Proposed Deferral of Lease Standards Due to COVID-19 Business Interruptions

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On April 8, 2020, the Financial Accounting Standards Board (FASB) proposed the deferral of Accounting Standards Update No. 2016-02, Leases (Topic 842), and subsequent amendments, commonly known as the lease standards, for certain entities. This was decided as a result of global concerns related to the COVID-19 pandemic.

The Lease Standards Effective Date

image of businessman sitting at his office desk signing a documentThe FASB is proposing to postpone the effective date by one year for private not-for-profit organizations and private companies to fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. Currently, nonpublic entities are required to comply with annual reporting periods beginning after December 15, 2020 and interim periods within fiscal years beginning after December 15, 2021.

This deferral would also apply to not-for-profit organizations that have issued or are conduit bond obligors for securities traded, listed and quoted on an exchange or over-the-counter market that haven’t yet issued financial statements, according to the proposal released by the FASB. The deferral would move the effective date to fiscal years beginning after December 15, 2019, including interim periods within those fiscal years.

Not-for-profit entities could still adopt the lease standards early.

15-Day Comment Period

The FASB included a 15-day comment period in their proposal for organizations to note challenges in adopting this standard during the Coronavirus pandemic.

Topic 842, Leases, was previously delayed in July of 2019 due to companies’ challenges understanding the standard and adopting it.

Speak with a Professional

We encourage not-for-profit organizations to take this time to prioritize their business and get a better understanding of the new standard. For help navigating the current business climate as a result of COVID-19, please contact your Sikich representative.

This publication contains general information only and Sikich is not, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or any other professional advice or services. This publication is not a substitute for such professional advice or services, nor should you use it as a basis for any decision, action or omission that may affect you or your business. Before making any decision, taking any action or omitting an action that may affect you or your business, you should consult a qualified professional advisor. You acknowledge that Sikich shall not be responsible for any loss sustained by you or any person who relies on this publication.

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