IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS

12 Months Ended

Dec. 31, 2020

IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS [Abstract]

IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS

NOTE 19

IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS

In June 2016, the FASB issued new guidance on the measurement of credit losses on financial instruments, to provide financial statement users with more information about expected credit losses on financial instruments. The guidance revises the incurred loss impairment methodology to reflect current expected credit losses and requires consideration of a broader range of information to estimate credit losses.  The new standard is effective for interim and annual reporting periods beginning after December 15, 2019, with early adoption permitted. The Company adopted this standard in the first quarter of 2020, which is primarily applicable to accounts receivable balances.  The Company’s credit losses on accounts receivable is minimal since we mitigate our exposure by discontinuing services in the event of non-payment.  However, due to the COVID-19 pandemic causing hardships for many utility customers, in March 2020, state government agencies issued executive orders requiring utility companies to take a number of steps to support their customers and communities, including prohibiting service disconnections for non-payment and prohibiting late fees.  In July 2020, the State of Delaware lifted its executive orders placing a moratorium on service disconnections for non-payment, with a provision requiring utilities to offer payment arrangements extending at least four months to customers.  After properly notifying customers, Artesian reinstated its late fee process in September 2020 and began administering service disconnections in October 2020 for its Delaware customers.  The State of Maryland and the Commonwealth of Pennsylvania lifted their executive orders placing moratoriums on service disconnections for non-payment effective November 2020.  The State of Maryland requires utilities to offer payment arrangements extending twelve months.  The Company experienced longer receivable cycles throughout 2020 and made an adjustment to increase the reserve for bad debt in the amount of $0.5 million.  We will continue to evaluate this adjustment amount when accounting for current expected credit losses as government agencies consider additional executive orders prohibiting late fees and service disconnections for non-payment.

In December 2019, the FASB issued new guidance on income taxes, which removes certain exceptions for recognizing deferred taxes for investments, performing intraperiod allocation and calculating income taxes in interim periods.  The guidance also reduces complexity in certain areas, including recognizing deferred taxes for tax goodwill and allocating taxes to members of a consolidated group.  This standard is effective for annual reporting periods beginning after December 15, 2020, including interim reporting periods within those annual reporting periods.  Management does not expect a material impact on the Company's financial statements due to the adoption of this guidance.