An AICPA committee has asked FASB to delay the private company implementation date of its new lease accounting standard, citing overload for private company financial statement preparers.
The AICPA Private Companies Practice Section’s Technical Issues Committee (TIC) sent a letter Monday to Shayne Kuhaneck, FASB’s acting technical director, asking for a delay. One of TIC’s objectives is to speak on behalf of local and regional firms, although TIC’s comments do not necessarily reflect the AICPA’s positions.
FASB’s new lease accounting standard took effect for public companies at the beginning of this year and is scheduled to be effective for private companies one year later, at the beginning of 2020. TIC’s letter notes that FASB’s Private Company Decision-Making Framework includes considerations for delaying the private company implementation for more than one year after the public company effective date.
The Associated General Contractors of America sent a letter with a similar request on May 3. FASB considers all unsolicited comment letters as part of its due process and will discuss at an upcoming meeting the request for a delay in the lease accounting standard, John Pappas, FASB’s senior manager for communications, said in an email.
TIC wrote that additional time should be given for the lease accounting standard because of the challenges associated with it, coupled with the work private companies also are doing to implement complex new standards for revenue recognition and credit losses.
“The big one is, they are still working through rev rec,” TIC Chairman Michael Westervelt, CPA, said in a phone interview. “Rev rec is such a significant change in standard. It’s one thing to figure out the accounting. It’s another thing to make sure you have the systems in place to properly account for things going forward.”
TIC’s letter states that:
- It can take more than a year for private companies to learn from SEC comment letters about the implementation issues public companies faced.
- The magnitude of change related to the standard could be significant for lease-intensive companies, with potential changes to internal controls and systems for capturing contracts.
- Users of private company financial statements would not be adversely affected by a delay.
- It’s difficult for private companies to keep up with the narrow-scope improvements FASB continues to issue related to the standard.
- TIC has found errors in some of the software that third-party vendors offer for lease accounting standard implementation. TIC said it will take time to make sure the software performs correctly and provides accurate and auditable information.
Deloitte survey results released in April support the idea that private companies have grave concerns about implementation. Just 30% of the private companies said in the survey that they plan to adopt the standard on schedule. One-third said they were unprepared to comply, and an additional 44% said they were just somewhat prepared to comply.
Ultimately, Westervelt said, the issue is that private companies want to make sure they perform the accounting correctly. The complexity related to a challenging lease accounting implementation on the heels of a difficult revenue recognition adoption process has left preparers concerned that they don’t have the time to get the accounting right.
“We continue to get some pushback from private entities and even small practitioners who say, ‘There’s a lot of information for me to gain an understanding of, and I want to get it right. So I just need a little bit more time to make sure I get that right,’ ” Westervelt said. “That’s the overarching concept.”
— Ken Tysiac (Kenneth.Tysiac@aicpa-cima.com) is the JofA’s editorial director.