The Financial Accounting Standards Board (“FASB”) is providing some relief to private companies affected by COVID-19 by approving a delay in the implementation of certain accounting standards.
The FASB acknowledges that many non-public business entities rely heavily on their outside accountants and auditors to assist with implementation of complex accounting standards. Due to the pandemic, many companies are still closed to employees, and some that may be open for employees may still be closed to outside vendors. Based on this, companies may not be able to work closely with their accountants and auditors.
In May 2020, the FASB reviewed a request for the delay in the implementation of certain accounting standards. This delay was approved and an accounting standard update (“ASU”) was issued effectively on June 3, 2020. This ASU (2020-05) impacts the following items:
- Accounting Standards Codification (“ASC”) 606: Revenue from Contracts with Customers – For any entities that have not yet issued financial statements or made financial statements available for issuance before the effective date of ASU 2020-05 (June 3, 2020), the transition date for implementation of ASC 606 has been delayed one year. Meaning, companies may now use an effective date of annual reporting periods beginning after December 15, 2019, and interim periods within annual reporting periods beginning after December 15, 2020.
- ASC 842: Leases – For nonpublic entities, the transition date for implementation of ASC 842 has been delayed an additional year. Meaning, companies may now use an effective date of annual reporting periods beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. Early application is permitted.
The FASB determined that delaying the implementation of these significant accounting standards changes would be beneficial to companies.