Dive Brief:
- Private companies and nonprofits will not get extra time to implement new lease accounting standards the Financial Accounting Standards Board (FASB) decided yesterday.
- "Since issuing Accounting Standards Update No. 2016-02, Leases (Topic 842), in February 2016, the FASB has issued two effective date deferrals for certain entities," FASB said, "one in June 2020 and one in November 2019. Today, the Board decided not to provide a third effective date deferral of Topic 842 for entities within the scope of paragraph 842-10-65-1(b) (generally private companies and certain not-for-profit organizations)."
- The new standards require companies to treat longer-term operating leases the same way as they do capital leases (now known as finance leases), which means including them on their balance sheet as lease assets or liabilities rather than in the footnotes. Some additional flexibility is provided for the treatment of leases with durations of less than a year.
Dive Insight:
Public companies have been subject to the new standards for a year already, but FASB considered another delay because it had been hearing feedback that more time is needed for private companies and nonprofits because of the resources required to make such sweeping changes.
“We’ve heard different perspectives,” FASB Chair Richard Jones told reporters at a press event on Tuesday. “We’ve been doing a lot of outreach with folks to understand where they are in the adoption process, and also [to see] what more time would mean.”
The board met Wed., Nov. 10, at 1:30 ET.
