The FASB May Delay the Deadline to Comply with ASC 842 in Response to COVID-19
Articles by: Richey May, Apr 20, 2020
The FASB voted on April 7 to propose a delay for ASC 842 and its amendments. The original deadline for the new lease accounting guidelines for private companies (for periods beginning on or after December 15, 2020) was January 1, 2021, but in light of the COVID-19 pandemic, the FASB feels companies may need more time to implement a system that helps them comply.
The comment period ends on May 6, and it looks likely that the FASB will proceed with a delay of one year.
According to the Journal of Accountancy:
“In recognition of the business disruptions caused by the new standard, FASB has voted to issue a proposal that would delay by one year the effective dates of its lease accounting standard for certain entities. If approved, the delay to FASB ASC Topic 842, Leases, would apply to private companies, not-for-profits, and not-for-profit entities that FASB calls public not-for-profits, which have issued or are conduit bond obligors for securities that are traded, listed, or quoted on an exchange or an over-the-counter market and that have not yet issued financial statements.
The soon-to-be-proposed delay for private companies and private not-for-profits would make the standard effective for private companies and private not-for-profits for fiscal years starting after Dec. 15, 2021. The effective date for public not-for-profits would be fiscal years starting after Dec. 15, 2019.”
This delay is undoubtedly good news, but companies should still begin actively preparing to comply. The lease accounting guidelines for public companies*, which went into effect January 1 of this year, were also delayed by one year from their previous deadline** of January 1, 2019, after many companies faced difficulties complying with the guidelines. COVID-19 is likely to make lease agreements more complicated, with companies looking to change some longer term leases to short term or breaking them altogether. Rent deferments and relief programs may also factor into accounting reporting and may increase the burden on your internal teams, who are likely already operating with limited resources from home.
Our expert team is here to help you understand the guidelines and implement technology to automate your reporting. Our dedicated lease accounting team takes a personal approach and we can help you be ready to comply before the rush, whether the FASB delays the deadline or not. Contact us to learn more and get started.
*for periods beginning on or after December 15, 2019
**periods beginning on or after December 31, 2018