Key impacts
The ASU is designed to reduce the cost and complexity of applying ASC 326 (credit losses) to current accounts receivable and current contract assets arising from transactions accounted for under ASC 606 (revenue from contracts with customers). This includes those acquired in a business combination or recognized through the consolidation of a variable interest entity that is not a business if those assets arose from transactions that the acquiree or variable interest entity accounted for under ASC 606. It does this by introducing a practical expedient and an accounting policy election.
Practical expedient
The practical expedient permits an entity to assume current conditions as of the balance sheet date that do not change for the remaining life of the current accounts receivable and current contract assets. This practical expedient is available to all entities.
Accounting policy election
This election allows an entity to consider cash collection activity after the balance sheet date when estimating expected credit losses on current accounts receivable and current contract assets. The election is available to entities other than public business entities, and it may only be made if the above practical expedient is also elected.
