On July 17th, 2019 the Financial Accounting Standards Board (FASB) voted to propose delaying adoption of the ASC 842 codification for one (1) year for private companies and not-for-profits.
The currently adopted standard states that private companies must adopt ASC 842 for the first fiscal year beginning after 12/15/19, year-end reporting only; with interim and year-end reporting starting the following year. With the proposed delay, private companies would be given an additional year to adopt, making the beginning date the first fiscal year after 12/15/20 (year-end only) and 12/15/21 (year-end and interim periods).
As with all such proposals from the FASB, there is always a comment period, and this one is limited to 30 days. Once the comment period has ended, the FASB Board will convene, evaluate the comments and vote. If voted for in the affirmative, the extension (as written) will go into effect.
This is clearly a windfall for the many private firms who have been struggling to simultaneously adopt ASC 606, Revenue Recognition and the new leases standard. Firms just beginning their leases projects would greatly benefit from the anticipated extension, with the extended time to now create an adequate adoption plan, staff it correctly, make a rational software selection and adopt seamlessly.
However, a word of caution to those who think that this extension allows them to continue procrastinating or pause an in-progress project: you would be setting yourself and your firm up for failure. Ensuring lease portfolios are compliant with the new regulations is a complex project. Many private companies can gain insights from the earlier public company adoptions. There can be many delays when it comes to getting compliant and you do not want to remain behind once given an extension.
The Time to Start is Now
Private companies and not-for-profits who have already started and are considering taking advantage of this newfound window of opportunity should stay the course and maintain the project with the most efficient timeline possible. Perhaps slow down a little as needed, re-write adoption plans as necessary, but whatever decision is made, do not stop.
However, if you are in the 30% or so who have yet to begin ASC 842 adoption, then you are in luck. This is the time to take advantage of a possible extension and bring your organization up to speed and into compliance.
Take the first step in getting compliant, schedule a call with one of our ASC 842 compliance experts to find out how need to get started.