On June 3, 2020, the Financial Accounting Standards Board (FASB) issued ASU 2020-05 Revenue from Contracts with Customers (Topic 606) and Leases (Topic 842): Effective Dates for Certain Entities to provide optional deferrals due to the COVID-19 pandemic.Initially, the optional deferral of the new revenue standard was proposed only for franchisors. However, the FASB decided to extend the optional deferral to all privately-owned companies. Under the changes, private companies, including private not-for-profits that have not yet issued financial statements (or made their financial statements available for issuance) as of June 3, 2020, can apply Topic 606 to annual reporting periods beginning after December 15, 2019, and interim reporting periods within annual reporting periods beginning after December 15, 2020.
Similarly, private companies and private not-for-profit entities will be able to apply Leases (Topic 842) to fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. In addition, not-for-profit entities that have issued or are conduit bond obligors for securities that are traded, listed, or quoted on an exchange or an over-the-counter market (public NFP entities) and which have not yet issued financial statements (or made their financial statements available for issuance) as of June 3, 2020, the effective date will be fiscal years beginning after December 15, 2019, including interim periods within those fiscal years.
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The decision to take advantage of the optional deferrals for the new revenue and leases guidance requires careful consideration. We encourage open dialogue with your Bonadio client service team in determining the appropriate course of action.
The information and advice we are providing for this matter relates to COVID-19 legislative relief measures. Because legislative efforts are still ongoing, we expect that there may be additional guidance and clarification from regulators that could modify some of the advice and information provided to you, after the conclusion of our engagement. We, therefore, make no warranties, expressed or implied, on the services provided hereunder.