FASB expands ASC 606 deferral and approves limited deferral of ASC 842
FINANCIAL REPORTING INSIGHTS |
On May 20, 2020, the FASB approved the following one-year effective date deferrals for certain entities for the following guidance in its Accounting Standards Codification (ASC):
- ASC 606, Revenue from Contracts with Customers, for which the effective date will be deferred (on an optional basis) for private companies (which includes those entities that are not public business entities [as defined in the Master Glossary of the ASC]) and not-for-profit entities that have not yet issued financial statements reflecting the adoption of ASC 606. For these entities, the FASB will defer the effective date of ASC 606 to annual reporting periods beginning after December 15, 2019, and interim reporting periods within annual reporting periods beginning after December 15, 2020. This deferral represents an expansion of the FASB’s proposed effective date deferral for ASC 606, which would have only applied to private franchisors.
- ASC 842, Leases, for which the effective date will be deferred for 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 (i.e., public not-for-profit entities) that have not yet issued (or made available for issuance) financial statements fully compliant with U.S. generally accepted accounting principles. For these entities only, the FASB will defer the effective date of ASC 842 to fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. With this approval, the FASB also clarified that the deferral applies even if a public not-for-profit entity has filed interim financial information reflecting the application of ASC 842 in the Electronic Municipal Marketplace Access system.
- ASC 842, for which the effective date will be deferred for private companies and private not-for-profit entities (i.e., not-for-profit entities other than those considered public as defined in the previous bullet point). For these entities only, the FASB will defer the effective date of ASC 842 to fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022.
ASC 842 may still be adopted early by the entities that will be affected by the related deferrals.
The deferrals are effective only upon issuance of a final ASU. During the meeting, there was an informal indication that the ASU will be issued in the coming weeks.