Opening of Bids - High Street Sidewalk Improvements Proj No. 123-012 - Selge Construction

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Selge Construction Company, Inc. Notes to Financial Statements Note 1. Nature of Business and Significant Accounting Policies (Continued) Leases: In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), to increase transparency and comparability among organizations related to their leasing arrangements. The update requires lessees to recognize most leases on their balance sheets as a right -of -use (ROU) asset representing the right to use an underlying asset and a lease liability representing the obligation to make lease payments over the lease term, measured on a discounted basis. Topic 842 also requires additional disclosure of key quantitative and qualitative information for leasing arrangements. Similar to the previous lease guidance, the update retains a distinction between finance ceases (similar to capital leases in Topic 840, Leases) and operating leases, with classification affecting the pattern of expense recognition in the income statement. The Company adopted Topic 842 on March 1, 2022, using the optional transition method to the modified retrospective approach, which eliminates the requirement to restate the prior -period financial statements. Under this transition provision, the Company has applied Topic 842 to reporting periods beginning on March 1, 2022, while prior periods continue to be reported and disclosed in accordance with the Company's historical accounting treatment under ASC Topic 840, Leases. The Company determines if an arrangement is or contains a lease at inception, which is the date on which the terms of the contract are agreed to, and the agreement creates enforceable rights and obligations. A contract is or contains a lease when (i) explicitly or implicitly identified assets have been deployed in the contract and (ii) the Company obtains substantially all of the economic benefits from the use of that underlying asset and directs how and for what purpose the asset is used during the term of the contract. The Company also considers whether its service arrangements include the right to control the use of an asset. The Company made an accounting policy election available under Topic 842 not to recognize ROU assets and lease liabilities for leases with a term of 12 months or less. For all other leases, ROU assets and lease liabilities are measured rased on the present value of future lease payments over the lease term at the commencement date of the lease (or March 1, 2022, for existing leases upon the adoption of Topic 842). The ROU assets also include any initial direct costs incurred and lease payments made at or before the commencement date and are reduced by any lease incentives. Future lease payments may include fixed rent escalation clauses or payments that depend on an index (such as the consumer price index), which is initially measured using the index or rate at lease commencement. Subsequent changes of an index and other periodic market -rate adjustments to base rent are recorded in variable lease expense in the period incurred. Residual value guarantees or payments for terminating the lease are included in the lease payments only when it is probable they will be incurred. The Company reassessed historical lease classification upon adoption of Topic 842 which resulted in the recording of additional ROU assets and lease liabilities related to the Company's finance leases of approximately $2,251,000 at March 1, 2022. The adoption of the new lease standard did not materially impact consolidated net earnings or consolidated cash flows and did not result in a cumulative -effect adjustment to the opening balance of retained earnings. Subsequent events: The Company has evaluated subsequent events for recognition and disclosure through May 25, 2023, which is the date the Company's financial statements were available to be issued.