The Financial Accounting Standards Board just issued Accounting Standards Update 2020-05 (the ASU), taking their turn in responding to the COVID-19 pandemic. The ASU extends the implementation date of ASU 2016-02, Leases, for yet another year! Nonpublic entities could now choose to adopt the new standard for years beginning after December 15, 2021. Early adoption would still be permitted. As a reminder, ASU 2016-02 created Topic 842 in the Accounting Standards Codification, which, simply put, requires lessees to capital all leases on their balance sheets.
The original pronouncement experienced multiple deferrals and postponements before finally being issued in February 2016. Since its issuance, it was already deferred for a year for non-public companies, due primarily to the significant effort required by public companies to comply, coupled with its initial implementation coming on the heels of complying with Topic 606, Revenue from Contracts with Customers, another drain on company resources. After never thinking the first deferral would happen, here we are with another one. The ASU explains that the existing implementation challenges “have been significantly amplified by the current business and capital market disruptions caused by the COVID-19 pandemic.” As such, it was determined to provide, as an option, another year to comply. As a reminder, early adoption is still permitted.