FASB delays revenue recognition and lease accounting standards
As a result of the coronavirus pandemic, the Financial Accounting Standards Board (FASB) has given some relief to private businesses and non-profit organizations that have not yet issued their 2019 financial statements. The FASB formally issued Standards Update No. 2020-05 which delays the required implementation date of Topic 606 – Revenue from Contracts with Customers and Topic 842 – Leases. The update was released and is effective on June 3, 2020.
Implementation for Topic 606 – Revenue from Contracts with Customers is now required for annual reporting periods beginning after December 15, 2019. The core principle of the guidance in Topic 606 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.
The update provides a one-year delay to implement Topic 842 – Leases, to years beginning after December 15, 2021. Among other things, new lease accounting guidance will require lessees to recognize the following for all leases (with the exception of short-term) at the commencement date: (1) A lease liability, which is a lessees’ obligation to make lease payments arising from a lease, measured on a discounted basis and (2) A right-of-use asset, which is an asset that represents the lessees’ right to use, or control the use of, a specified asset for the lease term.
Please contact us if you have any questions or would like to discuss the changes to the FASB standards.