COVID Accounting Guidance
Haven’t Issued Your Financial Statements? Revenue Recognition Delay Likely
- 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 is not yet authoritative. Final guidance is expected in early June.
- This will be 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. This will still need to go through a process before it is authoritative; but, as with the last delay, you can expect there won’t be much opposition to this. We expect the final guidance to come in early June.
Keep in mind, FASB did not defer ASU 2018-08, Accounting for Grants and Contributions, for nonprofit entities.
What should organizations do?
This deferral, once finalized, 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