Question

Adoption of ASU No. 2016-02

As discussed in Note 1 to the consolidated financial statements, the Company changed its method of accounting for leases in 2019, 2018 and 2017 due to the adoption of ASU 2016-02, Leases (Topic 842).

C. What do we call the paragraph about adopting ASU 2016-02?

(Short Answer)

Answer 1

asu 2016-02, which is effective for publicly traded companies after dec. 15, 2018, states that all leases, whether classified as operating or capital leases (called “finance leases” under the new standard), create a right-of-use asset and a liability that should appear on the lessee’s balance sheet. the only exception is for leases with a term of 12 months or less. for such short-term leases, a lessee is permitted to make an accounting policy election not to recognize leased assets and lease liabilities, and instead recognize lease expenses on a straight-line basis over the lease term, consistent with the accounting for operating leases under sfas 13.