Implementing ASC 842 LEASES: Focus Areas for Contractors

Published on: Feb 11, 2022 by Mike Gustafson, CPA

Updated on: October 31, 2024

It is Time For Contractors to Get Serious About FASB ASU 2016-02, Leases (ASC 842)

The contractor’s focus should be on the impact the lease standard will have on the company, specifically bank and surety considerations, as well as specific attributes of the standard such as embedded leases, related-party leases, and consolidation (when there is a variable interest entity (VIE)) and how to apply the lease accounting standard to these situations.

This whitepaper will provide further insight into some of the key areas that you should be aware of when implementing the new standard.

ASC 842 is set to replace the legacy rules under ASC Topic 840. ASC 842 is now effective for private companies and nonprofit organizations' annual reporting periods beginning after December 15, 2021.

This change will mean that under the new standard, companies will have to capitalize all leases with terms greater than 12 months, creating a new asset and liability on the balance sheet. In addition, all leases will be classified as operating or financing leases (“capital lease”). A key element of this standard is that it does not grandfather existing leases.

Download the full report – Implementing ASC 842 Leases: Focus Areas for Contractors

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Biz Tip Topic Expert: Mike Gustafson, CPA

Mike is a Principal at SVA Certified Public Accountants and provides assurance, consulting and tax services to family-owned businesses of varying sizes. He focuses on the hospitality, manufacturing, distribution, construction and professional services industries.

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