Revenue from Contracts with Customers (Topic 606)
and Leases (Topic 842): Effective Dates of Certain Entities

Accounting Standards Update 2020-05—Revenue from Contracts with Customers (Topic 606) and Leases (Topic 842): Effective Dates for Certain Entities

 

Overview


On June 3, 2020, the Financial Accounting Standards Board (FASB) issued an Accounting Standards Update as a limited deferral of the effective dates of the following Updates (including amendments issued after the issuance of the original Update) to provide immediate, near-term relief for certain entities for whom these Updates are either currently effective or imminently effective:
  1. Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606) (Revenue)
  2.  Accounting Standards Update No. 2016-02, Leases (Topic 842) (Leases).

Revenue


On May 28, 2014, the Board issued Update 2014-09, with an effective date for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period, for public business entities, certain not-for-profit (NFP) entities, and certain employee benefit plans. The effective date for all other entities was for annual reporting periods beginning after December 15, 2017, and interim periods within annual periods beginning after December 15, 2018.

In August 2015, the Board issued Accounting Standards Update No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date. The amendments in that Update deferred the effective date of Update 2014-09 for all entities by one year. Public business entities, certain NFP entities, and certain employee benefit plans were required to apply the guidance in Update 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. All other entities were required to apply the guidance in Update 2014-09 to annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019. Early adoption was permitted.

The amendments in this Update defer, for one-year, the required effective date of Revenue for entities, that are not public business entities, that have not yet issued their financial statements (or made financial statements available for issuance) reflecting the adoption of Revenue. Those entities may elect to adopt the guidance for annual reporting periods beginning after December 15, 2019, and for interim reporting periods within annual reporting periods beginning after December 15, 2020. 
 

Leases


In February 2016, the Board issued Update 2016-02, which was effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, for public business entities; NFP entities that have issued, or are conduit bond obligors for, securities that are traded, listed, or quoted on an exchange or an over-the-counter market (referred to as public NFP entities); and employee benefit plans that file or furnish financial statements with or to the U.S. Securities and Exchange Commission. For all other entities, Leases was effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020.

In November 2019, the Board issued Accounting Standards Update No. 2019-10, Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates. The amendments in Update 2019-10 deferred the effective dates for Leases for entities in the “all other” category by an additional year. Therefore, Leases was effective for all other entities for fiscal years beginning after December 15, 2020, and interim periods within fiscal years beginning after December 15, 2021. Early application was permitted. The deferrals were provided in response to feedback from stakeholders and the Board’s monitoring of the implementation of major Updates, which provided a greater understanding of the implementation challenges encountered by all types of entities when adopting a major Update.

The amendments in this Update defer the effective date of Leases for private entities (the “all other” category) to fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. Additionally, the amendments defer the effective date of Leases to fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, for NFP entities that have issued or are conduit bond obligors for securities that are traded, listed, or quoted on an exchange or an over-the-counter market that have not yet issued financial statements (or made financial statements available for issuance). Early application continues to be permitted, which means that an entity may choose to implement Leases before those deferred effective dates.
 

How Do the Amendments Improve Current Generally Accepted Accounting Principles (GAAP)?


The Coronavirus Disease 2019 (COVID-19) pandemic is adversely affecting the global economy and causing significant and widespread business and capital market disruptions. The Board is committed to supporting and assisting stakeholders during this difficult time and, therefore, has provided certain entities with additional time to adopt the Revenue and Leases guidance.
 

Additional Information

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