On April 8, 2020, the Financial Accounting Standards Board (FASB) added a project to its technical agenda to propose delaying the effective dates of its standards on revenue recognition and lease accounting for certain entities due to challenges related to the COVID-19 pandemic. The particular Accounting Standards Codifications (ASCs) in the proposal for delays were Topic 606, Revenue from Contracts with Customers, and Topic 842, Leases.
Topic 606 extended by one year from the effective date
FASB voted this week to extend the effective date of Topic 606 to all nonpublic entities that have not issued their financial statements. The extension’s timeframe is one year, pushing the required implementation date to year-ends beginning after December 15, 2019. FASB has instructed its staff to draft an Accounting Standards Update (ASU) that describes the delay, and the Board has noted they will vote in favor of the delay for Topic 606 on the final written ballot. This final ASU is expected to give nonpublic entities (which includes private nonprofits) the option of implementing the revenue recognition standard on the current date, or deferring for a year.
It is important to note that ASU No. 2018-18, Not-for-Profit Entities (Topic 958): Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made, was not considered as a part of FASB’s proposal for delays. Topic 958 was omitted even though a delay for the ASU was suggested so that required implementation dates of the guidance would have aligned with the revenue recognition deferral of Topic 606. The Board concluded, however, that guidance included in ASU No. 2018-08 will be helpful in accounting for funds received in response to the COVID-19 pandemic, particularly as they relate to the Coronavirus Aid, Relief, and Economic Security (CARES) Act and funds/loans received through the Paycheck Protection Program (PPP).
Topic 842, Leases, still needs a vote
FASB has yet to vote on a delay for Topic 842, Leases. Included in the scope of the deferral of the lease accounting effective date will be public nonprofits that have not yet issued their United States Generally Accepted Accounting Principles (GAAP)-compliant financial statements, or made those financial statements available for issuance.
While nonprofits focus on their survival and address the operational and funding impacts from COVID-19, staying abreast of industry developments is critical. Visit GRF’s COVID-19 Response page for the latest updates and subscribe to our industry alerts for breaking news via email. For technical questions about Topic 606, Topic 605, and Topic 842, contact Tricia Katebini, CPA, MBA, Senior Manager, at firstname.lastname@example.org or 301-951-9090.