On Wednesday April 8, 2020, The Financial Accounting Standards Board (“FASB”) voted unanimously to propose a delay to the effective dates of its standards on lease accounting and revenue recognition for certain entities due to the challenges companies are experiencing associated with the coronavirus pandemic. FASB plans to propose that private companies and not-for-profit entities get an extra year to implement the lease accounting standard. At the same time, the proposed plan will give private franchisor companies an extra year to implement the revenue recognition standard.
FASB voted to consider amending the effective date of ASC Topic 842, Leases, including subsequent amendments, for private companies and private not-for-profit entities. The proposal would delay the effective date for those entities to fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. Furthermore, for any not-for-profit that has issued or is a conduit bond obligor for securities that are traded, listed, or quoted on an exchange or an over-the-counter market (“public not-for-profits”), the proposal would delay the lease accounting standard effective date to fiscal years beginning after December 15, 2019, including interim periods within those fiscal years.
FASB also voted to consider amending the effective date of ASC Topic 606, Revenue From Contracts With Customers, including subsequent amendments, for franchisors that are not public business entities. The proposal is limited to this narrow group of entities due to unique challenges they have faced in applying this standard to initial franchise fees. For these entities only, the proposal would delay the revenue recognition standard effective date to fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020.
These two proposals are currently being drafted by the FASB’s Staff and there will then be a short 15 day comment period.