The COVID-19 emergency has hit many Virginia, Maryland, and D.C. businesses and nonprofits by complete surprise. The stay at home orders and forced business closures have left many facing scenarios that until recently seemed almost impossible. This traumatic change has left the focus on balancing expenses against diminishing revenues while modifying business strategies to navigate the “new reality”. The shift of attention has left little time for non-essential functions. This point was acknowledged by the Financial Standards Accounting Board (FASB) which instructed its staff to draft an Accounting Standards Update (ASU) that would give nonpublic entities the option of deferring the revenue recognition standard by one year. FASB also confirmed its support for amending the effective date of its lease accounting standard for private companies and not-for-profits. To help clients, prospects, and others, PBMares has provided a brief summary below.
If approved, the new ASU would delay ASC 606, Revenue from Contracts with Customers, for any nonpublic entity that has yet to adopt the guidance to years beginning after December 15, 2019. Early adoption will be permitted but is left to the discretion of management.
If approved, implementation of ASC 842, Leases, would be delayed for private companies and certain not-for-profit organizations for one year. For private companies and private not-for-profit organizations, the leasing standard will be effective for fiscal years beginning after December 15, 2021. For public not-for-profit organizations, the leasing standard will be effective for fiscal years beginning after December 15, 2019. Early adoption will be allowed.
Accounting for Contributions
Finally, there was consideration given to delaying the effective date of ASU 2018-08, Not-for Profit Entities (Topic 958): Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made. However, the Board voted against this change and there will be no deadline extension. It is the Board’s view that this standard will be helpful to organizations as they account for assistance received related to the pandemic.
The delays are not effective until the ASUs reflecting these changes are formally issued. It is expected this will be forthcoming shortly.
The deadline changes will allow resources to be diverted from accounting standard compliance to help manage through the COVID-19 emergency. The deadline extension is welcome news for those still working through the compliance process. If you have questions about the information outlined above or need assistance with a COVID-19 tax or business issue, PBMares can help. For additional information click here to contact us. We look forward to assisting you.