The Financial Accounting Standards Board (FASB) voted on May 20 to extend the effective date of the revenue recognition standard for all nonpublic entities that have yet to issue their financial statements by one year. The Accounting Standards Update (ASU) regarding the matter is still in draft but is expected to pass upon final vote.
Initially, the board proposed amending the effective date solely for franchisors that are nonpublic entities, but feedback on the proposal encouraged the board to increase the extension to all nonpublic entities. Such feedback argued that in light of the COVID-19 pandemic, companies are having to focus nearly all their attention on basic survival of the company. Given such changes as reduced or ceased operations and the complete overhaul of operations into facilitating remote work, many companies are simply unable to keep up with even the most basic accounting tasks.
As they took in feedback, the board decided asking private companies to spread their already-strained resources even thinner and implement new technologies when there is already so much uncertainty would be ineffective and unreasonable.
The final ASU is expected to give private entities the option to adopt the revenue recognition standard on the current date or to defer implementation for one year.
Conversely, FASB rejected feedback asking for a delay in the effective date for ASU No. 2018-08, Not-for-Profit Entities (Topic 958): Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made. Rather than align this guidance with the revenue recognition deferral, the board determined the guidance in ASU No. 2018-08 would be helpful to nonpublic entities as they account for the pandemic-related assistance they receive.
FASB also asserted its decision amending the effective date of the lease accounting standard for private companies and not-for-profits, and early adoption is permitted. For these private companies and not-for-profits, the effective date is for fiscal years beginning after December 15, 2021 and for interim periods within fiscal years that begin after December 15, 2022.
Consult with your E. Cohen advisor to determine how these changes could affect your business. For more information, email firstname.lastname@example.org or call 301-691-3600.