FASB voted Wednesday to extend by one year the effective date of its revenue recognition standard to all nonpublic entities that have not yet issued their financial statements.
The board originally had proposed amending the revenue recognition standard effective date just for franchisors that are not public business entities. But feedback FASB received on the proposal related to coronavirus pandemic challenges convinced the board that a broader extension was needed.
The AICPA Technical Issues Committee (TIC), for example, suggested in a comment letter that any private company should be able to defer implementation of the revenue recognition standard for one year. TIC explained that private companies have had to turn nearly all their attention to addressing their own survival through months of decreased or nonexistent operations and that the current remote work environment makes even routine, day-to-day financial accounting tasks extremely challenging.
Board members heeded the feedback.
“They [private companies] may not have the technology or resources to effectively implement the standard,” FASB member Sue Cosper said during the board’s meeting Wednesday.
The final ASU is expected to give nonpublic entities the option of adopting the revenue recognition standard (FASB ASC Topic 606, Revenue From Contracts With Customers) on the current implementation date or deferring implementation for one year.
FASB instructed its staff to draft an Accounting Standards Update (ASU) that describes the delay; the board members indicated that they will vote in favor of the ASU on the final, written ballot.
Meanwhile, FASB considered but rejected feedback asking for a delay in the effective date for ASU No. 2018-08, Not-for-Profit Entities (Topic 958): Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made. A delay of ASU No. 2018-08 would have aligned that guidance with the revenue recognition deferral.
The board concluded that the guidance in ASU No. 2018-08 will be helpful to nonpublic entities as they account for assistance they receive related to the pandemic.
Essentially they feel that there is some good guidance in there as it relates to the CARES Act and PPP loans and other grants that are provided during this time.
FASB also clarified that public not-for-profit entities that have not yet issued their GAAP-compliant financial statements or made those financial statements available for issuance are among the entities included in the scope of the deferral of the board’s lease accounting effective date.
For more news and reporting on the coronavirus and how CPAs can handle challenges related to the outbreak, visit the JofA’s coronavirus resources page.
— Ken Tysiac (Kenneth.Tysiac@aicpa-cima.com) is the JofA’s editorial director.