The Financial Accounting Standards Board (FASB) on Wednesday declined providing private companies and certain not-for-profit organizations a third effective date delay to its leases standard.
The tentative decision came at a board meeting, where a request from the Pennsylvania Institute of Certified Public Accountants (PICPA) to delay the standard for another two years was deliberated. As a result of the ruling, the effective date for Accounting Standards Codification Topic 842 remains fiscal years beginning after Dec. 15, 2021, and interim periods within fiscal years beginning after Dec. 15, 2022, for nonpublic entities.
The PICPA cited the effects of the COVID-19 pandemic and related resource constraints among the reasons behind its request.
“Given the significant effort needed to implement ASC 842 and the remaining financial burdens and labor shortages that nonpublic entities are facing, we believe an effective date of fiscal years beginning after Dec. 15, 2021 (Jan. 1, 2022), is untenable,” the PICPA wrote in a September letter to FASB Chair Richard Jones. “… In the absence of a deferral, we believe that many nonpublic entities will opt for GAAP exceptions, which could impact their ability to obtain capital. This is not a good outcome when most private companies are in capital preservation mode.”
FASB has already twice delayed the effective date of its leases standard: in June 2020 and in November 2019. The most recent delay was prompted by the pandemic.
The standard took effect for public companies in 2019.