FASB to Delay Lease, Revenue Recognition Standards for Private Companies

By:
Chris Gaetano
Published Date:
May 21, 2020
The Financial Accounting Standards Board (FASB), during its meeting on May 20, agreed, in response to the global pandemic, to delay the effective date for the lease and revenue recognition standards by one year for private companies.

The FASB first floated the idea toward the end of April. Under the proposal, private companies and private not-for-profit organizations would have the option to apply the new leases standard for fiscal years beginning after Dec. 15, 2021, and to interim periods within fiscal years beginning after Dec. 15, 2022. Public not-for-profit organizations that have not yet issued financial statements would have the option to apply the standard for fiscal years beginning after Dec. 15, 2019, including interim periods within those fiscal years. (The FASB includes in this category not-for-profit organizations that have issued, or are conduit bond obligors for, securities that are traded, listed or quoted on an exchange or an over-the-counter market.)

The proposed effective date deferral for revenue recognition would have been limited to private company franchisors. Those stakeholders would have had the option to apply the new standard for annual reporting periods beginning after Dec. 15, 2019, and interim reporting periods within annual reporting periods beginning after Dec. 15, 2020.

At its May 20 meeting, the FASB approved not only delaying the effective date delay for leases, but also expanding the scope of the proposal regarding revenue recognition to any private entity that has not yet adopted the standard, not just franchisors, in response to feedback from stakeholders.

Board member James Kroeker, in voicing his approval for this expansion, said that timing was the main factor, noting that this is not a good time for companies to have to adopt a new accounting standard.

"The reason I would support the deferral for revenue recognition for privates and not-for- profits that had not yet adopted simply has to do with timing, that is, the time period in which they're trying to close their books [while] the auditors couldn't be there was perhaps the most inconvenient time, or more difficult time, in terms of adoption if someone had not yet adopted," he said.

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