Citing the global COVID-19 pandemic, the Financial Accounting Standards Board (FASB) has issued Accounting Standards Update (ASU) 2020-05, Revenue from Contracts with Customers (Topic 606) and Leases (Topic 842) Effective Dates for Certain Entities.
ASU 2020-05 extends the effective date of the new revenue recognition and lease accounting standards for private companies and not-for-profit organizations as follows:
- Revenue from Contracts with Customers (Topic 606):
- The effective date for Topic 606 is deferred for certain entities that have not yet issued their financial statements or made financial statements available for issuance. These entities can elect to adopt Topic 606 for annual reporting periods beginning after December 15, 2019 and for interim reporting periods within annual reporting periods beginning after December 15, 2020.
- Public business entities are not subject to this deferral.
- FASB ASC 842, Leases:
- For private companies and not-for-profits, the effective date of FASB ASC 842, Leases is deferred by one year to fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022.
- For public not-for-profit organizations that have not yet issued or made available to issue financial statements reflecting the new lease accounting guidance, they may apply the standard for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years.
- Note – Early application of FASB ASC 842 continues to be permitted.
This delay is intended to relieve some of the pressure that businesses and non-profits are under due to the ongoing pandemic.
For additional information or guidance on this deferral, the lease and/or revenue recognition standards, please contact Gray, Gray & Gray at (781) 407-0300.