Over the last several years, FASB has significantly updated its accounting guidance for financial instruments. The standards on classification and measurement and credit impairment will have the greatest effect on financial institutions with investment portfolios. The changes to hedge accounting could expand its usage for all entities, especially those that manage prepayable mortgage portfolios, use commodity components in their production process or hold municipal securities. The 2021 phaseout of the London Interbank Offered Rate (LIBOR) will be an operational challenge for entities with derivatives, loans and securitizations tied to the LIBOR rate. The targeted updates for long-duration insurance contracts will be a significant undertaking for insurers.
The table below reflects FASB’s recently approved change in effective date philosophy that allows additional implementation time for smaller public companies and private companies.