The Financial Accounting Standards Board (“FASB”) members voted unanimously to propose moving back the effective date for lease accounting and two other major new accounting standards until January 1, 2021.
The FASB is the independent, private-sector, not-for-profit organization that establishes financial accounting and reporting standards for public and private companies and not-for-profit organizations that follow Generally Accepted Accounting Principles (“GAAP”).
One accounting standard that will be affected is ASC 842 (Lease Accounting) for privately-held companies, non-profits, and small-reporting companies.
The FASB process requires a formal proposal for public comment before finalizing the new effective dates. For private companies, ASC 842 is currently scheduled to take effect for annual financial reporting periods starting after Dec. 15 (or after Jan. 1, 2020 for calendar periods), and interim periods after Dec. 15, 2020.
For public companies, the new leasing standard took effect in January 2019, but several organizations had been calling for postponing the effective date for private companies. In May 2019, the American Institute of CPAs (“AICPA”) formally asked FASB to push back the effective date, calling lease accounting “significant and complex.”
The AICPA cited, among other things, the overlap with the implementation of FASB’s new revenue recognition standard, which became effective January 2019 and the struggles public companies had complying with the new lease accounting rules.
In a recent poll, Deloitte found that only 30% of private companies planned to adopt ASC 842 on schedule while 33% said they were unprepared to comply and 44% said they were just somewhat prepared.
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