The FASB recently issued ASU No. 2018-19: Codification Improvements to Topic 326, Financial Instruments – Credit Losses. The ASU intends to clarify the scope of the amendments in ASU No. 2016-13 and to align the implementation date for nonpublic entities’ annual financial statements with the implementation date for their interim financial statements.

Previously, the FASB issued ASU No. 2016-13, which introduced the expected credit loss methodology for the impairment of financial assets measured at amortized cost (Topic 326). The amendments in ASU No. 2016-13 originally stated that the effective date for nonpublic business entities was for periods beginning after December 15, 2020 and for interim periods within fiscal years beginning after December 15, 2021. However, ASU No. 2018-19 now modifies the effective date for nonpublic entities to implement Topic 326 to be for fiscal years beginning after December 15, 2021 and interim periods within those fiscal years.

The scope of the amendments in ASU No. 2016-13 includes financial assets measured at amortized cost basis, including net investments in leases arising from sales-type and direct financing leases. Previously, there was no mention of the receivables arising from operating leases. However, ASU No. 2018-19 now specifically excludes receivables arising from operating leases from the scope of Topic 326.

The effective date and transition requirements for ASU No. 2018-19 are the same as the effective dates and transition requirements in ASU No. 2016-13 as amended.

The full text of ASU No. 2018-19 is available here.

 

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