AICPA asks FASB to delay lease accounting standard for private companies
The American Institute of CPAs sent a letter to the Financial Accounting Standards Board asking FASB to postpone the effective date of its new lease accounting standard for one year, citing an overload for private company financial statement preparers.
In a letter Monday from Michael A. Westervelt, chair of the AICPA Private Companies Practice Section’s Technical Issues Committee, to FASB’s acting technical director, Shayne Kuhaneck, the AICPA pointed to the magnitude of the changes required of companies. The AICPA argues that users of private company financial statements wouldn’t be negatively affected by a delay, and it’s difficult for private companies to keep up with the narrow-scope improvements FASB keeps making in the original standard. For private companies, the standard takes effect for annual periods starting after Dec. 15, 2019 (that is, for calendar periods starting after Jan. 1, 2020), and interim periods after Dec. 15, 2020.
Westervelt also pointed to the many new accounting standards, including revenue recognition and current expected credit losses, that are taking effect around the same time. “With the significant and complex standards recently issued by the board including leases, revenue, and CECL, TIC [the Technical Issues Committee] believes they should be given special consideration considering the effective dates are so close together and the changes are quite substantial and will require significant time to adopt,” he wrote. “Many private companies still need to expend significant resources to adopt the new revenue standard.”
He sees FASB continuing to refine the standard, which makes it a bit of a moving target. “FASB continues to issue narrow scope improvements to this standard and it is difficult to keep up with what the standard currently requires,” he wrote. “Many of these changes and narrow scope improvements come from public companies that have already gone through the process.”
Westervelt also pointed to problems with some of the available software that is supposed to help companies cope with the process, and even the public companies that were supposed to have begun adopting the standard this year are struggling with it. “TIC has found that some of the third-party vendors that have developed solutions to assist companies in implementation of the lease standard have errors in their software and it will take some time to sort through to ensure these solutions are accurate and auditable,” he wrote. “TIC is aware that public company clients are struggling with adoption, and those entities have more resources than most private companies. Private companies could still early adopt in cases where they are prepared and wish to adopt the standard early.”
He argued for a one-year delay in the leases standard, also known as ASC 842. "An additional one-year delay should result in more accurate reporting under ASC 842 for private companies," he wrote.