Transition Related to ASU 2016-02., Leases (Topic 842) Nonpublic Companies, October 2019
ASC 842, Leases changes the way all entities will account for leases. The new standard brings numerous changes to the accounting for leases. One of the most important changes is that all leases, including operating leases, will be recognized on the balance sheet as an asset and a liability. Due to the significant impact the new standard has had on many companies and the complexity in implementing it, FASB has recently decided to extend the effective date of the standard by one year for nonpublic companies. This should give nonpublic companies some additional time to understand the standard and take the necessary steps to implement it.
ASC 842 must be applied by all nonpublic entities for periods beginning after December 15, 2020. For a calendar year company the effective date is January 1, 2021. The standard provides for implementation under a modified retrospective approach using either of two methods. Below, we have prepared a chart summarizing the two methods and the practical expedients for your convenience. We suggest you review the methods and discuss with the relevant parties.
It is imperative that your accounting department become familiar with the new standard and start developing a plan for its implementation. To download this complete white paper, click here.
Be on the look out for our firm’s future publications on ASC 842. If you would like to discuss how we can help you with implementation or want to be added to our mailing list, please send us an email to email@example.com.