Nov 20, 2024
Listen in as Mike Merrill and CICPAC Executive Director Kathleen Baldwin discuss the implications of the new lease accounting standard, ASC-842, on contractors’ financial statements and business operations.
ASC-842 now requires companies to record the financial impact of their leases on their balance sheets. Baldwin details how this standard affects metrics like working capital, debt covenants and bonding capacity. The conversation underscores the importance of proactive communication with sureties and banks to manage these changes effectively. This episode provides actionable insights for contractors looking to stay compliant and financially sound under the new regulations.
Key Takeaways
• Implement ASC-842 by ensuring most leases are
included on balance sheets, which impacts financial statements and
operational decisions.
• Assess how changes to lease accounting affect
working capital, influencing a contractor's bonding capacity and
ability to secure future projects.
• Reevaluate debt covenants under ASC-842 to maintain
compliance with lenders, as new lease liabilities may alter key
financial ratios.
• Adopt lease management software, such as
LeaseCrunch, to automate lease data management, enhancing
compliance and reducing manual errors.
• Engage in proactive financial planning by discussing
ASC-842 implications with sureties and lenders early, minimizing
the risk of financial statement surprises.