A new Accounting Standards Update (ASU) recently issued by the Financial Accounting Standards Board (FASB) will affect many construction industry contractors. The update is intended to improve financial reporting about leasing transactions.
The ASU will require companies that lease assets to recognize on the balance sheet the assets and liabilities for the rights and obligations those leases create. All leases with lease terms of more than 12 months, both finance and operating leases, will have to be recognized on the balance sheet. The new ASU also calls for certain disclosures to help investors and other financial statement users understand the amount, timing, and uncertainty of cash flows arising from leases.
For public companies, the ASU is effective for fiscal years (and interim periods within those fiscal years) beginning after December 15, 2018. The ASU is effective for all other organizations for fiscal years beginning after December 15, 2019, and for interim periods within fiscal years beginning after December 15, 2020.