FASB’s Quick Reaction to Pandemic
Yesterday, the Financial Accounting Standards Board (“FASB”) met to cover several matters that arose over the viral pandemic that has overrun the economy. Specifically, FASB:
- voted to defer the effective date to adopt the Revenue Recognition Standards (Topic 606) for non-public entities for another year. Topic 606 will be now be effective for the annual reporting periods beginning after December 15, 2019 (or, 2020 for calendar year-ends). Unfortunately, this decision was arrived at too late for the non-public entities that have already issued their financial statements for 2019 but at least that project has been completed for them.
- affirmed to delay the effective date of the standards related to the overhaul of the accounting for Leases (Topic 842) to the annual reporting periods beginning after December 15, 2021 (or, 2022 for calendar year-ends).
- could not arrive at a consensus on how to record the PPP loans at inception, during its term outstanding, and related forgiveness (if any). However, it is anticipated that AICPA will issue a Question & Answers document on this issue in the near term. It appears that FASB will provide input into this AICPA publication but will rely upon it as the guidance (and will step in later on if needed). Due to this uncertainty on how to proceed, FASB did state that as of now, they will require the following disclosures on the recording of the PPP loan and related activities:
- The identification and description of the accounting principles (“GAAP”) followed by the entity and the methods of applying those principles that materially affect its financial statements.
- Important judgments as to appropriateness of principles relating to recognition and methodology of revenue (forgiveness) and allocation of asset costs to current and future periods that involve any of the following:
- A selection from existing acceptable alternatives
- Principles and methods peculiar to the industry in which the entity operates, even if such principles and methods are predominantly followed in that industry
- Unusual or innovative applications of GAAP
By Eric Lerner, CPA, Director of Quality Control
May 21, 2020
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