The FASB issued a proposed ASU in April, for which the comment period closed May 6, 2020. At its May 20, 2020 meeting, the FASB voted to approve the proposed deferrals of the effective date for ASC 842, Leases (“ASC 842”), and ASC 606, Revenue from Contracts with Customers (“ASC 606”), for certain entities. In addition, the Board stated its intent to finalize its projects on convertible debt and derivatives and not-for-profit (NFP) reporting at the June 10th Board meeting.
This summary is based on our observation of the Board’s meeting and is subject to change once the FASB issues a final Accounting Standards Update (ASU).
After considering feedback from stakeholders, the Board voted to approve the deferral of the effective date for ASC 842 for private companies and certain not-for-profit entities (“NFPs”) for one year. For private companies and private NFPs, the leasing standard will be effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. For public NFPs, the leasing standard will be effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years.
Notably, the FASB also voted to approve the deferral the effective date for ASC 606, Contracts with Customers, for one year for all privately held entities that have not yet issued financial statements as of the date the final ASU is issued. This expands the scope of the deferral from the original proposal, which would have benefitted only privately-held franchisors. As a result, private entities in any industry that haven’t issued financial statements can elect to defer the adoption of the revenue standard to annual periods beginning after December 15, 2019 and interim reporting periods within annual reporting periods beginning after December 15, 2020.
The Board also considered whether to defer ASU 2018-08, Not-For-Profit Entities (Topic 958): Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made, but ultimately rejected such deferral.
Early adoption would continue to be allowed for each of these standards. A final ASU is expected shortly.
The FASB previously indicated a decision to temporarily delay many of its current standard-setting projects that are not yet effective, to allow entities more time to focus on the pressing issues they are currently facing and to provide resources to assist entities with technical questions.
At the May 20th meeting, the Board announced its intent to finalize the following two projects at its June 10th meeting:
- Not-for-Profit Reporting of Gifts-in-Kind
- Distinguishing Liabilities from Equity (Including Convertible Debt)
For more information please contact Samuel Evans, CPA at SEvans@hancockaskew.com.