Tentative Board Decisions
Tentative Board decisions are provided for those interested in following the Board’s deliberations. All of the reported decisions are tentative and may be changed at future Board meetings.Wednesday, May 20, 2020 FASB Board Meeting
Revenue from contracts with customers and leases: effective dates for certain entities. The Board discussed comments received and completed its redeliberations on proposed Accounting Standards Update, Revenue from Contracts with Customers (Topic 606) and Leases (Topic 842): Effective Dates for Certain Entities.
Revenue from Contracts with Customers (Topic 606)
The Board made the following decisions:
- For franchisors that are not public business entities, the Board affirmed its decision to amend the effective date of Topic 606.
- For all entities that have not yet adopted the guidance (that is, entities that have not yet issued financial statements or made their financial statements available for issuance reflecting the adoption of Topic 606), the Board decided to amend the effective date of Topic 606. For those entities, the effective date of Topic 606 will be for annual reporting periods beginning after December 15, 2019, and interim reporting periods within annual reporting periods beginning after December 15, 2020. Early application will continue to be permitted.
Leases (Topic 842)
The Board made the following decisions:
- For private companies and private not-for-profit (NFP) entities, the Board affirmed its decision to amend the effective date of Topic 842. For those entities, the effective date of Topic 842 will be for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. Early application will continue to be permitted.
- For NFP entities that have issued or are conduit bond obligors for securities that are traded, listed, or quoted on an exchange or an over-the-counter market (public NFP entities) and which have not yet issued financial statements (or made their financial statements available for issuance) reflecting the adoption of Topic 842, the Board affirmed its decision to amend the effective date of Topic 842. For those entities, the effective date will be fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption will continue to be permitted.
- The Board clarified that a public NFP entity that has issued financial information, rather than financial statements, that reflects adoption of Topic 842 is eligible to apply the deferral.
The Board concluded that the expected benefits would justify the expected costs of the effective date deferrals and directed the staff to draft a final Accounting Standards Update for vote by written ballot.
Paycheck Protection Program Loans
The FASB staff discussed its efforts to support stakeholders as they address the accounting for commonly encountered situations regarding Paycheck Protection Program (PPP) loans. The staff continues to engage with the AICPA’s expert panels and various practitioners to review and assist in the development of illustrations and reasonable applications of GAAP. The staff believes that this collaboration is valuable and is the most expeditious way to assist stakeholders who have questions about PPP loans. It is expected that the AICPA will publish question-and-answer documents in the near future. The staff will continue to evaluate questions outside of the PPP program to determine whether the staff or Board should take action to provide further interpretive guidance.
Disclosure of Government Assistance
In light of the unprecedented actions taken by government in the last few months, the staff has received questions about the disclosure of government assistance. Although GAAP does not have guidance specifically about government assistance to for-profit entities, the Board does have an active project on its agenda related to specific disclosures of certain types of government assistance. The staff highlighted that existing GAAP requires disclosure of significant accounting policies under Topic 235, Notes to Financial Statements. Specifically, paragraph 235-10-50-3 states the following:
Disclosure of accounting policies shall identify and describe the accounting principles followed by the entity and the methods of applying those principles that materially affect the determination of financial position, cash flows, or results of operations. In general, the disclosure shall encompass important judgments as to appropriateness of principle relating to recognition of revenue and allocation of asset costs to current and future periods; in particular, it shall encompass those accounting principles and methods that involve any of the following:
- A selection from existing acceptable alternatives
- Principles and methods peculiar to the industry in which the entity operates, even if such principles and methods are predominantly followed in that industry
- Unusual or innovative applications of GAAP.
On May 13, 2020, the Financial Accounting Foundation Board of Trustees approved a change to the Post-Implementation Review process. That process will now be embedded within the respective Boards’ standard-setting process, which is subject to continued oversight by the Board of Trustees. This change will allow the FASB to conduct reviews of certain standards in a timely fashion and to address any issues arising as a result of implementation. The FASB welcomes this change and the continued oversight from the Board of Trustees. The staff has begun developing a plan for Topic 606 (revenue), Topic 842 (leases), and Topic 326 (credit losses) and will be sharing that plan with the Board in the coming weeks.