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Chapter 18 — Reporting Considerations for SEC Registrants

18.7 Adoption of ASC 842 for an EGC That Elected Private-Company (Non-PBE) Adoption Dates

18.7 Adoption of ASC 842 for an EGC That Elected Private-Company (Non-PBE) Adoption Dates

An EGC may elect to adopt new accounting standards on the basis of effective dates that apply to a private company that is not a PBE (this provision is referred to as the extended transition provision), including the option to first adopt a new standard in annual financial statements. However, such an election is available only for as long as the entity qualifies as an EGC. Questions have been raised regarding the transition provisions applicable when an entity loses EGC status after the effective date for a PBE but before the effective date for an entity that is not a PBE. As discussed in paragraph 10230.1 of the FRM, the SEC staff generally expects an EGC that loses its EGC status to comply with PBE requirements in the first filing after loss of EGC status. Further, the staff encourages EGCs to (1) review their plans to adopt accounting standards upon the loss of EGC status and (2) consult with the Division of Corporation Finance if they do not believe that they will be able to comply on a timely basis with the requirement to reflect new accounting standards. The scenarios discussed below reflect our general understanding of how an EGC that elected to use the extended transition provision would reflect the leasing standard after the deferral of adoption dates for non-PBEs (i.e., under ASU 2019-10 and ASU 2020-05).

Footnotes

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See SEC Final Rule No. 33-10890, footnote 70, for additional information.