FASB Considering Offering Relief to Private Companies in the Midst of COVID-19 Disruption

FASB voted unanimously on Wednesday, April 8 to propose delaying effective dates of standards on lease accounting and revenue recognition for certain entities.

Private companies are in various stages of implementation efforts related to the new leases standard, which is currently effective for calendar year-end private companies in 2021 annual financial statements. The board is expected to propose delaying the standard for private entities for an additional year and may be open to additional extensions as more is learned about the effects of the COVID-19 pandemic. The board will also propose extensions to the earlier adoption date for public not-for-profit entities in an effort to support research and healthcare institutions that are key to the global response to the epidemic. While FASB looks to provide optional relief, companies included in the relief likely will have the opportunity to reassess the best use of resources during a time of unprecedented business disruption and take advantage of delayed mandatory adoption dates.

FASB also will propose a delay in the effective date of the adoption of the new revenue standard by one year for the franchising industry, an industry segment that has experienced relatively significant impacts and related challenges as a result of changes in revenue recognition as a result of the new standard. Franchisors will be watching expectantly to understand expected optional relief and to resolve significant uncertainty created by potential changes to their industry's application of new revenue standards given that many have already undertaken significant implementation efforts and have even issued annual financial statements post-adoption.