💼 The Backstory
The Financial Accounting Standards Board (FASB) and the Private Company Council (PCC) have been listening to the concerns of private companies and not-for-profit entities. These groups have been vocal about the high costs and complexities associated with estimating credit losses for accounts receivable and contract assets.
Specifically, the current guidance under Topic 326, Financial Instruments—Credit Losses (CECL), is a pain point. Stakeholders argue that analyzing macroeconomic data for short-term receivables is like using a sledgehammer to crack a nut—it’s overkill and doesn’t materially affect the allowance for these receivables.
🛠️ The Proposal
To cut through the red tape, the FASB is proposing amendments that introduce a practical expedient and an accounting policy election specifically for private companies and certain not-for-profits.
What does this mean? Essentially, it would simplify the process of estimating credit losses for short-term receivables, making life easier for preparers without sacrificing the quality of information for investors and other financial statement users.
🗓️ Mark Your Calendar
The FASB is inviting stakeholders to review and comment on the proposed Accounting Standards Update (ASU) by January 17, 2025.
"Your feedback is crucial in shaping standards that work for everyone," says the FASB.
The full proposal, along with details on how to submit your comments, is available on the FASB's website.
