In a surprise move, on May 20, 2020, the Financial Accounting Standards Board (FASB) approved a one-year deferral to the effective date of the revenue standard (FASB ASC Topic 606, Revenue from Contracts with Customers) for all nonpublic and not-for-profit entities that have not issued their financial statements. This deferral was the result of private company feedback in light of the current COVID-19 situation, and a desire to reduce the challenges placed on nonpublic entities during this time.
FASB had originally proposed changing the revenue recognition standard effective date just for franchisors that are not public business entities. The deferral will result in the adoption of the standard being effective for annual periods starting after December 15, 2019 (2020 reporting period for calendar year-end entities). Early adoption will continue to be permitted. This deferral also does not apply to public business entities and not for profit conduit debt obligors, who have previously adopted the revenue standard.
It is important to know that this deferral is not effective until the formal accounting standards update (ASU) is released, which is expected in the next month. Any GAAP basis financial statements issued before the formal release of the ASU are required to abide by the pre-deferral effective date.
To learn more about this deferral or any other questions related to how the new revenue recognition standard impacts your business contact your Barnes Dennig accounting team member or have a member of your Barnes Dennig client service team reach out to you here.
Barnes Dennig COVID-19 Advisory Team Leaders: