Effective Date Reminder: New Accounting Standards Applicable to Financial Institutions Which Become Effective January 1

By Jason Brooks December 15, 2020

The following table summarizes the Accounting Standards Updates (ASUs) previously issued by the Financial Accounting Standards Board (FASB) which become effective and require adoption by calendar year-end financial institutions January 1, 2021.

This schedule is provided as a quick-reference guide and is not intended as a substitute for reading the ASUs. Some effective date and transition requirements have been paraphrased by the author. For more information or a discussion on how these or other future standards may impact your institution, contact Jason Brooks, BNN audit supervisor, or your BNN advisor at 800.244.7444.

Effective January 1, 2021 for:

ASU #	Title	Securities and Exchange Commission (SEC) Filers	Public Business Entities (PBE)	Nonpublic Business Entities	Summary
2017-04	Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment	Previously Adopted	X		These amendments eliminate Step 2 from the goodwill impairment test. The annual, or interim, goodwill impairment test is performed by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. In addition, income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit should be considered when measuring the goodwill impairment loss, if applicable.   The amendments also eliminate the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary.
2017-12 (as amended by 2019-10)	Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities	Previously Adopted	Previously Adopted	X	These amendments refine and expand hedge accounting for both financial (e.g., interest rate) and commodity risks. Its provisions create more transparency around how economic results are presented, both on the face of the financial statements and in the footnotes. It also makes certain targeted improvements to simplify the application of hedge accounting guidance.
2018-14	Compensation—Retirement Benefits—Defined Benefit Plans—General (Subtopic 715-20): Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans	Previously Adopted	Previously Adopted	X	These amendments modify the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans by removing and adding certain fair value disclosures.
2018-15	Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract	Previously Adopted	Previously Adopted	X	These amendments align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal use software license). The accounting for the service element of a hosting arrangement that is a service contract is not affected by these amendments.
2018-16	Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting	Previously Adopted	Previously Adopted	X	The new ASU adds the Secured Overnight Financing Rate as a U.S. benchmark interest rate to facilitate the transition away from LIBOR and to provide sufficient lead time for entities to prepare for changes to interest rate hedging strategies for risk management and hedge accounting purposes.
2018-17	Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities	Previously Adopted	Previously Adopted	X	The new guidance supersedes the private company alternative for common control leasing arrangements issued in 2014 and expands it to all qualifying common control arrangements. Under the new standard, a private company could make an accounting policy election to not apply VIE guidance to legal entities under common control (including common control leasing arrangements) when certain criteria are met. This accounting policy election must be applied by a private company to all current and future legal entities under common control that meet the criteria for applying the alternative. A private company will be required to continue to apply other consolidation guidance, specifically the voting interest entity guidance.
2019-12	Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes	X	X		This ASU simplifies the accounting for income taxes by removing the following exceptions: (1) Exception to the incremental approach for intra-period tax allocation; (2) Exceptions to accounting for basis differences when there are ownership changes in foreign investments; and (3) Exception in interim period income tax accounting for year-to-date losses that exceed anticipated losses.   This ASU also improves financial statements preparers’ application of income tax-related guidance and simplifies GAAP for: (1) Franchise taxes that are partially based on income; (2) Transactions with a government that result in a step up in the tax basis of goodwill; (3) Separate financial statements of legal entities that are not subject to tax; and (4) Enacted changes in tax laws in interim periods.
2020-08	Codification Improvements to Subtopic 310-20, Receivables—Nonrefundable Fees and Other Costs	X	X		This ASU clarifies that an entity should reevaluate whether a callable debt security is within the scope of ASC paragraph 310-20-35-33 for each reporting period.

For a listing of accounting pronouncements which became effective in 2020 and should be reflected in financial statements issued for the year ended December 31, 2020, as well as guidance issued but not yet effective, please refer to our most recent annual illustrative financial statements which may be downloaded here.