Relief for Non-public Entities that Issue GAAP Financial Statements
May 21, 2020
Stone & Company Financial Reporting Update
On Wednesday, May 20, 2020,
the Financial Accounting Standards Board (FASB) voted to extend the effective date of the new revenue recognition standard (ASC 606) Revenue from Contracts with Customers. See JofA article
here. This is welcome news for audit and attest clients that prepare financial statements in accordance with accounting principles generally accepted in the United States (GAAP) and, frankly, also provides some welcome relief for some accounting firms who provide audit and attestation services for those entities.
The new revenue recognition standard, originally effective for private companies with year-ends beginning after December 15, 2018, has presented challenges for many reporting entities because revenues reported under the new standard could be different from the legacy revenue guidance under GAAP. As such, implementation involves a robust analysis to determine the effect of the new model on revenue recognition and, in some cases, could require changes to systems that track and report revenue.
The decision essentially eliminates, albeit temporarily, some extra work and related documentation that would have been required for audits and reviews of GAAP financial statements not yet started for entities with a December 31, 2019 year-end. Welcome relief during these unprecedented times as businesses and other reporting entities manage their way through the COVID-19 pandemic.
Robert S. Miller, CPA, CFE, is a partner at Stone & Company LLC, Lexington, MA
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