FASB Grants Delay for Revenue Recognition and Leases Standard

In a recent and welcomed move, the Financial Accounting Standards Board (FASB) approved a one-year deferment for private companies and nonprofit organizations to comply with the new accounting rules for revenue recognition and leases as a result of the ongoing challenges surrounding the pandemic.

Revenue Recognition Standards

While public companies have been using the revenue standard since 2018, private companies were on target to implement the new standard by the end of this year. However, the impact of the health crisis has caused companies to voice concerns over the foreseen difficulties needed to implement extensive changes while adjusting to company-wide remote work environments.

This is the second time FASB has delayed the revenue recognition standards, as compliance was originally intended for public companies by 2017 and private companies by 2018.

Under the new extension date, private companies and nonprofits that have not already implemented the new standards are now required to do so for annual reporting periods beginning after Dec. 15, 2019, and interim reporting periods within annual reporting periods after Dec. 15, 2020. Companies are permitted to adopt early application.

The new revenue recognition standard is intended to streamline how companies account for revenue from sales and services.

Leases Standard

In the recent notice, FASB is also giving private companies and nonprofits a one-year extension to implement the new leases standard, which includes placing operating leases on balance sheets.

The effective date for private companies and nonprofits is now moved to fiscal years beginning after Dec. 15, 2021 and interim periods within fiscal years beginning after Dec. 15, 2022. Public nonprofits are required to implement leasing rules starting in fiscal years after Dec. 15, 2019.

The leases standard was placed into effect for public companies in 2019 and was intended to have an effective date of the beginning of this year for private companies and nonprofits before it was recently extended.

Next Steps

Contact me at dmcgrew@bpw.com or (805) 963-7811 for any questions regarding the new extension dates for accounting standards and leases.