The FASB issued ASU 2020-051(“ASU”) to provide a one-year deferral of the effective dates of:
The FASB has received feedback from certain stakeholders regarding challenges associated with transitioning to the new revenue and leases standards, some of which have been significantly amplified by the current business and capital disruptions caused by the COVID-19 pandemic. Therefore, the FASB has decided to provide a near-term relief for certain entities. The final ASU is available here.
The ASU defers the effective date for ASC 842 for private companies and certain not-for-profit entities (“NFPs”) for one year. For private companies and private NFPs, the leasing standard is effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. For public NFPs that have not yet issued financial statements or made financial statements available as of June 3, 2020, the leasing standard is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years.
In addition, the ASU defers the effective date of ASC 606 for one year for all privately held entities that have not yet issued financial statements or made financial statements available as of June 3, 2020. For these private entities, the revenue standard is effective for annual periods beginning after December 15, 2019 and interim reporting periods within annual reporting periods beginning after December 15, 2020.
Early adoption would continue to be allowed for each of these standards.
KL Observation: If an entity has already recorded its revenue through the end of its fiscal year under the principles of ASC 606 but has not yet issued financial statements for that period, the entity should carefully weigh the costs and benefits of a decision to revert to prior guidance.