NOTE 2. Recent Accounting Pronouncements

(a)

New Accounting Updates Recently Adopted

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842). ASU 2016-02 introduces a lessee model that requires recognition of assets and liabilities arising from qualified leases on the consolidated balance sheets and disclosure of qualitative and quantitative information about lease transactions. The new standard was effective for our fiscal year beginning October 1, 2019. We adopted Topic 842 using the modified retrospective approach. The modified retrospective approach provides a method for recording existing leases at the beginning of the period of adoption. In addition, we elected the package of practical expedients permitted under the transition guidance within the new standard, which, among other things, allowed us to carry forward the historical lease classification and we elected the hindsight practical expedient to determine the lease term for existing leases. Additionally, the Company elected an accounting policy to not record operating lease right-of-use assets and lease liabilities for leases with an initial term of twelve months or less on its condensed consolidated balance sheet. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods.

Adoption of the new standard resulted in the recording of net operating lease right-of-use assets of $4.8 million and operating lease liabilities of $4.8 million, as of October 1, 2019. The standard did not have an impact on our consolidated results of operations or cash flow.

The impact of the adoption of Accounting Standards Codification (“ASC”) 842 on the balance sheet as of October 1, 2019 was:


		As Reported				Balance
		September 30, 2019		Increase		October 1, 2019
(in thousands)
Operating lease right-of-use assets	$	-	$	4,800	$	4,800
Total assets		109,562		4,800		114,362
Operating lease liabilities		-		800		800
Total current liabilities		30,719		800		31,519
Operating lease liabilities non-current		-		4,000		4,000
Total liabilities		32,816		4,800		37,616
Total liabilities and equity		109,562		4,800		114,362

In connection with the sale/leaseback of non-residential real estate on February 10, 2020, the Company recorded an additional operating lease right-of-use (“ROU”) assets and operating lease liabilities of $10.8 million during the six months ended March 31, 2020. See also Note 9 – Property, Plant and Equipment, net in the notes to the condensed consolidated financial statements.

(b)

Recent Accounting Standards or Updates Not Yet Effective

In June 2016, the FASB issued ASU 2016‑13 Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which changes the way entities measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net earnings. The new standard is effective for annual periods beginning after December 15, 2019, including interim periods within those annual periods. The new standard will be effective for our fiscal year beginning October 1, 2020 and early adoption is permitted. The Company is currently evaluating the new guidance to determine the impact it may have on its condensed consolidated financial statements and related disclosures.