If you have not yet issued financial statements, you may not be required to adopt new revenue recognition standards this year.
This article was originally published on May 21, 2020. It was updated to reflect ASU 2020-05, which was issued on June 3, 2020.
- FASB voted and the majority approved to extend the deferral of ASC 606, Revenue from Contracts with Customers, to all entities that have not yet issued financial statements.
- The decision was made authoritative with ASU 2020-05, which was issued on June 3, 2020.
- This is an optional election. Consider where you are in the process before determining whether to continue or delay.
On April 16, we shared good news about the proposed delay of accounting standard, including an option to delay ASC 842, Leases, for all entities as well as a narrow option to delay ASC 606, Revenue from Contracts with Customers, just for franchisors. We now have more big news related to the delay of ASC 606!
Questions or comments?
During a live stream meeting on the morning of May 20, the Financial Accounting Standards Board (FASB) discussed expanding the deferral ASC 606 adoption to all entities that have not yet issued financial statements. They noted that there may be a handful of entities that have not yet adopted ASC 606 and some entities may not have the technology or resources to adopt the standard in our current environment.
In a 6-1 vote, the board decided to extend this deferral beyond franchisors to all entities that have not yet issued financial statements. Subsequent to the board vote, FASB issued Accounting Standards Update 2020-05, which formally grants a one-year effective date delay for certain companies and organizations applying the revenue recognition and leases guidance.
Keep in mind, FASB did not defer ASU 2018-08, Accounting for Grants and Contributions, for nonprofit entities.
What should organizations do?
This deferral essentially gives some calendar year-end companies and many fiscal year-end companies the option to take one additional year to adopt the revenue recognition standards.
However, it’s important to note this is an optional election. You may continue to adopt ASC 606 as originally scheduled. Depending on where you are in the implementation process, it may make sense to continue as planned. Make a decision based on what is most cost effective and best meets the needs of your stakeholders.
How we can help
As always, CLA is here to help you through new accounting standards. Reach out if you would like to discuss ASC 606 and how this change impacts your organization.Contact Us