The Financial Accounting Standards Board (FASB) has decided to recommend delaying implementation of ASC 606 and ASC 842 based on disruptions due to the coronavirus pandemic.
FASB is proposing deferring the effective date of Accounting Standards Codification No 2014-09: Revenue from Contracts with Customers (also called Topic 606 or ASC 606) for one year for franchisors that are not public business entities. This optional deferral is until annual reporting periods for fiscal years starting after December 15, 2019, and until interim reporting periods for fiscal years after December 15, 2020. Additionally, FASB will be evaluating the implementation costs of applying ASC 606 to initial franchise fees.
FASB is also proposing deferring the effective date of Accounting Standards Codification 842: Leases (ASC 842) for:
• Public nonprofit entities (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)
• Private companies
• Private nonprofit entities
The deferral period varies per entity type. For the public nonprofit entities, ASC 842 will be deferred until fiscal years after December 15, 2019, including both interim and annual reporting periods. For private companies and private nonprofit entities, ASC 842 will be deferred until annual reporting periods for fiscal years beginning after December 15, 2021, and for interim reporting periods for fiscal years beginning after December 15, 2022. The deferrals are optional.
Before these deferrals are effective, the FASB must initially issue the proposed Accounting Standards Update for comment. The FASB expects to do so on an expedited basis and provide for a 15-day comment period, after which they will redeliberate the proposal and decide whether to proceed with a final standard. The deferrals are effective only upon issuance of the final standard. LaPorte will provide updates as the process progresses.