FASB Offers Reprieve from Updated Lease and Revenue Recognition Rules
Kirsch CPA Group
Jul 23, 2020

If you’re feeling burned out from coping with extreme circumstances brought on by the COVID-19 pandemic, you’re not alone. Fortunately, the Financial Accounting Standards Board (FASB) and Congress are offering some compliance-related relief for certain entities.
Deferral of Revenue Recognition Rules
Let’s start with Accounting Standards Update (ASU) No. 2020-05, Revenue from Contracts with Customers (Topic 606), and Leases (Topic 842): Effective Dates for Certain Entities. It postpones the effective dates to two standards. First, ASU 2014-09, Revenue from Contracts with Customers (Topic 606), grants a one-year deferral for privately-owned companies and nonprofits that haven’t yet adopted the standard.
Under the deferral, private companies and not-for-profit organizations that qualify can choose to apply the updated revenue recognition rules to annual reporting periods beginning after December 15, 2019. Qualifying entities also can defer the rules for interim reporting periods within annual reporting periods beginning after December 15, 2020. Early adoption is allowed.
The updated revenue recognition guidance was issued in 2014 to replace hundreds of industry-specific accounting rules with a principles-based five-step model for reporting revenues earned from certain types of customer contracts. This is the second delay granted for the revenue recognition standard.
The FASB issued the previous deferral in 2015. It allowed public companies to apply the updated guidance to annual reporting periods beginning after December 15, 2017, and private companies to apply it to annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019.
Public companies and some nonprofits have already adopted the rules. But, when the COVID-19 pandemic hit, many private companies were in the process of preparing their first annual financial statements under the updated guidance. So, the FASB approved an additional deferral.
Deferral of Lease Rules
The second deferral under ASU 2020-05 applies to the updated lease guidance. Specifically, it grants a one-year delay of ASU No. 2016-12, Leases (Topic 842), for the following entities:
- All private companies,
- Private not-for-profit organizations, and
- Public nonprofits that haven’t yet adopted the rules.
Under the deferral, private companies and private not-for-profit organizations can choose to apply the standard to fiscal years beginning after December 15, 2021, and to interim periods within fiscal years beginning after December 15, 2022. Public not-for-profit organizations that haven’t yet issued (or made available to issue) financial statements reflecting the adoption of the lease guidance can choose to apply the standard to fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is allowed.
The updated lease guidance was issued in 2016 to require companies — for the first time — to record the full magnitude of their long-term lease liabilities and assets on the balance sheet. Public companies had to adopt the rules for fiscal years beginning after December 15, 2018, and it would have taken effect for private companies with fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Previously, the FASB had issued a one-year deferral in November 2019 for private companies.
Proposal to Defer Long-Term Insurance Standard
On July 9, the FASB issued a proposal to defer the updated guidance for long-term insurance contracts to help insurers navigate hurdles brought by the COVID-19 pandemic. If approved, the proposal would provide a one-year deferral of ASU No. 2018-12, Financial Services-Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts.
The deferral would postpone the effective dates of ASU 2018-12 for large public companies until 2023, for smaller reporting companies (SRCs) until 2025, and for private companies and not-for-profit organizations until 2025. Earlier adoption is encouraged.
ASU 2018-12 provides simpler, more transparent ways to report technical aspects of life insurance, disability income, long-term care and annuity payouts. If approved, the proposal will be the second delay granted to insurance companies. In November 2019, the FASB deferred the updated guidance after the American Council of Life Insurers said that companies needed more time to put software systems in place, educate investors and staff, and work on other troublesome matters.
Need Help?
These standards are some of the most substantial accounting changes to hit the U.S. marketplace in decades. The FASB recognizes that many companies will need more time to evaluate and process the changes under these unprecedented conditions. If you have questions about implementing these changes, contact Kirsch CPA Group at 513.858.6040.

