The Financial Accounting Standards Board released the draft of its proposed Accounting Standards Update to clarify the transition for non-public business entities (non PBEs) under the current expected credit loss model, or CECL.
“The proposed ASU addresses areas of uncertainty brought to our attention by our stakeholders,” FASB Chairman Russell G. Golden said in a news release. “It is intended to reduce transition complexity and represents our ongoing commitment to support a successful transition to our standards.”
The FASB said stakeholders have until Sept. 19 to review and provide comment on the proposed changes.
As noted earlier, the FASB intends to align the implementation date for non-PBEs’ annual financial statements with the implementation date for their interim financial statements so that these entities implement CECL for periods after Dec. 15, 2021. For entities reporting on a calendar-year-end basis, this essentially provides them with 90 more days to report reserve levels in accordance with the standard beginning in Q1 2022 instead of Q4 2021.
The proposed ASU also clarifies that receivables arising from operating leases are not within the scope of the credit losses standard but instead should be accounted for under ASU No. 2016-02, Leases (Topic 842).
Additional Resources
Whitepaper: Practical CECL Transition: Discounted Cash Flow
On-demand Webinar: Best Practices for Running and Validating a CECL Model
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