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New North American member Yeo & Yeo discusses the lease-related issues brought on by the Covid-19 outbreak and possible relief provided by the FASB's proposed accounting standards update.
Now that many nonprofit and nonpublic organizations are starting to put the implementation struggles of the new revenue recognition standards behind them, it seems that it is time to start shifting attention to the new lease standard (ASC Topic 842, Leases) … or is it?
A new proposal by FASB
FASB’s Proposed Accounting Standards Update for Revenue from Contracts with Customers and Leases is intended to provide relief to nonprofit and nonpublic organizations already dealing with other operational disruptions caused by COVID-19. Under this proposal, FASB has proposed deferring the lease standard implementation again for another year (a one-year deferral was already approved in 2019). This would make the lease standard effective for fiscal years beginning after December 15, 2021, or in layman’s terms, for December 31, 2022 year-end financial reporting.
The COVID-19 pandemic has created a new wave of lease-related issues, such as short-term and long-term lease modifications, as well as other lease concessions, that could impact the accounting for lease assets and liabilities to be recorded under ASC Topic 842, Leases. So, a delay in implementation may be good news for some entities already at their capacity for change.
This proposed lease delay to date has yet to be accepted. However, in the event it is, use this additional time to continue getting your ducks in a row; we don’t advise just putting this off.
- Start a log of your organization’s current leases.
- Determine if you have any debt covenants that could be impacted by changes to the balance sheet.
- Consider changes to policies, procedures and internal controls related to the new standard.
Yeo & Yeo
Yeo & Yeo is a top 200 full-service assurance, tax and advisory firm with a reputation for personal service, commitment to clients and community support. Founded in 1923, Yeo & Yeo has grown to include more than 200 trusted professionals who have been successfully advising Michigan businesses. Through our four companies – Yeo & Yeo CPAs & Business Consultants, Yeo & Yeo Computer Consulting, Yeo & Yeo Medical Billing & Consulting and Yeo & Yeo Wealth Management – we have created a strong network of professionals with the expertise to solve complex problems in each industry we serve.Learn more