July 29, 2019
Atlanta area companies working through the challenges of implementing lease account changes may soon breathe a sigh of relief. Given the challenges many are facing, the American Institute of Certified Public Accountants (AICPA) lobbied to get the effective date for the new lease accounting standard changed. The standard, which is already effective for publicly held companies, requires private companies to comply by 2020. On July 17th, the Financial Accounting Standards Board (FASB) voted to officially consider the delay. While the delay is not official it is expected that it will be approved shortly. To help clients, prospects and others understand the delay and other essential details, Wilson Lewis has provided a summary of key details below.
The AICPA argued that private entities should be given additional time to comply with the law for the following reasons:
The effective date for public entities just recently passed. Both annual and interim reports for fiscal years that began after December 15, 2018, should reflect the new standard. For most public entities, this made their effective date January 1st of 2019. Private organizations were given an additional year to comply. For privately held companies the annual reports for fiscal years after December 15, 2019, and interim reports after December 15, 2020, are required to comply with the new standard.
The FASB’s proposal is to push the effective date for non-public entities back by one year, so that annual reports for fiscal years beginning after December 15, 2020, would reflect the new standard. This means that calendar-year entities would have until 2021 to comply.
The FASB recognizes how difficult it can be for organizations to implement new accounting standards. By allowing for a delay in the effective dates, organizations would have time to learn from the mistakes that public entities made during their first year of implementation and then change their business processes accordingly. It will also give third-party vendors time to modify their products. For instance, in order to meet the standard’s new disclosure requirements, organizations may want their leasing software to report the overall value of the lease agreement or the contract’s end date. Giving software vendors time to alter their applications and integrating those applications into the organization’s processes will take more than just a few months.
For many Georgia companies, the changes mandated in the lease accounting standard represent significant changes to their accounting and financial reporting process. The move to delay implementation reflects this fact and will provide additional “breathing room” for Atlanta companies. While the delay has not yet been approved, it’s important to ensure your company’s efforts are on track to ensure compliance. If you have questions about the new standard or need assistance with implementation, Wilson Lewis can help! For additional information please call us at 770-476-1004 or click here to contact us. We look forward to speaking with you soon.