FASB Officially Delays Lease Accounting Standard

The Financial Accounting Standards Board (FASB) voted on October 16, 2019 to delay the effective dates for three major accounting standards for most nonprofit organizations. Only one of these standards is expected to have a significant impact for ECFA members.

FASB first issued Accounting Standards Update No. 2016-02, Leases (Topic 842) on February 25, 2016. The update was designed to help increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing transactions. This new standard was originally scheduled to be effective for nonprofit organizations with fiscal years beginning after December 15, 2019. It was met with significant resistance by both public and private organizations due to the high cost and complexity of requiring with the new lease accounting rules.

The new effective date will be delayed for one year and will now be required for fiscal years beginning after December 15, 2020 (calendar years ending December 31, 2021 and non-calendar years beginning in 2021). Early adoption requirements will remain unchanged.

We mentioned earlier this delay is for “most” nonprofit organizations. It does not apply to a nonprofit organization that is a borrower of tax-exempt bonds and is considered a conduit bond obligor for securities that are traded, listed, or quoted on an exchange or over-the-counter market. The delay does apply to conduit bond obligors of securities that are sold pursuant to a private placement offering.

We recommend reaching out to your independent CPA with any questions surrounding your organization’s requirements under this new accounting standard.

This text is provided with the understanding that ECFA is not rendering legal, accounting, or other professional advice or service. Professional advice on specific issues should be sought from an accountant, lawyer, or other professional.