On July 17, 2019, the Financial Accounting Standards Board (FASB) unanimously approved to propose delaying the effective date for a number of significant accounting standards for private companies and nonprofit organizations. Included in these proposed changes is Accounting Standards Update (ASU) No. 2016-02, Leases. This comes on the heels of the FASB receiving a letter from the AICPA’s Technical Issues Committee, requesting such a delay. The AICPA pointed to several reasons for such a request, one very important one being the overlap with the implementation of the new revenue recognition standard. The two complex standards with widespread applicability were scheduled to be implemented by private companies in consecutive years.
Before finalizing the new effective dates, the FASB will be issuing a formal proposal for public comment with a 30-day comment period. Once final, the new leases standard is expected to be effective for private companies for annual reporting periods beginning after December 15, 2020 (2021 calendar year). This is a one-year deferral of the effective date.
Stay tuned for more information from your Cohen & Company engagement team. We have been, and will continue to be, working with our clients to assist with implementing the leases standard. Despite the additional time this extension will provide, companies still need to be prioritizing this implementation. The time and resources it will take as well as its impact on financial ratios and covenant compliance can easily be underestimated.
Please contact a member of your service team, or contact Jami Blake at jblake@cohencpa.com for further discussion.
Cohen & Company is not rendering legal, accounting or other professional advice. Information contained in this post is considered accurate as of the date of publishing. Any action taken based on information in this blog should be taken only after a detailed review of the specific facts, circumstances and current law.