The American Institute of CPAs has asked the Financial Accounting Standards Board to delay the effective date of its “significant and complex” lease accounting standard for private companies.
AICPA cited, among other things, the overlap with the implementation of FASB’s new revenue-recognition standard and the experience of public companies with the new lease accounting rules in asking the board to consider postponing the effective date of the leasing standard for one year.
For private companies, ASC 842 is currently scheduled to take effect for annual financial reporting periods starting after Dec. 15, 2019 (or after Jan. 1, 2020 for calendar periods), and interim periods after Dec. 15, 2020.
FASB issued the new standard in February 2016 after years of planning. It has been estimated to bring $2 trillion of lease liability onto S&P 500 balance sheets, affecting public and private entities that enter lease arrangements and sign contracts containing leases to support their business operations.
AICPA’s technical issues committee “has heard concerns from private companies about the effective date of the lease standard, especially it being just one year after the effective date” of the revenue-recognition standard, committee chair Michael Westervelt wrote FASB in a letter.
“With the significant and complex standards recently issued by [FASB] including leases, revenue, and [current expected credit loss], TIC believes [private firms] 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 added.
In a recent survey cited by AICPA, Deloitte found that only 30% of private companies plan to adopt ASC 842 on schedule while 33% said they were unprepared to comply and 44% said they were just somewhat prepared.
The Center for Plain English Accounting has reported that more than 50% of private firms do not feel they have adequate controls in place to appropriately adopt all the standard’s provisions.
“TIC is aware that public company clients are struggling with adoption, and those entities have more resources than most private companies,” Westervelt noted.