United States

FASB finalizes limited effective-date deferrals for ASC 606 and 842

FINANCIAL REPORTING INSIGHTS  | 

On June 3, 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2020-05, Revenue from Contracts with Customers (Topic 606) and Leases (Topic 842): Effective Dates for Certain Entities. In the ASU, the FASB provided the following one-year effective date deferrals for certain entities and guidance in its Accounting Standards Codification (ASC):

  • ASC 606, Revenue from Contracts with Customers, for which the ASU defers the effective date (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 private not-for-profit entities provided they have not issued (or made available for issuance) financial statements as of June 3, 2020 that reflect the adoption of ASC 606. For these entities only, the effective date of ASC 606 has been deferred 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 ASU defers the effective date 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 issued (or made available for issuance) financial statements as of June 3, 2020 that were fully compliant with U.S. generally accepted accounting principles (GAAP) (which would have included the adoption of ASC 842). For these entities only, the effective date of ASC 842 has been deferred to fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Paragraphs BC29 to BC34 of ASU 2020-05 discuss whether a public not-for-profit entity is eligible for the deferral if it has filed financial information reflecting the application of ASC 842 in the Electronic Municipal Marketplace Access (EMMA) system. Based on paragraph BC32 of ASU 2020-05, when a public not-for-profit entity has only filed interim financial information (and not U.S. GAAP-compliant interim financial statements) reflecting the adoption of ASC 842 in the EMMA system, it is still eligible for the deferral. Conversely, when a public not-for-profit entity has filed interim or annual U.S. GAAP-compliant financial statements reflecting the adoption of ASC 842 in the EMMA system, it is not eligible for the deferral.
  • ASC 842, for which the ASU defers the effective date for private companies and private not-for-profit entities. For these entities only, the effective date of ASC 842 has been deferred 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 eligible for the related deferrals.

 

 

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