For private companies who have not yet adopted the revenue recognition standard, (FASB ASC Topic 606, Revenue from Contracts with Customers), there is good news to report. Last week the Financial Accounting Standards Board (FASB) voted to extend the one-year effective date for all nonpublic entities that have not yet issued their financial statements. The effective date will be extended to annual reporting periods beginning after December 15, 2019, and interim reporting periods within annual reporting periods beginning after December 15, 2020. Additionally, early application will continue to be permitted.
Previously, the Board proposed amending the standard effective date just for non-public franchisors, but with recent feedback related to the coronavirus pandemic, the Board decided on a broader extension. FASB has instructed its staff to draft an Accounting Standards Update that describes the delay which will allow nonpublic entities the option of adopting the revenue recognition standard on the current implementation date or deferring implementation for one year.
This is truly great news and FASB should be applauded for considering the ripple effects businesses and management teams are facing related to survival within the current environment. For those management teams who have already adopted the standard, there is little doubt regarding the extensive number of hours and capital required to perform and document the assessment and implementation. As companies focus on managing operations, a scaled workforce, vendor and customer relationships, and remote work models the most routine, day-to-day accounting and finance tasks are becoming quite challenging. For those who have not yet adopted the standard, the extension may come as a welcome gift during a time that has brought much heartache and concern over matters more pressing than a change related to accounting and reporting.
Lastly, during the meeting last week FASB also reaffirmed its decision to amend the effective date of its lease accounting standard adoption for private companies. For private companies, the effective date will be for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022.
Again, kudos to the Board for recognizing the feedback received to make a much-needed reprieve for management teams to allow them to focus on their people and their business during this difficult time. If your company has not yet adopted the new revenue recognition or lease accounting standards and require assistance, please allow Calvetti Ferguson to serve your organization.
It can be difficult to make sense of all the new legislation passed in the wake of COVID-19. Contact us to help you navigate through this pandemic and check out our COVID-19 Resources page for more information.