Business entities and not-for-profit organizations that report their financial statements in accordance with the U.S. generally accepted accounting principles (GAAP) are subject to the accounting standards codification (ASC) promulgated by the Financial Accounting Standards Board (FASB). When the FASB changes U.S. GAAP, it issues Accounting Standards Updates (ASU). An ASU issued today will have a required implementation date sometime in the future. Typically, complex accounting changes must be implemented by public companies first, with implementation dates for private companies and not-for-profits lagging by a year. At times, these accounting changes are complex enough that several ASUs are issued to address each topic.
The revenue recognition implementation deadline.
A major, complex accounting change required for private companies and not-for-profit organizations with reporting periods beginning after December 15, 2018 (so starting with December 31, 2019 year ends) is FASB ASC 606, Revenue from Contracts with Customers, often referred to as the new revenue recognition standard. Your Corrigan Krause advisors have been working behind the scenes and directly with you to assist you in complying with the new revenue recognition standard since 2014 when ASU 2014-09, Revenue from Contracts with Customers was issued. We have communicated details of the new revenue recognition standard in previous blog posts.
The new lease standard.
Another complex accounting change impacting the typical Corrigan Krause client is the new lease standard. Public companies are required to adopt the new lease standard for fiscal years beginning after December 15, 2018. Private companies and not-for-profit organizations were initially allowed a 1-year delay.
The lease implementation delay.
The FASB voted unanimously in July 2019 to propose delaying the effective date for a number of significant accounting standards for private companies and not-for-profit organizations. The FASB approved this one-year deadline extension proposal for private companies and nonprofits on October 16, 2019. Among the upcoming standards affected by this extension is ASU 2016-02, Leases. The primary reason cited for the implementation delay is the widespread impact on reporting entities subject to both the new revenue recognition standard (FASB ASC 606) and the new lease standard. The delay allows private companies and not-for-profits an additional year to adopt the new lease standard. The new lease standard is now effective for private companies for annual reporting periods beginning after December 15, 2020 (2021 calendar year).
Please contact a member of your Corrigan Krause advisor team, or email info@corrigankrause.com for further discussion.