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The Financial Accounting Standards Board (FASB) recently issued ASU 2020-05 Revenue from Contracts with Customers (Topic 606) and Leases (Topic 842): Effective Dates for Certain Entities, giving private companies and private not-for-profits (NFPs) an extra year to adopt the new revenue recognition and leases standards as they adjust from the fallout of the COVID-19 pandemic. Doeren Mayhew’s dedicated CPAs and advisors further explore this new guidance and how it may impact your business.
Historically, optional deferrals of the new revenue standard were only proposed to franchisors. Now that the FASB has decided to extend the optional deferral to all privately-owned companies, these businesses can apply Topic 606 to the annual reporting period starting after Dec. 15, 2019, as well as interim reporting periods within the annual reporting period starting after Dec. 15, 2020. This guidance also includes private NFPs who have yet to issue their financial statements or make financial statements available for issuance as of June 3, 2020.
Correspondingly, both private companies and private NFPs can apply Topic 842 (pertaining to leases) to fiscal years which begin after Dec. 15, 2021, and interim periods during fiscal years starting after Dec. 15, 2022. As for NFPs who have previously issued or are conduit bond obligors for securities which are traded, listed or quoted on an exchange or an over-the-counter market (public NFP entities) and have yet to issue financial statements or make their financial statements available for issuance as of June 3, 2020, the effective date is the fiscal year which started after Dec. 15, 2019. This also includes interim time periods within fiscal years going forward.
When deciding if your business should take advantage of the optional deferrals for revenue recognition and leases, be sure to carefully weigh your options. Doeren Mayhew’s CPAs and advisors are prepared to assist you in determining the optimal course of action for your business – contact us today.
This publication is distributed for informational purposes only, with the understanding that Doeren Mayhew is not rendering legal, accounting, or other professional opinions on specific facts for matters, and, accordingly, assumes no liability whatsoever in connection with its use. Should the reader have any questions regarding any of the news articles, it is recommended that a Doeren Mayhew representative be contacted.
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