FASB Proposes Delay in Effective Dates for Leases and Revenue Recognition Standards for Certain Entities
The Financial Accounting Standards Board (FASB) has issued a proposed Accounting Standards Update (Exposure Draft) that includes an optional one-year delay in the effective date for certain entities in applying the new lease and revenue recognition standards. The FASB provided the Exposure Draft in response to challenges associated with the implementation of major accounting standards, which have been amplified by disruptions caused by the COVID-19 pandemic.
Accounting Standards Update No. 2016-02, Leases (Topic 842)
The Exposure Draft includes a deferral of the effective date for one year for private companies and private not-for-profit organizations, as well as public not-for-profit organizations that have not yet issued their financial statements.
Private companies and private not-for-profit organizations would have the option to apply Topic 842 for fiscal years beginning after Dec. 15, 2021.
Not-for-profit organizations 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 yet issued financial statements would have the option to apply Topic 842 for fiscal years beginning after Dec. 15, 2019.
Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606)
The Exposure Draft also includes a deferral of the effective date for one year for Topic 606 limited to franchisors that are not public businesses. The application of Topic 606 has been particularly challenging for franchisors, specifically in relation to the recognition of revenue from initial franchise fees. The deferral in the Exposure Draft is intended to provide the FASB with additional time to explore this issue.
The Exposure Draft has a shortened comment period of 15 days, which ends on May 6, 2020.
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