The FASB Responds to COVID-19 by Delaying the Implementation of Several New Standards

The FASB Responds to COVID-19 by Delaying the Implementation of Several New Standards

Posted on

By Colin M. Hannifin, CPA, Business Assurance & Advisory Services Manager

Relief to entities struggling with the challenges presented by the ongoing COVID-19 pandemic

On Wednesday, June 3, 2020, the Financial Accounting Standards Board (the “FASB” or the “Board”) issued Accounting Standards Update (ASU) 2020-05, which delays the effective dates of the new revenue recognition standards and lease standard for certain entities. The delays were first proposed in April 2020 as a means to provide relief to entities struggling to respond to the COVID-19 pandemic and simultaneously implement the significant new accounting standard.

Revenue Recognition

ASU 2020-05 provides an option to delay the effective date for Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers for all nonpublic entities that have not yet issued financial statements reflecting the implementation of the revenue recognition standard.

Under the optional delay, nonpublic entities may elect to implement the new rules for annual reporting periods beginning after December 15, 2019, and interim reporting periods within annual reporting periods beginning after December 15, 2020. This reflects a one-year delay in the implementation of the standard and is optional.

Leases

ASU 2020-05 also provides an option to delay the required implementation date for ASC Topic 842, Leases for one additional year for the following entities:

  • Private entities, including companies and not-for-profits; and
  • Public not-for-profits, meaning any not-for-profit that has issued or is a conduit bond obligor for securities that are traded, listed, or quoted on an exchange or over-the-counter market that has not yet issued or made available financial statements.

Under the new ASU, the new lease standard is effective for private entities for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022.  This marks the second time the effective date of the lease standard has been delayed for private entities; in November 2019, the FASB issued ASU 2019-10, which provided effective date deferrals for a number of new standards, including leases.

For public not-for-profits, the new lease standard is now effective for fiscal years beginning after December 15, 2019, including interim periods within those years.

The schedule for the implementation of the new lease standards for public business entities will remain unchanged.

Conclusion

The delays are effective as of June 3, 2020, and the entities as noted above can take advantage of these delays as long as their financial statements have not been made available. The delays are optional, and if significant implementation efforts are underway, entities may find it most efficient to implement in alignment with existing implementation guidelines.

The FASB intends these optional delays to provide relief to entities struggling with the challenges presented by the ongoing COVID-19 pandemic by easing the implementation burden on short staffed and overwhelmed accounting departments. The FASB has stated it plans to continue to monitor the impact of COVID-19 and will consider additional relief from the strain of implementation if necessary. Several projects on the FASB’s agenda remain temporarily suspended so that priority may be given to addressing the impact of the global pandemic.

Questions on this topic? Contact your Keiter Representative or Email | Call: 804.747.0000. We are here to help.

Additional Resources

Revenue Recognition and other Business Assurance Topics

COVID-19 Business Resource Library


About the Author

Colin is a Business Assurance & Advisory Services Senior Manager at Keiter. He has significant experience in public accounting for both the not-for-profit and private sectors. Colin’s clients rely on him for sound advice and insights on accounting regulations and changes that may impact their business. Read more of Colin’s insights on our blog.

More Insights from Colin Hannifin, CPA


The information contained within this article is provided for informational purposes only and is current as of the date published. Online readers are advised not to act upon this information without seeking the service of a professional accountant, as this article is not a substitute for obtaining accounting, tax, or financial advice from a professional accountant.

Contact

How Can We Help You and Your Business?

Innsbrook Corporate Center
4401 Dominion Boulevard
Glen Allen, Virginia 23060

804.747.0000 or 804.273.6200

Directions