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 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.
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.