Fiscal calendars are an important element of ASC 842 lease accounting compliance, as the Finance Accounting Standards Board determined the effective dates for Accounting Standard Update (ASU) for public entities with fiscal years and interim periods within those fiscal years beginning after December 15, 2018 and effective on January 1, 2019. For private entities and all other non-public organizations, the effective date for fiscal years begins after December 15, 2019 and any interim periods within the fiscal year after December 15, 2020.
Fiscal Calendar Defined
Fiscal calendars are the start dates set by an entity to record accounting and financial statements for a 12-month period. Fiscal calendars can be the start date of a business’s inception or any date set by the entity. The Internal Revenue Service (IRS) permits entities to record their accounting and financial statements in either calendar years or fiscal calendars.
Risks Associated with Missing the Fiscal Calendar Compliance Date
Missing the deadline to fiscal compliance (or calendar year compliance) could be a violation of lender agreements, creating a domino effect of failed business deals and stock drops. Date compliance is not a violation of the law unless the violations coincide with other laws.
It is a universally accepted standard for entities to follow the accounting practices of the Generally Accepted Accounting Principles (GAAP) which ensures that entities are reporting lease accounting records and financial statements clearly for their investors. Should an investigation of an entity be required, the Securities and Exchange Commission (SEC) Division of Enforcement will review the criteria and evidence and impose actions. For more information on the Division of Enforcement, www.sec.gov.