The American Institute of CPAs has sent a letter to the Financial Accounting Standards Board asking the FASB to delay the effective date of its new accounting standard on leases by one year, citing a surcharge for financial statement preparers private companies.
In a letter Monday from Michael A. Westervelt, chair of the Technical Issues Committee of the AICPA’s Private Business Practices Section, to the FASB’s Acting Technical Director, Shayne Kuhaneck, the AICPA highlighted the magnitude of the changes required of companies. The AICPA argues that users of private company financial statements would not be adversely affected by a delay, and it is difficult for private companies to keep up with the narrow-scope improvements the FASB continues to make to the original standard. . For private companies, the standard takes effect for annual periods beginning after December 15, 2019 (i.e. calendar periods beginning after January 1, 2020) and interim periods after December 15, 2020.
Westervelt also pointed to the many new accounting standards, including revenue recognition and current expected credit losses, which come into effect around the same time. “With the significant and complex standards recently released by the council, including leases, revenues and CECL, TIC [the Technical Issues Committee]considers that they should be the subject of particular attention given that the dates of entry into force are so close to each other and that the changes are quite significant and will require considerable time to be adopted”, a- he writes. “Many private companies still need to expend significant resources to adopt the new revenue standard.”
He sees the FASB continuing to refine the standard, making it a bit of a moving target. “The FASB continues to make limited scope enhancements to this standard and it is difficult to keep up with what the standard currently requires,” he wrote. “A lot of these limited-scope changes and improvements come from public companies that have already gone through the process.”
Westervelt also pointed to problems with some of the software available that is supposed to help companies cope with the process, and even public companies that were supposed to have started adopting the standard this year are struggling to do so. “TIC has found that some of the third-party vendors who have developed solutions to help companies implement the rental standard have errors in their software and it will take some time to ensure these solutions are accurate and verifiable” , did he declare. wrote. “TIC is aware that customers of public companies are struggling to adopt, and these entities have more resources than most private companies. Private companies could still adopt early in cases where they are prepared and wish to adopt the standard early.
He argued for a one-year delay in the leases standard, also known as ASC 842. “An additional one-year delay should result in more accurate reporting under ASC 842 for private companies,” he wrote.