Home / Resources / Industry Alerts / Accounting Standards Update 2020-05 Topic 606 (Revenue from Contracts with Customers) and Theme 842 (Leases) Effective Date for Certain Companies On June 3, 2020, the Financial Accounting Standards Board (FASB) released the Accounting Standards Update (ASU) 2020-05, Revenue from contracts with customers (subject 606) and Leases (subject 842): Effective dates for certain entities. The changes in ASU 2020-05 did not change the efficacy data previously codified by ASU 2020-02. SEC staff have not yet provided guidance on the interaction of their previous statements with the 2020-05 ASU deferral. Companies that could be affected by this problem should continue to monitor future developments in the SEC. Practical Help: Review of Management`s Estimates in CSA 606 This practical guide walks you through the five steps of the FASB asC 606 topic, including the potential risks associated with material misstatement, processes where the client should have controls in place, and examples of audit procedures to manage risk. The changes to ASU 2020-05 affect businesses in the “all others” category (those that are not public corporations, certain not-for-profit entities and certain employee pension plans) as well as not-for-profit public entities that have not yet submitted financial statements reflecting the adoption of the new guidelines on the accounting for leases. These companies can postpone the application for one year. Businesses in the “all others” category may refer to tax years after the 15th anniversary of the “all others” category. December 2021 and carry-over to provisional periods in fiscal years beginning after December 15, 2022. Public not-for-profit organizations that have not yet submitted financial statements that reflect acceptance may be carried forward to fiscal years beginning after December 15, 2019, including interim periods in those fiscal years.
Prior to the COVID-19 pandemic, concerns had already been raised about the implementation of stakeholders in the franchise industry, prompting the FASB to consider further investigation into the issue. After the pandemic began, other private companies and non-profit organizations began to voice their own concerns about implementation due to the challenges posed by COVID-19. In response to these comments, the FASB has published ASU 2020-05. The AICPA`s Guide to Auditing and Accounting for Revenue Recognition provides general information on accounting and auditing to consider when implementing the new revenue recognition standard, as well as industry-specific considerations. Some companies may meet the definition of a public business entity only because their financial statements or financial information are included in another company`s filing with the SEC. This may be the case to comply with disclosures required by SEC Rule 3-05 or Rule 3-09 of S-X. From the Journal of Accountancy: How Accountants Can Remain Independent While Advising on Revenue Recognition With the full-fledged revenue recognition standard, it can be instinctive to help clients who still feel left behind. The extent of this support could affect the independence of the company. Discover some best practices here to avoid pushing the boundaries of independence. As mentioned in a previous GRF industry warning, the Financial Accounting Standards Board (FASB) added a draft to its technical agenda on April 8, 2020 to propose to extend the effective dates of its revenue recognition and lease recognition standards for certain companies due to the challenges related to the COVID-19 pandemic. The special codifications of accounting standards (ASCs) in the delay proposal were Topic 606, Revenue from Contracts with Customers, and Topic 842, Leases.
Regulatory updates, strategies to address the following risks, and possible actions to strengthen your staff and organization can be found in the following resources: Changes to this update extend the required effective date of item 606, Revenue from Customer Contracts for the above-mentioned companies, by one year. These entities may choose to adopt the guidelines for annual reporting periods beginning after December 15, 2019 and for interim periods during annual reporting periods beginning after December 15, 2020. Early adoption is always allowed. Employee Training Presentation This PowerPoint presentation (with speaker notes) is designed to help companies train audit staff to audit customers whose sales are subject to ASC 606. ASU 2014-09, Revenue from Contracts with Customers (Topic 606), provided comprehensive new guidance on revenue recognition. ASU 2020-05 concerns franchisors that are not publicly traded companies, not-for-profit corporations and other companies that have not yet published financial statements reflecting the new revenue recognition guidelines. Those entities may defer application to financial years beginning after 15 December 2019 and to interim periods of financial years beginning after 15 December 2020. Following the release of ASU 2014-09, Revenues from Contracts with Clients (Topic 606), the FASB released the following related updates to the accounting standard and employee records: According to the FASB, the Board noted that “challenges related to the transition to a large ASU such as Theme 606 and Theme 842 for private corporations, small publicly traded companies and not-for-profit organizations. These challenges have been significantly exacerbated by the current disruptions in business and financial markets caused by the COVID-19 pandemic. In addition, the Council had already planned a round table to discuss implementation by listed companies in order to support private companies in their efforts and to determine whether additional practical means or other changes are warranted as private companies prepare for final implementation. .
gepubliceerd op 28 januari 2022