The Financial Accounting Standards Board (FASB) voted on Wednesday, May 20 to delay the effective date of the Revenue Recognition Standard by one year for all nonpublic companies who have not issued financial statements yet. FASB had originally proposed a delay only for franchisors, but comment letters received related to the proposed amendment asked FASB to consider an extension to a broader population of companies, namely, all private companies who had not issued their financial statements yet.
The overarching theme of the comment letters was the reality that private companies have had to turn nearly all their attention to addressing their survival through months of decreased or nonexistent operations. In addition, the current remote work environment makes even routine, day-to-day financial accounting tasks extremely challenging. Many private companies need to work with their outside accountants to guide them through the implementation of new and complex standards. The “stay home stay safe” orders and categorization of essential and non-essential businesses has made it difficult to get the assistance needed to adopt the new accounting
In their meeting on Wednesday, the FASB showed their ability to consider the needs of non-public entities. Each member expressed empathy for the position that companies find themselves in, as communicated in many of the comment letters. A final ASU will be issued in the coming weeks that is expected to give nonpublic entities the option to adopt the revenue recognition standard (FASB ASC Topic 606, Revenue From Contracts With Customers) as of the date that is currently in place or to delay implementation for one year.
In this meeting the FASB also affirmed their decision to delay the effective date of the lease accounting standard for non-public companies and not-for-profit entities until fiscal years beginning after December 15, 2021 with early adoption permitted.
The above represents our best understanding and interpretation of the material covered as of the date of this post. Things are moving at a rapid pace, and as such, information is subject to change. This information is provided for informational purposes only and is not intended to be a substitute for obtaining accounting, tax, or financial advice from an accountant.