FASB to provide limited deferrals for ASC 606 and ASC 842

FINANCIAL REPORTING INSIGHTS  | 

Authored by RSM US LLP


At its meeting on April 8, 2020, the Financial Accounting Standards Board (FASB) decided to propose the following effective date deferrals due to the coronavirus pandemic:

  • Topic 606, Revenue from Contracts with Customers, of the FASB’s Accounting Standards Codification (ASC) for franchisors that are not public business entities (as defined in the Master Glossary of the ASC). For these entities only, the FASB will propose the effective date of ASC 606 be deferred (on an optional basis) to annual reporting periods beginning after December 15, 2019, and interim reporting periods within annual reporting periods beginning after December 15, 2020. The FASB also decided to add a research project to its agenda to evaluate the application of ASC 606 to initial franchise fees and to understand the related implementation costs. 
  • ASC 842, Leases, for 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 (i.e., public not-for-profit entities) and that have not yet issued financial statements. For these entities only, the FASB will propose the effective date of ASC 842 be deferred to fiscal years beginning after December 15, 2019, including interim periods within those fiscal years.
  • ASC 842 for private companies and private not-for-profit entities (i.e., not-for-profit entities other than those considered public as defined in the previous bullet point). For these entities only, the FASB will propose the effective date of ASC 842 be deferred to fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022.

ASC 842 may still be adopted early by the entities affected by the related deferrals.

Before these deferrals are effective, the FASB must initially issue the proposed Accounting Standards Update for comment. The FASB expects to do so on an expedited basis and provide for a 15-day comment period, after which they will redeliberate the proposal and decide whether to proceed with a final standard. The deferrals are effective only upon issuance of the final standard. We will provide updates as the process progresses. 

Also during the meeting on April 8, 2020, the FASB staff discussed certain questions it has answered through its technical inquiry service on the following topics related to the coronavirus pandemic:

  • Lease concessions 
  • Interest income recognition when a lender grants a payment holiday
  • Ramifications when a hedged forecasted transaction is delayed
  • Fair value measurements 
  • Fee recognition on Small Business Administration loans

Additional information about these questions and the answers provided by the FASB staff will be forthcoming from the staff in written guidance. We also will provide additional information about these questions and answers. 

For additional information about financial reporting and other issues arising as a result of the coronavirus pandemic, see our article, Coronavirus: Financial reporting considerations, which we are continuously updating, and our Coronavirus Resource Center.