On June 3, 2020, the FASB issued an Accounting* Standards Update (ASU) 2020-05, Revenue from Contracts with Customer (Topic 606) and Leases (Topic 842): Effective Dates for Certain Entities. It provides a one-year deferral of the effective dates for certain entities in applying the new revenue recognition and leases standards.
Key Provisions
FASB acknowledged that the pandemic is adversely affecting the global economy and causing disruptions on the businesses. Thus, the ASU 2020-05 was issued that grants a one-year deferral for certain entities that have not applied the new revenue recognition and lease guidance.
Revenue from Contract with Customers
The deferral of the effective date of Topic 606 applies to private entities that have not yet issued financial statements or made their financial statements available for issuance as of June 3, 2020, reflecting the adoption of Topic 606.
The eligible entities may elect to adopt the new revenue recognition standard for annual reporting periods beginning after December 15, 2019, and for interim reporting periods within annual reporting periods beginning after December 15, 2020.
The deferral of Topic 606 does not apply to:
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Public business entities
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Public not-for-profits – not-for-profit entities that have issued, or are conduit bond obligors for, securities that are traded, listed, or quoted on an exchange or an over-the-counter market
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Employee benefit plans that file or furnish financial statements with the Securities and Exchange Commission (SEC)
Leases
The deferral of the effective date of Topic 842 applies to entities in the “all other” category and public not-for-profits that have not yet issued financial statements or made their financial statements available for issuance as of June 3, 2020, reflecting the adoption of Topic 842.
The eligible entities may elect to adopt the new lease standard for annual reporting periods beginning after December 15, 2021, and for interim reporting periods within annual reporting periods beginning after December 15, 2022. Additionally, for public non-for-profit entities that have not yet issued financial statements (or made available for issuance) reflecting the adoption of Topic 842, effective date is for fiscal years beginning after December 15, 2019.
The deferral of Topic 842 does not apply to:
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Public business entities;
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Public not-for-profits that have issued interim financial statements reflecting the adoption of Topic 842 prior to June 3, 2020; or
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Employee benefit plans that file or furnish financial statements with the SEC.
Note: Early adoption continues to be permitted for both Topic 606 and Topic 842.
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Disclaimer
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. It is not intended to be relied upon as accounting*, tax, or other professional services. Please refer to your advisors for specific advice. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation.
