Now that many nonprofit and nonpublic organizations are starting to put the implementation struggles of the new revenue recognition standards behind them, it seems that it is time to start shifting attention to the new lease standard (ASC Topic 842, Leases) … or is it?
A new proposal by FASB
FASB’s Proposed Accounting Standards Update for Revenue from Contracts with Customers and Leases is intended to provide relief to nonprofit and nonpublic organizations already dealing with other operational disruptions caused by COVID-19. Under this proposal, FASB has recommended deferring the lease standard implementation for yet another year (a one-year deferral was already approved in 2019). This would make the lease standard effective for fiscal years beginning after December 15, 2021, or in layman’s terms, for December 31, 2022, year-end financial reporting.
The COVID-19 pandemic has created a new wave of lease-related issues, such as short-term and long-term lease modifications, as well as other lease concessions, that could impact the accounting for lease assets and liabilities to be recorded under ASC Topic 842, Leases. So, a delay in implementation may be good news for some entities already at their capacity for change.
This proposed lease delay to date has yet to be accepted. However, in the event it is, use this additional time to continue getting your ducks in a row; don’t just put this off.
- Start a log of your organization’s current leases.
- Determine if you have any debt covenants that could be impacted by changes to the balance sheet.
- Consider changes to policies, procedures and internal controls related to the new standard.
If you have questions or need assistance with accounting for your organization’s leases, please contact your local Yeo & Yeo professional.
The information contained in this post may not reflect the most current developments, as the subject matter is extremely fluid and constantly changing. Please continue to monitor Yeo & Yeo’s COVID-19 Resource Center for ongoing developments. Readers are also cautioned against taking any action based on information contained herein without first seeking professional advice.