18.9 Interaction Between Non-EGC’s ASC 842 Adoption Date and Its IPO Registration Statement

The financial statement impacts of adopting ASC 842 are significantly affected by the adoption date, since all lease liabilities are discounted on the basis of the discount rate as of that date. As discussed at the July 29, 2020, CAQ SEC Regulations Committee joint meeting with the SEC staff, the SEC staff reiterated its “view that an IPO registration statement of a non-EGC should apply the PBE adoption dates for all standards that apply the PBE definition, including Topic 842. However, if an entity believes it has a reasonable basis to support an alternative conclusion under GAAP and SEC rules and regulations, the staff is available for consultation.” Thus, even a non-EGC that undertakes an IPO several years after adopting ASC 842 (e.g., an IPO in 2026 after adoption of ASC 842 in 2022) would need to push back the adoption date of ASC 842 to the PBE adoption date, if the impact would be material.