Lease & Revenue Deferral for Private Companies & NFPs

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On June 3, 2020, FASB issued Accounting Standards Update (ASU) 2020-05, Effective Dates for Certain Entities, which defers the effective date for Accounting Standards Codification (ASC) 842, Leases, for private companies and all not-for-profits (NFP), including an NFP 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 (OTC) market. The ASU also defers ASC 606, Revenue from Contracts with Customers, for all entities that have not yet issued, or made available for issuance, their financial statements as of June 3, 2020, reflecting the adoption.  

These changes are effective immediately. Early adoption continues to be permitted for both ASC 842 and ASC 606. 

Lease Delay

An NFP entity that has issued—or is a conduit bond obligor for—securities that are traded, listed or quoted on an exchange or an OTC market, and that has not yet issued or made available for issuance its generally accepted accounting principles (GAAP) financial statements as of June 3, 2020, can adopt ASC 842 for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. All other entities can adopt ASC 842 for financial statements issued for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. Earlier application is permitted.  

The ASU’s basis for conclusion clarifies that interim financial information posted to the Electronic Municipal Market Access (EMMA) system—non-GAAP financial information that does not include full disclosures—would not disqualify an entity from taking advantage of this lease deferral.

Lease Delay Chart

Revenue Delay 

ASC 606 is already effective for public business entities, conduit bond obligors and employee benefit plans that file financial statements to the SEC. 

For all other entities that have not yet issued financial statements or made financial statements available for issuance as of June 3, 2020, ASC 606 is effective for annual reporting periods beginning after December 15, 2019, and interim reporting periods beginning after December 15, 2020. 

Revenue Delay Note

Revenue Delay Chart

Conclusion 

If you have questions, contact your BKD Trusted Advisor today.

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