February 7, 2022

The past two years have been a whirlwind of change in the accounting industry. To help you stay on track, we’ve compiled a short list of new 2022 GAAP accounting standards that are effective now, so you can make sure you’re set up for a smooth, GAAP-filled year.

1. Leases (Topic 842)

The “lease standard” is finally here and now applies to all entities.

Since its introduction in 2016, the standard has been postponed and updated several times. Although applicable for certain entities earlier, this standard must now be implemented by all entities reporting on a GAAP basis for calendar year 2022 and fiscal years ending in 2023. The modified retrospective approach for implementation is required, which means the effect of the change will be reflected for the earliest year presented in the financial statements.

Important Features

Lessees’ commitments and rights will now be recognized on the balance sheet – a liability for the total payments that will be made throughout the term of the lease, along with a “right to use” asset. There is specific guidance to determine if an agreement is a lease (read more), which will determine if the agreement must be reported on the balance sheet. Leases will be classified as operating or financing, replacing the concepts of operating and capital leases. Accounting for lessors is generally unchanged.


  • If not already done, take an inventory of all facilities and equipment lease agreements.
  • Gather information on lease terms, escalating payments, and incentives.
  • Review current straight-line rent and amortization schedules to make sure they’re current and accurate. These will be needed to calculate new schedules for recognizing the liability, right to use asset, rent, amortization, and interest expense going forward. Additionally, a separate schedule must be prepared for each lease.
  • Update accounting policy documents for certain elections that may be made to comply with the standard.
  • Contact Clark Nuber or become familiar with the calculations necessary to implement the new lease standard.

2. Gifts-in-Kind (ASU 2020-07)

Effective for all entities for years beginning after June 15, 2021 (calendar 2022). Retrospective application is required.

If your organization receives significant nonfinancial gifts-in-kind (GIK), this standard is for you. Although this ASU doesn’t change the methods used to determine the fair value of GIK, it does expand required disclosures and more transparent financial statement reporting. Read more about ASU 2020-07 here.

Important Features

Show GIK revenue as a separate line item on the statement of activities. Disclose nonfinancial GIK by category that depicts the type of contributed nonfinancial asset.

Additionally, disclose the following information for each category:

  • Whether the GIK was monetized or utilized, and if utilized, a description of the programs or activities in which the GIK was used;
  • Your policy regarding monetizing rather than utilizing GIK;
  • Any donor-imposed restrictions on the GIK;
  • A description of the valuation techniques and inputs used to determine the fair value measurement; and
  • The principal market used to arrive at the fair value measurement and any donor-imposed restriction on the use or sale of the GIK.


  • Review your organization’s GIK policy for any appropriate updates regarding gift acceptance, valuation methods, and reporting practices.
  • If you present audited financial statements, gather information to be included in the enhanced disclosures for all years presented in the financial statements.

3. Reference Rate Reform (ASU 2020-04 and ASU 2021-01, Topic 848)

We are saying goodbye to LIBOR (the London Interbank Offered Rate) as a reference rate for interest.

Effective as of March 12, 2020 through December 2022. This ASU will result in wide-spread changes to loans, leases, and the derivatives markets that use LIBOR.

Important Features

GAAP currently requires an analysis of whether a change in interest rate for a loan is a debt extinguishment or debt modification. Calculating and recording debt extinguishments can be complicated and time consuming and can result in recognizing large gains or losses. ASU 2020-04 provides practical expedients to ease the cost of this transition.

If LIBOR is changed to another reference rate, you may elect to account for this change as a debt modification. This means that your organization can treat debt modifications by prospectively adjusting the effective interest rate (ASC 470). Modifications of leases should be accounted for as a continuation of the existing contract without reassessments of the lease classification and discount rate (ASC 840 or ASC 842). If electing these optional expedients for modifications, they must be applied consistently to all eligible contracts and transactions.


  • Review debt, lease, and other agreements that have an interest element or refer to LIBOR as a reference rate.
  • Contact your lender to inquire about the timing of any changes to the LIBOR reference rate.
  • Review current loan and lease schedules and become familiar with calculations and considerations for such contract modifications.
  • If you hold derivatives or participate in a derivatives market, you’re likely already aware of these changes, but if not, contact Clark Nuber or your professional advisor.

4. Costs Associated with Cloud Computing (ASU 2018-15, Subtopic 350-40)

Cloud computing solutions are internet-based software that reside on the vendor’s or third-party’s systems. This ASU helps determine if a cloud computing agreement (CCA or hosting arrangement) includes a software license.

Effective for nonpublic entities for calendar year 2021 and fiscal years ending in 2022. This ASU may be applied either retrospectively or prospectively.

Important Features

If the CCA includes a license for internal use of the software, then the user generally records an intangible asset for the software license and a liability for any remaining payments due on the license (ASC 350-40). If the CCA does not include a license but instead is a subscription agreement, the hosting element is considered a service contract and is expensed as incurred.

Implementation costs for both CCAs with and without licenses should be accounted for in accordance with ASC 350-40 that specifies which implementation costs can be capitalized. Capitalized costs are still amortized; however, capitalized costs for service contracts are amortized over the term of the hosting arrangement, including renewal options. In addition, amortization of capitalized costs for service contracts are presented on the income statement with hosting fees (not amortization), and capitalized implementation costs are presented on the balance sheet as a prepayment of the hosting fees (not with fixed assets).


  • Identify and inventory contracts in place for all software solutions.
  • Review the contracts to identify whether the agreement includes a license or a service contract. Keep in mind recent software conversions or updates that may reflect updated terms.
  • Evaluate planned system conversions to lay out the treatment of software and implementation costs.

Please contact us if any of these new accounting standards will affect your organization and you have questions. Have a happy and productive 2022!

© Clark Nuber PS, 2022. All Rights Reserved.

This article contains general information only and should not be construed as accounting, business, financial, investment, legal, tax, or other professional advice or services. Before making any decision or taking any action, you should engage a qualified professional advisor.