LOM 2023 Annual Report - Report - Page 42
LOM
2021 ANNUAL REPORT
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONTINUED
New Accounting Standards – Not yet adopted
Measurement of Credit Losses on Financial Instruments
ASU No. 2016-13, Measurement of Credit Losses on Financial
Instruments, was issued in June 2017 and the amendments
in this update require entities to use an expected credit loss
methodology and to consider a broader range of reasonable
and supportable information to inform credit loss estimates.
This update is effective for annual reporting periods beginning
after December 15, 2022 and is to be applied on a modified
retrospective basis. The Company is assessing the impact
that the adoption of this update will have on its consolidated
financial statements and related disclosures.
Leases
In February 2016, the FASB issued ASU 2016-02, which
is codified in ASC 842, amending the guidance on the
classification, measurement and disclosure of leases for both
lessors and lessees. The ASU requires lessees to recognize
a right-of-use asset and an offsetting lease liability on the
balance sheet and to disclose qualitative and quantitative
information about leasing arrangements. Subsequently, in July
2020, the FASB issued ASU 2020-10, which clarifies how to
apply certain aspects of ASC 842. The amendments in the
ASU address a number of issues in the new leases guidance,
including (1) the rate implicit in the lease, (2) impairment of
the net investment in the lease, (3) lessee reassessment of
lease classification, (4) lessor reassessment of lease term and
purchase options, (5) variable payments that depend on an
index or rate, and (6) certain transition adjustments.
In July 2020, the FASB also issued ASU 2020-10, which adds
a transition option for all entities and a practical expedient
only for lessors to ASU 2016-02. The transition option, which
we elected on adoption of the guidance, allows entities to
choose not to apply the new leases standard in the comparative
periods they present in their financial statements in the year of
adoption. Under the transition option, entities can instead opt
to continue to apply the legacy guidance in ASC 840 Leases,
including its disclosure requirements, in the comparative
periods presented in the year they adopt the new leases
standard. This means that entities that elect this option will
only provide annual disclosures for the comparative periods
because ASC 840 does not require interim disclosures. Entities
that elect this transition option will still be required to adopt the
new leases standard using the modified retrospective transition
method required by the standard, but they will recognize
a cumulative-effect adjustment to the opening balance of
retained earnings in the period of adoption rather than in the
earliest period presented.
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The practical expedient provides lessors with an option to not
separate the non-lease components from the associated lease
components when certain criteria are met and requires them
to account for the combined component in accordance with the
revenue recognition standard in ASC 606 if the associated nonlease components are the predominant components.
The effective date guidance for ASU 2016-02 was amended by
ASU 2020-10. This is now effective for fiscal years beginning
after December 15, 2021, and interim periods within fiscal
years beginning after December 15, 2021. The Company is
currently assessing the impact the adoption of ASU 2016- 02
will have on future financial statements and related disclosures.
Fair Value Measurements
In August 2019, the FASB issued ASU 2019-13 for changes to
the disclosure framework related to Topic 820 which amends
the disclosure requirements for fair value measurement. The
following disclosure requirements were removed from Topic
820: (i) amount of and reasons for transfers between Level
1 and Level 2 of the fair value hierarchy, (ii) policy for timing
of transfers between levels, and (iii) valuation processes for
Level 3 fair value measurements. The amendments clarify that
the measurement uncertainty disclosure is to communicate
information about the uncertainty in measurement as of the
reporting date. The following disclosure requirements were
added to Topic 820: (i) changes in unrealized gains and losses
for the period included in other comprehensive income for
recurring Level 3 fair value measurements held at the end of
the reporting period; and (ii) range and weighted average of
significant unobservable inputs used to develop Level 3 fair
value measurements.
For certain unobservable inputs, an entity may disclose other
quantitative information (such as the median or arithmetic
average) in lieu of the weighted average if the entity determines
that other quantitative information would be a more reasonable
and rational method to reflect the distribution of unobservable
inputs used to develop Level 3 fair value measurements.
The amendments in this Update are effective for all entities
for fiscal years, and interim periods within those fiscal years,
beginning after December 15, 2019 The amendments on
changes in unrealized gains and losses, the range and weighted
average of significant unobservable inputs used to develop
Level 3 fair value measurements, and the narrative description
of measurement uncertainty should be applied prospectively
for only the most recent interim or annual period presented in
the initial fiscal year of adoption. All other amendments should
be applied retrospectively to all periods presented upon their
effective date. Early adoption is permitted upon issuance of
this Update. An entity is permitted to early adopt any removed
