The impact of the Coronavirus Disease 2019 (COVID-19) pandemic has required businesses to navigate through rapidly changing environments and regulations like never before. Manufacturing and distribution businesses are focusing on maintaining compliance with various state regulations for re-opening as well as the impacts on budgets, supply chains, personnel, etc. The Financial Accounting Standards Board (FASB) has recognized the impact COVID-19 has had on organizations and, as a result, has issued Accounting Standards Update (ASU) 2020-05, Revenue from Contracts with Customers (Topic 606) and Leases (Topic 842), in June 2020, to provide some relief. This standard provides near-term relief for certain entities as it relates to the effective dates of:
1) Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606) (Revenue)
2) Accounting Standards Update No. 2016-02, Leases (Topic 842) (Leases)
Revenue from Contracts with Customers
Public business entities, certain nonprofit entities, and certain employee benefit plans were required to apply Revenue to annual reporting periods beginning after December 15, 2017. All other entities were required to apply Revenue to annual reporting periods beginning after December 15, 2018. As a result of these original dates, several audits of private companies under the new Revenue standard are currently in progress.
Accounting Standards Update 2020-05 defers the effective date for certain entities in the “all other” category that have not yet issued their financial statements (or made their financial statements available for issuance). Such entities may now elect to adopt the Revenue guidance for annual reporting periods beginning after December 15, 2019 (and for interim periods within annual reporting periods beginning after December 15, 2020). However, these entities may elect to follow the original effective dates as well.
Leases
Public business entities, certain nonprofit entities, and certain employee benefit plans were required to apply Leases to annual reporting periods beginning after December 15, 2018. All other entities were required to apply Leases to annual reporting periods beginning after December 15, 2020.
Accounting Standards Update 2020-05 defers the effective date for certain entities in the “all other” category that have not yet issued their financial statements (or made their financial statements available for issuance) with the adoption of Leases. Such entities may now elect to adopt the Leases guidance for annual reporting periods beginning after December 15, 2021 (and for interim periods within annual reporting periods beginning after December 15, 2022). However, early implementation continues to be permitted thus an entity can choose to implement Leases before the deferred dates noted above.
Whether it be the deferral of the Revenue and Lease standards or any other accounting topic your entity is facing, VonLehman staff can help you determine how these will impact your financial statements. Contact us today at kleadingham@vlcpa.com or 800.887.0437.
