FASB Extends Implementation Deadline for New Accounting Rules
Businesses and nonprofit organizations continue to figure out new ways to drive revenue, manage expenses, and implement new measures to protect employees from COVID-19. The sudden shift to a business situation which months ago seemed impossible means there has been little time for much else. The Financial Standards Accounting Board (FASB) recognized this issue in April when they published proposed changes to various implementation dates for new accounting standards. As outlined initially, there was a proposal to extend the deadline for certain filers complying with new lease accounting and revenue recognition standards.
The proposed rule had been submitted for a routine comment period to allow regulators to consider outside perspectives. On May 20, 2020, FASB voted to extend the compliance deadline for both the lease accounting and revenue recognition standards.
It was decided during the meeting to delay ASC 606, Revenue from Contracts with Customers for any organizations that have yet to adopt the guidance. If an organization has not, however, issued its 2019 calendar year financial statements (including those with a June 30th, 2020 year-end), it may elect to wait one year before applying the revenue recognition changes. Note this extension automatically applies to both qualifying private for-profit and not-for-profit entities. Finally, early adoption is still permitted but is left to management’s discretion if they want to implement the change now or wait until issuing the 2020 financial statements.
It was also decided during the meeting to delay the implementation of ASU 2016-02, lease accounting changes, for both private companies and not-for-profit organizations. The change means that these entities now have until fiscal years starting after December 15, 2021, and for interim periods beginning after December 15, 2022, to apply the new lease rules.
Finally, there was consideration given to delaying the effective date of ASU 2018-08, Not-for-Profit Entities (Topic 958): Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made. However, the Board voted against this change, and there will be no deadline extension.
The reason for these delays is to permit companies to allocate resources towards managing through the COVID-19 crisis. While the delays will not impact businesses that have already issued financial statements with the new standards applied, it does represent welcome relief for those still working through the process. If you have questions about the applicability or impact of the above information on your business or organization or need assistance with a COVID-19 tax planning or another issue, Klatzkin can help. For additional information, click here to contact us. We look forward to speaking with you soon.
The above represents our best understanding and interpretation of the subject matter covered as of the date of this post. Things are moving at a rapid pace, and as such, information is subject to change. This material is provided for informational purposes only and is not intended to be a substitute for obtaining accounting, tax, or financial advice from an accountant.