Most Private Companies Have Not Adopted New Revenue Rules, Are Unlikely to Adopt Lease Rules on Time
A majority of private companies have not yet started to adopt new revenue accounting rules that took effect in January 2019 for that sector, nor do they plan to adopt lease accounting by its 2020 effective date, according to advisory discussions by FASB’s Private Company Council (PCC). The PCC’s survey revealed that only 1% of private companies have completed adoption of Accounting Standards Codification Topic 606, “Revenue from Contracts with Customers;” 10% have made significant progress, 37% have recently started, and 52% have not yet started. The adoption lag might be due to change fatigue stemming from controllers and CFOs juggling multiple demands, PCC members said during a June 24 meeting. “I think the change fatigue is more encompassing than just that GAAP changes; it’s going to be whether it’s the tax, regulatory changes, technology, everything,” Jeremy Dillard, partner with SingerLewak LLP in Los Angeles, said. “Most of the clients I’m dealing with in the middle market space—the controllers and the CFOs are juggling multiple demand; they’re trying to keep up with all of those changes.” Topic 606 was issued in 2014, and was effective 2018 for public companies and 2019 for private companies. The standard eliminates hundreds of pieces of industry-specific revenue guidance and replaces them with a principles-based five-step model for reporting revenues earned from certain types of contracts. The rules took more than a decade to develop.
Proposal to Amend and Defer Insurance Accounting Rules Issued
On June 26, the IASB proposed to amend its first comprehensive insurance standard and defer the effective date from 2021 to 2022. Insurers will incur some costs, but the changes would enable investors to better understand their operations, the board said. “Moving to IFRS 17 is a big task, and this proposed package of targeted amendments will help insurers in their ongoing implementation of the new standard,” IASB Chairman Hans Hoogervorst said in a statement. IFRS 17, Insurance Contracts, was issued in May 2017. The proposal would amend that standard in areas related to acquisition costs, profit from investment services, risk mitigation, reinsurance contracts held, and presentation of insurance contract assets and liabilities, as well as provide options for transitioning. Companies should submit comments on the proposed revisions by September 25.
Rules for Retirement Savings Plans that Allow Tax Deferral of Wages Being Revised
State and local governments can now weigh in on a proposal aimed at requiring them to apply pension accounting rules to some retirement plans offered by tax-exempt organizations that provide more flexibility than traditional benefit plans, including Internal Revenue Code (IRC) section 457 plans. These plans are popular forms of retirement savings that allow employees to defer taxation of wages to a future year. If finalized, the changes would enhance the relevance, consistency, and comparability of accounting and financial reporting by pension plans, including section 457 plans, and by the governments that provide benefits through those plans, the GASB said. Government entities have until September 27 to comment on the changes.