On Wednesday, May 20, the Financial Accounting Standards Board (FASB) met virtually to discuss comment letter feedback on the proposed Accounting Standards Update (ASU), Revenue from Contracts with Customers (Topic 606) and Leases (Topic 842): Effective Dates for Certain Entities.
The initial proposed ASU was issued in April 2020 and would have delayed Accounting Standards Codification (ASC) Topic 842, Leases (ASC 842) for all private companies and private not-for-profit entities as well as public not-for-profit entities that have not yet issued their financial statements. In addition, the proposal would have delayed ASC Topic 606, Revenue from Contracts with Customers (ASC 606) for franchisors that are not public business entities. This proposal was issued in an effort to provide immediate relief to entities struggling with disruption as a result of the COVID-19 pandemic. This proposal was subject to a 15-day comment period.
At Wednesday’s meeting, the FASB discussed comments received on the proposed ASU and voted on several matters to be included in the draft of the final ASU. In response to comments received from the American Institute of Certified Public Accountants (AICPA) Technical Issues Committee (TIC), as well as others, the FASB voted to expand the scope of entities eligible to defer the effective date of ASC 606 by one year to include all nonpublic companies that have not yet issued their financial statements or made them available to be issued. Private companies are expected to have the option of adopting ASC 606 on the current effective date or deferring the implementation by one year.
The final ASU is expected to be issued in the first week of June 2020.
Resulting Effective Dates
ASC Topic 606, Revenue from Contracts with Customers, including subsequent amendments, for private companies:
- One-year deferral of effective date for private companies that have not yet issued their financial statements or made their financial statements available for issuance to annual reporting periods beginning after Dec. 15, 2019, and interim reporting periods with annual reporting periods beginning after Dec. 15, 2020.
ASC Topic 842, Leases, including subsequent amendments:
- One-year deferral of effective date for private companies and private not-for-profits to fiscal years beginning after Dec. 15, 2021, and interim periods with fiscal years beginning after Dec. 15, 2022.
- One-year deferral of effective date for public not-for-profit entities that have not yet issued GAAP compliant financial statements to fiscal years beginning after Dec. 15, 2019, including interim periods within those fiscal years.
Additional Matters Discussed
The FASB clarified its intent that deferral of the lease accounting standard is available for any public not-for-profit entity that has not yet issued GAAP compliant financial statements or made those financial statements available for issuance.
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