On Friday November 15th, the Financial Accounting Standards Board (FASB) officially delayed the effective dates for four recent accounting standards including lease accounting, credit losses, hedging, and long-duration insurance contracts.
The new lease accounting standards update is effective as of December 15th, 2020 and benefits the private companies, not-for-profit, and small reporting companies that have not been impacted by the standards that went into effect for public companies back in January of 2019.
FASB recognizes that the implementation of these accounting standards represents a significant undertaking for these companies and organizations. The new effective date provides them with additional time to gather information and review the financial statements of public companies that have adopted the standards to develop a deeper understanding. Public companies’ resources were stretched thin by the overlapping effective date of the new complex revenue recognition standards and they struggled with implementation. While the official delay of these standards for private companies, not-for-profits, and small reporting companies came as no surprise, the one year extension should have a positive impact and provide them with the resources and time needed to plan for and implement the standards accordingly.
During the forum in July, the board implied that this two year delay of effective dates for major accounting standards updates between public and private companies may become the new standard.