Updated: June 4, 2020 at 12:30 PM
On Wednesday, May 20, 2020, the Financial Accounting Standards Board (FASB) voted to extend its revenue recognition standard (FASB ASC Topic 606, Revenue From Contracts With Customers) effective date by one year for all private entities that have not yet issued their financial statements. On June 3, 2020, FASB issued an Accounting Standards Update (ASU), ASU 2020-05, so the delays mentioned below regarding revenue recognition and lease accounting effective dates are now officially part of U.S. generally accepted accounting principles (GAAP).
FASB’s original intention was to extend the effective date only for franchisors that are not public business entities; however, the Board decided that a broader extension was needed after receiving feedback from the AICPA Technical Issues Committee (TIC) and other sources regarding businesses that have suffered hardships due to the COVID-19 pandemic.
The goal of the extension is to provide private businesses more time to recover from the unforeseen challenges brought on by the outbreak, as well as adopt the technology and resources needed to implement the Standard.
The final Accounting Standards Update (ASU) will provide nonpublic entities the option of adopting the revenue recognition standard on the current implementation date (annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019) or to defer implementation for up to one year.
Additionally, FASB has amended the effective date of its lease accounting standard for private companies and not-for-profit organizations. The effective date for private companies and private not-for-profits will be for fiscal years beginning after December 15, 2021 and interim periods within fiscal years beginning after December 15, 2022. The effective date for pubic not-for-profits (those that have issued or are conduit obligors for securities that are traded, listed or quoted on an exchange or an over-the-counter marker) that have not yet issued financial statements or made them available for issuance will be for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years.
Public not-for-profits that have not yet issued their GAAP-compliant financial statements or made them available for issuance are included in the scope of the lease accounting effective date deferral.
Disclaimer: This communication is intended to provide general information on legislative COVID-19 relief measures as of the date of this communication and may reference information from reputable sources. Although our Firm has made every reasonable effort to ensure that the information provided is accurate, we make no warranties, expressed or implied, on the information provided. As legislative efforts are still ongoing, we expect that there may be additional guidance and clarification from regulators that may modify some of the provisions in this communication. Some of those modifications may be significant. As such, be aware that this is not a comprehensive analysis of the subject matter covered and is not intended to provide specific recommendations to you or your business with respect to the matters addressed.