Articles for CPAs during the pandemic: Expect delay in lease effective date for private companies and NFPs – 4/9

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Big news from FASB yesterday. They are planning to postpone the new lease rules for private companies and most not-for-profit entities.

4/8/20 – Journal of Accountancy – FASB effective date delay proposals to include private company lease accounting and Wall Street Journal – FASB Proposes Delaying New Accounting Rules for Some Companies Because of Coronavirus – FASB is moving towards a deferral of revenue recognition that applies to a very narrow slice of companies. Also moving toward a deferral of new lease accounting for private companies and private not-for-profit organizations.

The board directed staff to prepare an exposure draft that will have a 15 day comment period.

Rev Rec will be postponed a year for private company franchisors. At issue is sorting out how to account for the initial franchise fees paid to the franchisors. While a big issue for those affected, this extension will apply to a very small number of companies.

Much more significant is a one-year deferral of the new Topic 842 on leases. No change for public business entities and not-for-profit entities who are conduit bond issuers is publicly traded securities have already issued financial statements (those are called public not-for-profit entities).

Effective date is extended for one year to those fiscal years beginning after December 15, 2021. This would apply to:

  • Private companies
  • Private not-for-profit entities

For those not-for-profit entities with conduit bond obligations which are publicly traded, the effective date is postponed from fiscal years beginning after December 15, 2018 for another year to fiscal years beginning after December 15, 2019.

Those dates always require a translation in my brain. For organizations with a December 31 fiscal year-end, if approved as proposed the new effective dates would be:

  • 12/31/20 – public not-for-profit entities (i.e. with public debt)
  • 12/31/22 – private companies
  • 12/31/22 – private not-for-profit entities (same date as private companies)

Noticeably not mentioned anywhere in the discussion is CECL.

Chairman Golden indicated additional deferrals will be considered if necessary.

4/3/20 – AICPA – Ethical implications to consider for COVID-19 PPP loan applications – I just came across this article from last week.

Watch out for independence impairments if you take a PPP loan from an existing client or you sign a client’s PPP application.  Comments make clear that helping out with a PPP application is a non-attest service. If your client is an attest client, that means you need to take a few extra steps. Also watch out for taking on management functions.

Be careful. I see lots of ways to create liability and to impair independence.

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