A version of this article previously appeared on EideBailly.com
What started out as a slow quarter for accounting standards updates (ASUs) ended with a bang with a significant change to goodwill evaluations for certain entities.
During the first quarter of 2021, the Financial Standards Accounting Board (FASB) issued three new ASUs. What is certainly appreciated by accounting and finance professionals is that each of the three 2021 ASUs provided accounting relief to entities. The first two ASUs issued in 2021 provide relief to recently effective accounting guidance for reference rate reform and revenue recognition for franchisors. The third ASU issued in 2021 establishes a new private company GAAP alternative related to the evaluation of goodwill for impairment triggering events.
In addition to assessing the impact of the new ASUs on your financial statements, you’ll likely be continuing to assess the impact of the COVID-19 pandemic and certain government programs that were created in response to the pandemic. On December 27, 2020, the Coronavirus Response and Relief Supplemental Appropriations Act 2021 (CRRSAA) was enacted and provided an additional allocation of funds to help both first round and second round Paycheck Protection Program (PPP) borrowers.
The CRRSAA also expanded the Employee Retention Credit (ERC). PPP and ERC are both unique government programs that have provided needed lifelines for entities struggling through the pandemic. The uniqueness of the programs has raised numerous questions on how to treat the programs from an accounting perspective and how the programs should be disclosed within financial statements and footnote disclosures.
What's New in 2021?
- 2021-03—Intangibles—Goodwill and Other (Topic 350): Accounting Alternative for Evaluating Triggering Events
- 2021-02—Franchisors—Revenue from Contracts with Customers (Subtopic 952-606): Practical Expedient
- 2021-01—Reference Rate Reform (Topic 848): Scope
What's Effective for Non-Public December 31, 2021, Financial Statements?
Do you know which standards updates you need to consider as you are preparing 2021 interim and year-end financial statements? The following ASUs are effective for December 31, 2021, financial statements (applicable to all entities, unless otherwise noted).
- 2020-10—Codification Improvements
- 2020-04—Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (the following update is related to Reference Rate Reform): 2021-01—Reference Rate Reform (Topic 848): Scope
- 2019-04—Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments
- 2019-02—Entertainment—Films—Other Assets—Film Costs (Subtopic 926-20) and Entertainment—Broadcasters—Intangibles—Goodwill and Other (Subtopic 920-350): Improvements to Accounting for Costs of Films and License Agreements for Program Materials (a consensus of the Emerging Issues Task Force)
- 2018-18—Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 60
- 2018-17—Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities
- 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 Purpose
- 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 (a consensus of the FASB Emerging Issues Task Force
- 2018-14—Compensation—Retirement Benefits—Defined Benefit Plans—General (Subtopic 715-20): Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans
- 2017-12—Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities (the following updates are related to Derivatives and Hedging): 2019-04—Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments; 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 Purposes
- 2016-02—Leases (Topic 842) (the following are updates related to Leases) 2020-05—Revenue from Contracts with Customers (Topic 606) and Leases (Topic 842): Effective Dates for Certain Entities; 2019-10—Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates; 2019-01—Leases (Topic 842): Codification Improvements; 2018-20—Leases (Topic 842): Narrow-Scope Improvements for Lessors; 2018-11—Leases (Topic 842): Targeted Improvements; 2018-10—Codification Improvements to Topic 842, Leases; 2018-01—Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic 842
Dive Deeper: Visit EideBailly.com to read more about each new accounting standard and their effective dates.