The Financial Accounting Standards Board (FASB) just authorized an Accounting Standards Update (ASU) that will defer the implementation of three accounting standards for private companies. The standards involve accounting for leases, credit losses and hedging.
The standard that will affect many businesses and nonprofit organizations is the lease standard. This standard developed from the project, which started in 2002, to converge U.S. Generally Accepted Accounting Principles (GAAP) with International Financial Reporting Standards (IFRS).
After failing to accomplish full convergence, the lease standard was issued as ASU 2016-2 and had a four-year implementation period. The complexity of the implementation, however, resulted in the need to further extend the implementation for non-public entities to fiscal years beginning after December 15, 2020.
Deferred But Not Forgotten: What to Do Now
This is only a deferral so we recommend that you investigate the impact of the standard now if you haven’t already done so.
We also recommend that you talk to the users of your financial statements, and consider not adopting the standard and instead take a GAAP exception in the auditor or accountant’s report on your financial statements. Using cash basis or tax basis may also be acceptable alternatives.