FASB Delays Revenue Recognition and
Lease Standards in Response to COVID-19

Matthew Boland, CPA
Focused on You. Dedicated to Your Success.
May 28, 2020

The Financial Accounting Standards Board (FASB) voted on May 20 to give private companies and not-for-profit organizations an extra year to comply with the revenue recognition and leases standards in response to COVID-19.
 
Revenue Recognition
FASB issued a proposal last month to defer the effective date of the revenue recognition and leases standards in response to the COVID-19 pandemic. Under the original proposal, the change would only affect franchisor businesses in response to complaints from some of them. FASB has decided to extend the deferral to all private companies and nonprofits. They were supposed to start applying the revenue recognition standard during the year ended December 31, 2019. Public companies have been using the revenue recognition standard since 2018.
 
“Based on feedback received from private companies and not-for-profit organizations comping with the effects of the COVID-19 pandemic, the board decided to extend the revenue recognition effective date deferral to all private companies and not-for-profits that have not yet issued their financial statements (or made them available for issuance) reflecting the adoption of the revenue recognition standard,” said Christine Klimek, FASB’s spokesperson. “A final standard is expected to be issued during the first week of June.”
 
The effective date will now be for annual reporting periods beginning after December 15, 2019, and interim reporting periods within annual reporting periods beginning after December 15, 2020. Early application will continue to be permitted.
 
Lease Accounting Standard
The new lease accounting standard took effect for public companies at the start of 2019. It was originally supposed to take effect at the beginning of 2020 or private companies and nonprofits, but FASB postponed the effective date for private companies and nonprofits last October. It will now be pushed back for another year.
 
Implementation of the leasing standard for private companies and private nonprofits will be pushed back to fiscal years beginning after December 15, 2021. For public nonprofits, the effective date for the leasing rules will be pushed to fiscal years starting after December 15, 2019, including interim periods within those fiscal years. Early adoption will continue to be permitted.

We will continue to update you on new developments. Please visit our COVID-19 Resource Page for more alerts.

Feel free to contact any member of our team at (610) 828-1900 (PA) or (732) 341-3893 (NJ) with questions. Rich Higgins, CPA, managing principal – New Jersey office can be contacted at Richard.Higgins@MCC-CPAs.com . I can be reached at Matthew.Boland@MCC-CPAs.com . As always, we are happy to help. Have a good Memorial Day weekend.

Stay safe,

Matthew Boland, CPA
Director - Accounting & Assurance
McCarthy & Company

Disclaimer: This alert is for informational purposes only and does not constitute professional advice. Information contained in this communication is not intended or written to be used as tax advice, and cannot be used by the recipient to avoid penalties that may be imposed under the Internal Revenue Code. We strongly advise you to seek professional assistance with respect to your specific issue(s).