About The Author
Kirsch CPA Group is a full service CPA and business advisory firm helping businesses and organizations with accounting,…
Tags
Sign Up for Email Updates
Related Articles












Does your Business Deduct Research & Development Expenses? Major Changes Impact 2022 Taxes…
- 11-09-22
- Elizabeth Michalak






Why Have Your Financial Statements Reviewed (Even When Not Required)
- 10-17-22
- Kirsch CPA Group















Case Study: Strategic Accounting Support from Acquisition to Sale
- 09-20-22
- Kirsch CPA Group



























Prevent a Poorly Structured Chart of Accounts from Hiding Your Profitability
- 01-06-22
- Nick Roell















Entrepreneurial Mindset: Kirsch CPA Group Sets a Framework for Growth
- 10-28-21
- Kirsch CPA Group






























What Your Numbers Are Saying: Are You Listening?
Part 2: How Attractive Is Your Balance Sheet?
- 07-19-21
- Kirsch CPA Group












What Your Numbers Are Saying: Are You Listening?
Part 1: Do You Know Your Profitability?
- 06-09-21
- Kirsch CPA Group




































Using Cash Flow Forecasting to Avoid Problems & Grow Your Business
- 04-07-21
- Kirsch CPA Group









Selecting the Right Payroll System for Your Construction Business
- 04-01-21
- Kirsch CPA Group















Self-Employed May Be Eligible for COVID-Related Tax Breaks for 2020
- 03-17-21
- Kirsch CPA Group






COVID-19 Relief: Overview of the New American Rescue Plan Act for Individuals
- 03-17-21
- Kirsch CPA Group



COVID-19 Relief: Business Overview of the New American Rescue Plan Act
- 03-17-21
- Kirsch CPA Group



























Opportunity Zone Investments: A Tax Deferral Opportunity You May Have Overlooked
- 02-17-21
- Kirsch CPA Group




































The Status of Temporary COVID Tax Relief Measures After the New Law
- 01-21-21
- Kirsch CPA Group















8 Accounting Practices for a Financially Healthy Construction Business
- 01-07-21
- Kirsch CPA Group









Appropriations Law Adds Some Business Tax Breaks and Extends Others
- 01-07-21
- Kirsch CPA Group



























Contending With the Patchwork of State Requirements for Nonprofits
- 12-17-20
- Kirsch CPA Group




































Employee or Independent Contractor? The Rules May Be Getting Simpler
- 11-12-20
- Kirsch CPA Group









Do the COVID-19 Extended Deadlines for Health Plans Still Apply?
- 11-12-20
- Kirsch CPA Group












Using Remote Workers? Protect Sensitive Company Data from Exposure
- 10-28-20
- Kirsch CPA Group













































What You Need to Know About the Deferral of Payroll Tax Obligations
- 09-15-20
- Kirsch CPA Group









Hobby or Business? How to Treat COVID-19 Sideline Activities for Taxes
- 09-15-20
- Kirsch CPA Group















Monitor These 3 Things as COVID-19 Changes Your Nonprofit’s Priorities
- 08-11-20
- Kirsch CPA Group















COVID-19 Crisis May Affect Tax Angles for Rental Property Losses
- 07-10-20
- Kirsch CPA Group









Last-Minute Strategies for Businesses that Deferred Filing Tax Returns
- 07-01-20
- Kirsch CPA Group









Can Your Business Survive and Even Thrive in These Trying Times?
- 06-18-20
- Kirsch CPA Group






Five COVID-19 Obstacles a Construction Company Needs to Navigate
- 06-12-20
- Kirsch CPA Group












Cash Flow Tip: Postpone Payment of Certain Federal Employer Payroll Taxes
- 04-20-20
- Sue Schloemer


















Tax Filing Deadline Remains April 15 – Payment Due Extended to July 15
- 03-19-20
- John Kirsch










































8 strategies to help you adapt to economic down turn without layoffs
- 02-24-18
- Diane Glover





















Which Research Activities Qualify for the Qualified Small Business Tax Credits
- 07-17-17
- Diane Glover





































