounting Standards Updates No. 2016-13, Financial
Instruments — Credit Losses (Topic 326): Measurement of
Credit Losses on Financial Instruments, No. 2018-19,
Codification Improvements to Topic 326, Financial
Instruments — Credit Losses, No. 2019-04,
Codification Improvements to Topic 326, Financial
Instruments — Credit Losses, Topic 815, Derivatives and
Hedging, and Topic 825, Financial Instruments, No.
2019-05, Financial Instruments — Credit Losses (Topic
326): Targeted Transition Relief, No. 2019-10,
Financial Instruments — Credit Losses (Topic 326),
Derivatives and Hedging (Topic 815), and Leases (Topic
842): Effective Dates, No. 2019-11, Codification
Improvements to Topic 326, Financial Instruments —
Credit Losses, and No. 2022-02, Financial
Instruments — Credit Losses (Topic 326): Troubled Debt
Restructurings and Vintage Disclosures:
-
The pending content that links to this paragraph shall be effective as follows:
- For public business entities that meet the definition of a Securities and Exchange Commission (SEC) filer, excluding entities eligible to be smaller reporting companies as defined by the SEC, for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The one-time determination of whether an entity is eligible to be a smaller reporting company shall be based on an entity’s most recent determination as of November 15, 2019, in accordance with SEC regulations.
- Subparagraph superseded by Accounting Standards Update No. 2019-10.
- For all other entities, for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.
-
Early application of the pending content that links to this paragraph is permitted for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years.Note: See paragraph 250-10-S99-6 on disclosure of the impact that recently issued accounting standards will have on the financial statements of a registrant. . . .
9.1.1 Effective Date of ASU 2016-13, as Amended by ASU 2019-10
The effective date of ASU
2016-13, as amended by ASU
2019-10, depends on the nature of the reporting entity:
- For SEC filers,1 excluding those that meet the definition of a smaller reporting company (SRC),2 the ASU became effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years (“Bucket 1”).
- For all other entities, the ASU became effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years (“Bucket 2”).
In addition, entities were permitted to early adopt the new
guidance for fiscal years beginning after December 15, 2018, including interim
periods within those fiscal years.
9.1.2 Effective Dates of ASU 2019-04, ASU 2019-05, and ASU 2019-11
For entities that had already adopted ASU 2016-13, the
amendments in ASU
2019-04, ASU 2019-05, and ASU 2019-11 became
effective for fiscal years beginning after December 15, 2019, and interim
periods therein. Such entities were permitted to early adopt those three ASUs in
any interim period after their issuance. ASU 2019-04 states that the amendments
should be applied “on a modified-retrospective basis by means of a
cumulative-effect adjustment to the opening retained earnings balance in the
statement of financial position as of the date an entity adopted the amendments
in Update 2016-13.”
For all other entities, the effective date was the same as the
effective date in ASU 2016-13.
9.1.3 Effective Date of ASU 2022-02
For entities that had already adopted ASU 2016-13, the
amendments in ASU
2022-02 became effective for fiscal years beginning after
December 15, 2022, including interim periods within those fiscal years. For
entities that had not yet adopted ASU 2016-13, the amendments in ASU 2022-02
became effective upon adoption of ASU 2016-13.
Entities were permitted to early adopt the amendments in ASU
2022-02, including adoption in any interim period, provided that the amendments
were adopted as of the beginning of the annual reporting period that includes
the interim period of adoption. In addition, entities were permitted to elect to
early adopt the amendments to TDR accounting, as well as the related disclosure
enhancements, separately from the amendments to the vintage disclosure
requirements.
Entities had the option of applying the updated guidance on TDR
recognition and measurement by using a modified retrospective transition method,
which would result in a cumulative-effect adjustment to retained earnings, or to
adopt the amendments prospectively. If an entity elected to adopt the updated
guidance on TDR recognition and measurement prospectively, the guidance should
have been applied to modifications occurring after the date of adoption. The
amendments related to TDR and vintage disclosures should have been adopted
prospectively.
