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The COVID-19 emergency has impacted individuals, families, businesses, and nonprofit organizations. The effects of forced business closures and shelter-in-place orders have drastically reduced revenues. This seismic shift in such a short time has left many to make tough decisions about employees and other costs. The effects of these decisions are evident through the recently reported 3,000% increase in national jobless claims over the past three weeks. Businesses are moving to protection mode seeking additional funding from lenders and government programs such as the Paycheck Protection Program. Against this backdrop, the Financial Accounting Standard Board (FASB) announced on April 8, the possible delay of new lease accounting standards. FASB is concerned about requiring compliance by existing deadlines in current market conditions. To help clients, prospects, and others, JLK Rosenberger has provided a summary of the announcements below.
Lease Accounting Delay
There was a tentative decision made that provides an optional, one-year effective date delay for private companies and nonprofit entities to comply with the new lease accounting rules. The extension would also apply to nonprofit organizations such as hospitals and higher education institutions that have yet to issue financial statements under lease accounting rules. For those who are prepared to report under the new rules, early adoption will be permitted.
FASB did not address the CECL standard, which requires companies to take a current unexpected credit loss (CECL) approach to recognize the credit-based instruction in financial statements. This standard was the only one directly impacted by the CARES Act as it allows for an optional compliance delay. The Act permits financial institutions to delay compliance until the end of the COVID-19 national emergency, or December 31, 2020, whichever is sooner.
It’s important to note these are tentative decisions and will be presented for a 15-day public comment period. Once received, FASB will reconvene to consider comments and make a final decision on delays.
The results of today’s meeting provide important insights into FASB’s intentions with new accounting standard compliance. Although it’s unclear if the tentative rules will be implemented or face additional changes, it’s obvious some period of delay is likely to be approved. If you have questions about the announcement and its impact on your financial reporting process, JLK Rosenberger can help. For additional information, call us at 949-860-9890, or click here to contact us. We look forward to speaking with you soon.