The Financial Accounting Standards Board on Wednesday finalized effective date delays to standards affecting revenue recognition and leases in response to the coronavirus pandemic.
The delays were first approved unanimously by FASB at a virtual board meeting in April. The board completed its redeliberations on the proposed changes at a meeting on May 20 before directing staff to draft a final Accounting Standards Update (ASU 2020-05).
The ASU delays the effective dates of Topic 606 (Revenue from Contracts with Customers) and Topic 842 (Leases) by one year for certain companies and organizations.
“The FASB issued the ASU to allow certain companies and organizations who have not yet applied the revenue recognition and leases guidance to delay their implementation by one year,” said outgoing FASB Chairman Russell Golden in a statement. “We believe the deferral will provide these stakeholders a measure of relief during this unprecedented time.”
The ASU permits a one-year delay for Topic 606 for private companies and not-for-profit organizations that have not yet applied the revenue recognition standard to do so for annual reporting periods beginning after Dec. 15, 2019, and interim reporting periods within annual reporting periods beginning after Dec. 15, 2020. The delay originally applied specifically to franchisors that are not public business entities before being widened following a comment period.
“Based on feedback from our stakeholders, the FASB amended our original proposal that would have limited the revenue recognition delay to private company franchisors,” noted Golden.
With regard to Topic 842, the ASU offers a one-year delay for private companies and private not-for-profit entities. The standard will now take effect for the aforementioned for fiscal years beginning after Dec. 15, 2021, and interim periods within fiscal years beginning after Dec. 15, 2022. FASB said public not-for-profit organizations that have not yet issued (or made available to issue) financial statements reflecting the adoption of the lease guidance may apply the standard for fiscal years beginning after Dec. 15, 2019, including interim periods within those fiscal years.
Early adoption of each standard will still be accepted.
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FASB finalizes leases, rev rec delays prompted by coronavirus