9.1.4 Emerging Growth Companies
As noted in Topic 10 of the SEC’s Financial Reporting
Manual, “Title I of the [Jumpstart Our Business Startups (JOBS)] Act, which was
effective as of April 5, 2012, created a new category of issuers called
‘emerging growth companies, or EGCs’ whose financial reporting and disclosure
requirements in certain areas differ from [those of] other categories of
issuers.” For example, under SEC rules, an EGC is not required to comply with
new or revised accounting standards as of the effective dates for PBEs and may
elect to take advantage of the extended transition provisions by applying
non-PBE (or private-company) adoption dates for as long as the issuer qualifies
as an EGC.
During the 2019 AICPA Conference on Current SEC and PCAOB
Developments, SEC Division Deputy Chief Accountant Lindsay McCord addressed
transition requirements related to the adoption of the credit losses standard
for EGCs. She clarified that ASU 2019-10 does not benefit non-SRC, EGC
registrants that plan to adopt a new standard by using Bucket 2 adoption dates
but subsequently lose their EGC status. Therefore, a registrant’s loss of EGC
status before the non-PBE adoption date (Bucket 2) would affect its adoption
date of a new standard.
In a manner consistent with the circumstances addressed in Ms.
McCord’s remarks and our understanding of the requirements, the example below
illustrates the application of the transition requirements related to the
adoption of the credit losses standard. Although not explicitly discussed by the
SEC staff, the scenario addressed in Example 9-2 further demonstrates our
understanding of the transition requirements related to situations in which a
registrant loses EGC status after the end of the year containing the Bucket 1
adoption date.
Example 9-1
Calendar-Year-End Non-SRC Registrant Loses Its EGC
Status on December 31, 2020
Assume that a non-SRC registrant is a
calendar-year-end EGC that has elected to take advantage
of the extended transition provisions and adopt the
credit losses standard by applying private-company
adoption dates (Bucket 2).
A registrant that loses its EGC status on December 31,
2020, should do the following:
- Adopt ASC 326 for the annual period beginning on January 1, 2020.
- First present the application of ASC 326 in its 2020 annual financial statements included in its 2020 Form 10-K.
- Present the application of ASC 326 in its selected quarterly financial data (SEC Regulation S-K, Item 302(a)) for its 2020 quarterly periods in its 2020 Form 10-K. Further, we believe that the registrant should provide clear and transparent disclosures that the quarterly financial data presented in its 2020 Form 10-K do not mirror the information in its 2020 Forms 10-Q for the current year.
- Present the application of ASC 326 in its quarterly interim financial statements for its comparable 2020 quarterly periods presented in Forms 10-Q in 2021.
Example 9-2
Calendar-Year-End Non-SRC Registrant Loses Its EGC
Status on December 31, 2021
Assume the same facts as in the example
above except that the registrant loses its EGC status on
December 31, 2021. The registrant should do the
following:
- Adopt ASC 326 for the annual period beginning on January 1, 2021.
- First present the application of ASC 326 in its 2021 annual financial statements included in its 2021 Form 10-K.
- Present the application of ASC 326 in its selected quarterly financial data (SEC Regulation S-K, Item 302(a)) for its 2021 quarterly periods in its 2021 Form 10-K. Further, we believe that the registrant should provide clear and transparent disclosures that the quarterly financial data presented in its 2021 Form 10-K do not mirror the information in its 2021 Forms 10-Q for the current year.
- Present the application of ASC 326 in its quarterly interim financial statements for its comparable 2021 quarterly periods presented in Forms 10-Q in 2022.
Footnotes
1
The ASC master glossary defines an SEC filer as
follows:
An entity that is required to file or
furnish its financial statements with either of the
following:
- The Securities and Exchange Commission (SEC)
- With respect to an entity subject to Section 12(i) of the Securities Exchange Act of 1934, as amended, the appropriate agency under that Section.
Financial statements for other entities
that are not otherwise SEC filers whose financial
statements are included in a submission by another SEC
filer are not included within this definition.
2
SEC Regulation S-K, Item 10(f)(1), defines an
SRC, in part, as:
[A]n issuer that is not an investment
company, an asset-backed issuer (as defined in §
229.1101), or a majority-owned subsidiary of a parent
that is not a smaller reporting company and that:
(i) Had a public float of less than $250
million; or
(ii) Had annual revenues of less than $100
million and either:
(A) No public float; or
(B) A public float of less
than $700 million.