FASB Votes to Delay Leasing Standard Amid Coronavirus Concerns
Private companies and not-for-profit organizations are expected to have an additional year to adopt the changes to lease accounting in ASC Topic 842, Leases. The Financial Accounting Standards Board (FASB) voted April 8 to further delay the effective date of the accounting changes to give non-public business entities and not-for-profit entities, including those that are conduit debt obligors, more time to work through the fallout from the COVID-19 pandemic and its related impacts.
Public business entities are not impacted by the proposed delay, as these entities have generally implemented the new guidance for leasing based on its previous effective date. However, not-for-profit entities that have issued or are conduit bond obligors for securities that are traded, listed or quoted on an exchange or an over-the-counter market, that have not already adopted the new leasing guidance, are set to receive a delay so that the new guidance is effective for fiscal years beginning after Dec. 15, 2019. For example, a not-for-profit entity that is a conduit bond obligor that was scheduled to adopt the new leasing guidance for its June 30, 2020 fiscal year end financial statements would receive a one year deferral to June 30, 2021 if the delay is adopted.
For all other entities that were set to adopt the new leasing guidance for annual periods beginning after Dec. 15, 2020, if the delay is finalized, these entitieswould now apply the guidance to fiscal years beginning after Dec. 15, 2021 and interim periods beginning after Dec. 15, 2022 (i.e. Calendar year Dec. 31, 2022).
The FASB’s vote is expected to be circulated shortly in a proposed accounting standard update with a 15 day comment period. After the comment period the FASB will vote on a final standard. The expected new effective dates would become effective upon issuance of a final standard by the FASB.
Other updates from the meeting includes a delay in the effective date of the revenue recognition standard for franchisors that are not public business entities to fiscal years beginning after Dec. 15, 2019 and interim periods beginning after Dec. 15, 2020.
We will continue to monitor for further developments to lease accounting and other significant accounting changes as the FASB works with stakeholders to ease burdens around the coronavirus. For questions, comments or concerns, please contact us.