2022 FASB Accounting Standards Updates
By Nate Jordan
In 2022, the Financial Accounting Standards Board (FASB) issued the following four Accounting Standards Updates (ASUs) that will affect financial reporting for a variety of businesses. The below offers an overview of those updates, as summarized by the FASB.
What: ASU No. 2022-01, Derivatives and Hedging (Topic 815)
Why: To expand and clarify the guidance in ASU 2017-12 in an effort to continue making targeted improvements to hedge accounting.
Who: All entities that elect to apply the portfolio layer method of hedge accounting.
When: Effective for public business entities for fiscal years beginning after 12/15/22, and interim periods within those fiscal years. Effective for all other entities for fiscal years beginning after 12/15/23, and interim periods within those fiscal years.
What: ASU No. 2022-02, Financial Instruments – Credit Losses (Topic 326)
Why: This update amends ASU No. 2016-13 to further address accounting for troubled debt restructurings and gross write-offs. Under 2022-02, accounting requirements for troubled debt restructurings by creditors under Subtopic 310-40 are eliminated, and disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty are enhanced. Additionally, the update requires that public business entities disclose current period gross write-offs by year of origination for financing receivables and net investments in leases within the scope of Subtopic 326-20.
Who: As it relates to troubled debt restructurings, all entities that have adopted 2016-13. As it relates to vintage disclosures, all public business entities with investments in financing receivables that have adopted 2016-13.
When: Effective for entities that have adopted the amendments in 2016-13 for fiscal years beginning after 12/15/22, including interim periods within those fiscal years. Entities that have not yet adopted 2016-13 will follow the effective dates specified in 2016-03.
What: ASU No. 2022-03, Fair Value Measurement (Topic 820)
Why: This update amends Topic 820 to clarify that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and is not considered in measuring fair value. Additionally, disclosure requirements include presenting the fair value of equity securities subject to contractual sale restrictions reflected on the balance sheet, the nature and duration of said restrictions, and the circumstances that could cause a lapse in the restrictions.
Who: All entities with investments in equity securities measured at fair value that are subject to a contractual sale restriction.
When: Effective for public business entities for fiscal years beginning after 12/15/23, and interim periods within those fiscal years. Effective for all other entities for fiscal years beginning after 12/15/24, and interim periods within those fiscal years.
What: ASU No. 2022-04, Liabilities – Supplier Finance Programs (Subtopic 405-50)
Why: This update requires the buyer in a supplier finance program to disclose qualitative and quantitative information regarding the terms of the program and the obligations the buyer has confirmed as valid to the finance provider in the program.
Who: All entities that use supplier finance programs for purchasing goods and services.
When: Effective for fiscal years beginning after 12/15/22, including interim periods within those fiscal years.
To learn more about these ASUs and to read the full text of the updates, please visit FASB.org. To determine how these updates may affect your business, please contact your audit and accounting advisor.
The information contained in this article is for informative purposes only and should not be relied on when making any business, legal, or other decisions. This information may be updated without notice and/or may not contain the most current information that is available related to this topic. Please consult with your advisor to determine how this information applies to your specific facts and circumstances.