Recording goodwill impairment just got easier. With an unprecedented number of businesses negatively impacted by the COVID-19 pandemic, the Financial Accounting Standards Board (FASB), approved Accounting Standards Update 2021-03 (ASU) in March 2021 to help businesses get their financial statements in sync with their current economic condition. Any private company or non-profit that shows a higher value on their books than what they could get by selling the business today needs to evaluate whether they can—and if they should—take advantage of this new accounting option.
Category: Accounting Standards
Your gut reaction to to the ASC 842 Lease Accounting Standard may be to think it’s for the other party—those that lease real estate, vehicles or equipment to others. However, the greater impact is on the lessee doing the borrowing, rather than the lessor. Any contracts signed where you’re using another company’s property with the expectation of returning it or buying it at the end of the contract term will fall under the new standard.
At a high level, operating lease obligations that are included in footnotes will now need to also be recorded as assets and obligations on your balance sheet. As is often the case, when you begin to assess the scope of the project and its impact, you’re sure to find that the devil will be in the details.