SEC Permits Delayed Adoption of ASC 606 and ASC 842 for Certain Entities
At the July 20th EITF meeting, Sagar Teotia, Deputy Chief Accountant in the Office of the Chief Accountant, announced that the SEC staff will not object if an entity that qualifies as a public business entity (PBE) solely because its financial statements or financial information is included in another entity’s filing with the SEC adopts ASU No. 2014-09 – Revenue from Contracts with Customers (Topic 606) and ASU No. 2016-02 – Leases (Topic 842) using the effective dates applicable to private entities.
Examples of PBE financial statements or financial information that may reflect the adoption of the standards above using private company effective dates include:
- Financial statements of an acquired business under S-X 3-05;
- Financial statements of an equity method investee under S-X 3-09; and
- Summarized financial information of an equity method investee under S-X 4-08(g).
Consequently, entities meeting the criteria above may elect to adopt:
- ASC Topic 606 for fiscal years beginning after December 15, 2018 and interim periods within fiscal years beginning after December 15, 2019. Previously these entities were required to adopt the standard for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years.
- ASC Topic 842 for fiscal years beginning after December 15, 2019 and interim periods within fiscal years beginning after December 15, 2020. Previously these entities were required to adopt the standard for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years.
Such entities may still elect to adopt these standards using the public company effective dates outlined above. For questions related to matters discussed above, please contact us.
 Criterion (a) of the FASB Master Glossary definition of a public business entity includes other entities whose financial statements or financial information are required to be or are included in a filing with the SEC. The announcement relates only to this type of PBE and only to the standards referenced above.
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