FASB proposes to delay accounting standards in response to coronavirus
The Financial Accounting Standards Board plans to propose that private companies and not-for-profit organizations get an extra year to implement the lease accounting standard while they deal with the coronavirus crisis, while also giving private franchisor companies an extra year to get ready for the revenue recognition standard.
FASB held a meeting Wednesday with its members and staff attending remotely to discuss the impact of the coronavirus crisis on some of the upcoming accounting standards (see our story).
FASB chairman Russell Golden (pictured) issued a statement following the meeting Wednesday, saying, “In the coming days, the FASB will issue a proposal to provide certain private companies and not-for-profit organizations with an optional, one-year effective date delay of the leases standard. Stakeholders will have a 15-day comment period from the time of issuance to review and provide comments on the proposal. The FASB will also add a project to its research agenda to see if there are opportunities to provide revenue recognition implementation expedients to franchisors. While that project is ongoing, the private company franchisors will also be given a one-year deferral for the revenue recognition standard.”
Some franchise businesses have been asking for relief from the revenue recognition standard. BrightStar Care CEO Shelly Sun, a CPA and home health care franchisor with over 300 locations, and a former chair of the International Franchise Association, visited Capitol Hill in February to lobby for changes in the standard, saying it would harm over 100,000 franchise businesses around the country.
“While we are a $15 million organization, no way could I have complied with what was necessary to recognize franchisees upfront,” Sun told Accounting Today at the time.
“We are hopeful with Congress’s intervention to get small business implementation guidance on the record that would allow small franchisors not to have to go through 500 hours of documentation, to take what would be a practical amount of the initial franchise fee known to be used for getting a franchisee up and going,” she added.
Golden said FASB’s staff would soon issue a leases question-and-answer document to help stakeholders account for the rapid, unprecedented lease concessions lessors are seeking to provide tenants during the pandemic. “The staff also addressed implementation questions about other crisis-related issues, including interest income and loan payment holidays, hedging and fair value accounting,” he added. “The staff also noted that they have received questions related to accounting for loans from the Small Business Administration and that they will work with stakeholders to provide accounting clarity in that area as well. This information will be memorialized in FASB’s upcoming summary of tentative board decisions (TBDs) and meeting minutes to be posted to the FASB website.”
In addition, FASB has also announced that it will temporarily suspend issuance of other public exposure documents and will defer work that requires public outreach on other technical agenda projects to focus on supporting stakeholders as they navigate the impact of the crisis, he noted. “Consequently, we have also decided to postpone our May 18, 2020 public leases roundtable meeting to a future date,” Golden added. “Finally, it’s important to note that we recognize that there are other standards with effective dates of 2022 and beyond—and that companies implementing them are also suffering from a dislocation of accounting staff and a reallocation of resources. I want to assure them that the FASB is committed to understanding how the COVID-19 crisis is impacting their transition plans, and we will continue to address issues at a future Board meeting, including addressing the need for more time related to adoption.”
He said FASB and its staff would continue to closely monitor questions and concerns from their stakeholders, and he is encouraging them to continue to share their questions and concerns during this difficult time. Questions can be submitted through FASB’s Technical Inquiry Service.