Private companies and not-for-profits will not see further relief from the effective date of FASB's new lease accounting standard after the board voted unanimously Wednesday to reject a request for a two-year extension that was submitted by the Pennsylvania Institute of CPAs (PICPA).
The current effective date for nonpublic entities is for fiscal years beginning after Dec. 15, 2021, and interim periods within fiscal years beginning after Dec. 15, 2022. The standard was issued in 2016, but its effective dates for nonpublic entities previously were extended in two one-year deferrals.
In November 2019, a deferral was issued for nonpublic entities in recognition of the challenges encountered in the implementation of a major standard. The second deferral for nonpublic entities, in June 2020, was issued because of disruptions caused by the coronavirus pandemic.
FASB Chair Richard Jones said he was glad that the board had considered the PICPA request, which was made in a Sept. 21 letter, because it provides certainty that the adoption requirements are imminent after hearing chatter that another delay might be forthcoming.
"I would encourage all parties to get going on this," Jones said.
The PICPA letter said the COVID-19 pandemic has strained the viability of nonpublic entities, including not-for-profits, and decimated their balance sheets. It said practitioners have been challenged by the added workload of managing government pandemic relief, performing attest work remotely, and implementing FASB's revenue recognition standard.
According to PICPA, for many nonpublic entities, implementing FASB's lease accounting standard will require businesses to invest considerable time and resources in gathering the information required for reporting.
In an analysis prepared for the board, FASB's staff recommended against an additional delay. The staff said financial statement users are ready for reporting on leases by private companies to match that of their public company peers, which already have adopted the standard. The staff also said there's no guarantee that private companies will have more resources available to adopt the standard after a delay of two more years.
FASB members expressed sympathy for the challenges that come with adopting a major standard but said they don't expect those challenges to get better with time.
— Ken Tysiac (Kenneth.Tysiac@aicpa-cima.com) is the JofA's editorial director.