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Please note: This article was originally published on May 21st and updated on June 3rd
Adoption of the new revenue recognition standard, Accounting Standards Codification (ASC) 606, has already proven difficult for many private companies due to the complexities involved. Now the global pandemic has put additional pressure on these same companies as they move through their annual financial statement audit or review.
The Financial Accounting Standards Board (FASB) took note of this. On May 20, 2020, they voted to extend the effective date of ASC 606 to private companies that have not yet issued their financial statements. This decision was meant to alleviate one of the many hardships companies are facing as they turn their focus to decreased operations, collections, staffing decisions, and other uncertainties of COVID-19.
On June 3, 2020, the FASB issued an accounting standards update, ratifying their vote. This update provides guidance describing the delay in greater detail and grants private companies the option to adopt the standard on the existing date or to defer adoption for one year. If companies have not yet issued their financial statements and elect to adopt the standard at the later date, guidance would apply to annual reporting periods beginning after December 15, 2019. For a calendar year-end company, this means that adoption can be extended one year from January 1, 2019 to January 1, 2020.
For more information on ASC 606 and what this delay means for your company, contact a member of your DGC client service team or Nicholas Tamvaklis, CPA, MST at 781-937-5147 / firstname.lastname@example.org if you have specific questions. You can also visit our coronavirus web page at dgccpa.com/coronavirus which is frequently updated with resources to help you deal with the impact of the coronavirus on you and your business.