On July 17, 2019 the Financial Accounting Standards Board (FASB) voted unanimously to draft an Accounting Standards Update (ASU) to defer the effective date of the new Accounting Standards Codification 842, Leases. Once finalized, the delay provides privately-held companies with an extra year to adopt the new lease standard. Previously, the standard was scheduled to take effect for reporting periods starting after December 15, 2019 (2020 for calendar year-end companies) and interim periods after December 15, 2020. Private companies will now have until reporting periods beginning after December 15, 2020 (2021 for calendar year-end companies) once the ASU is finalized.
The American Institute of Certified Public Accountants (AICPA) provided a number of reasons to delay the effective date. However, the main reason cited was ASC 842’s overlap with the adoption of ASC 606, Revenue from Contracts with Customers. Due to the resources allocated, reporting processes, and timing of audits to comply with ASC 606, adding the new lease standard would create undue burden for a number of private companies. The delay is viewed positively, as it provides private companies with necessary time to properly adopt the new lease standard.
As always, Aronson will continue to be on the look-out for any noteworthy updates or releases by FASB regarding the new lease standard. For more information regarding how these changes may affect your company or organization, please contact Aronson at 301.231.6200.