In response to the unprecedented challenges currently facing the business and nonprofit communities, the FASB approved two measures on May 20, 2020, that will bring welcome relief to financial reporting for nonpublic entities.
1. Deferral of the New Revenue Standard (ASC 606): Previous guidance required nonpublic entities to adopt the new revenue standard for fiscal years beginning after December 15, 2018. The FASB approved a one-year extension to this effective date. As a result, implementation is now no longer required until fiscal years that begin after December 15, 2019. Many entities (especially those that follow the calendar year for financial reporting) have already issued financial statements under ASC 606 in accordance with the previous effective date. However, use of this one-year extension is certainly worth considering for entities with non-calendar fiscal years, many of which have not yet issued their fiscal year 2020 financial statements.
2. Deferral of the New Leasing Standard (ASC 842): Previous guidance required nonpublic entities to adopt the new leasing standard for fiscal years beginning after December 15, 2020. However, the FASB has also approved a one-year extension for this standard which means that implementation is now required for fiscal years that begin after December 15, 2021. Although this standard now seems far away, compliance with the new leasing guidance will bring significant reporting changes when it does arrive. Therefore, organizations should still plan for adequate lead time in advance of the effective date to ensure appropriate preparation.
Early adoption of the new revenue and leasing standards continues to be permitted.
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