Summary of Significant Accounting Policies
|12 Months Ended|
Dec. 31, 2021
|Accounting Policies [Abstract]|
|Summary of Significant Accounting Policies||Summary of Significant Accounting Policies
Cash and Cash Equivalents
The Company considers cash and all highly liquid investments purchased with an original maturity of three months or less at the date of purchase to be cash equivalents. The fair market value of cash equivalents approximated their carrying value at December 31, 2021 and 2020.
Short-term investments consist primarily of money market funds, U.S. government securities, commercial paper, corporate debt and asset-backed securities. The Company’s policy requires investments to be investment grade, with the primary objective of minimizing the potential risk of principal loss. The Company classifies its short-term investments as available-for-sale securities at the time of purchase and reevaluates such classification at each balance sheet date. The Company has classified its investments as current based on the nature of the investments and their availability for use in current operations.
Available-for-sale debt securities are recorded at fair value each reporting period. Unrealized gains and losses on these investments are reported as a separate component of accumulated other comprehensive income (loss) on the consolidated balance sheets until realized. Interest income is reported within other, net in the consolidated statements of operations. The Company periodically evaluates its investments to assess whether those with unrealized loss positions are other-than-temporarily impaired. The Company considers various factors in determining whether to recognize an impairment charge, including the length of time the investment has been in a loss position, the extent to which the fair value is less than the Company’s cost basis, and the financial condition and near-term prospects of the investee. Realized gains and losses are determined based on the specific identification method and are reported in Other, net in the consolidated statements of operations. The Company did not consider any of its investments to be other-than-temporarily impaired as of December 31, 2021.
Accounts receivable are recorded at the invoiced amount net of allowance for doubtful accounts and are non-interest bearing. The allowance is based on the Company’s assessment of the collectability of accounts by considering the age of each outstanding invoice, the collection history of each customer and an evaluation of potential risk of loss associated with delinquent accounts. Amounts deemed uncollectible are recorded to these allowances in the consolidated balance sheets with an offsetting decrease in related deferred revenue and a charge to general and administrative expense in the consolidated statements of operations. As of December 31, 2021 and 2020 the Company recorded an allowance for doubtful accounts of $34,000 and $159,000, respectively.
Bad debt allowances consisted of the following (in thousands):
Capitalized Software Costs
Capitalization of software development costs for products to be sold to third parties begins upon the establishment of technological feasibility and ceases when the product is available for general release. The Company’s current process for developing its software is essentially completed concurrently with the establishment of technological feasibility, whereby there
is minimal passage of time between achievement of technological feasibility and the availability of the Company’s product for general release. Therefore, the Company has not capitalized any internally developed software costs to date. Software development costs incurred before technical feasibility and after general release are expensed as incurred.
Software development costs for internal use software are subject to capitalization during the application development stage, beginning when a project that will result in additional functionality is approved and ending when the software is put into productive use. The cost incurred between these stages are generally not material to the Company due to short development cycles. Capitalizable software development costs for the years ended December 31, 2021 and 2020, were not material. The Company has capitalized certain implementation costs incurred in connection with cloud computing arrangements that are service contracts and recorded these in contract and other assets in the consolidated balance sheets. Costs related to preliminary project activities and post-implementation activities are expensed as incurred.
Property and Equipment
Property and equipment is stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method in amounts sufficient to write-off depreciable assets over their estimated useful lives, generally to seven years. Leasehold improvements are amortized over the shorter of the estimated useful lives of the assets or the period of the lease term. Repairs and maintenance are expensed as incurred. The Company reduces the cost and accumulated depreciation of depreciable assets retired or otherwise disposed of from the respective accounts and reflect any gains or losses in operations for the period.
Property and equipment is reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of any asset may not be recoverable. Recoverability of assets to be held and used is measured by comparing the carrying amount to the estimated undiscounted future cash flows expected to be generated. If the carrying amount exceeds the undiscounted cash flows, the assets are determined to be impaired and an impairment charge is recognized as the amount by which the carrying amount exceeds its fair value. For the year ended December 31, 2021 and 2020, there were no material impairment charges recorded.
Estimated useful lives of fixed assets are as follows:
The Company recognizes revenue under ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”). Consistent with the overall core principle of ASC 606, the Company recognizes revenue when promised products and services are transferred to the customer. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled in exchange for these products and services. The Company applies judgement in identifying and evaluating terms and conditions in contracts which may impact revenue recognition.
To determine the appropriate amount of revenue to be recognized as it fulfills its obligations under each of the agreements, the Company performs the following steps:
•Step 1 – Identify the contract(s) with the customer
•Step 2 – Identify the performance obligations in the contract
•Step 3 – Determine the transaction price
•Step 4 – Allocate the transaction price to the performance obligations in the contract
•Step 5 – Recognize revenue when (or as) performance obligations are satisfied
Step 1 – Identify the contract with the customer:
Prior to recognizing any revenue, both the Company and its customer sign a written agreement (“contract”) that clearly specifies each party’s rights and obligations, as well as the payment terms for delivered products and services.
Step 2 – Identify the performance obligations in the contract
Performance obligations are identified based on the products and services that will be transferred to the customer that are both (i) capable of being distinct, whereby the customer can benefit from a product or service either on its own or together with other resources that are readily available from third parties or from the Company, and (ii) are distinct in the context of the contract, whereby the transfer of certain products or services is separately identifiable from other promises in the contract.
The Company sells its products and services through term license, perpetual license and SaaS subscription contracts. On-premise (i.e. self-managed) offerings are comprised of subscription term or perpetual licenses and an obligation to provide support and maintenance, which constitute separate performance obligations. The Company’s SaaS subscriptions provide customers the right to access cloud-hosted software and support as a service, which the Company considers to be a single performance obligation. The Company also renews subscriptions for support and maintenance, which the Company considers to be a single performance obligation.
Professional services consist of consulting and training services. These services are distinct performance obligations from self-managed offerings and SaaS subscriptions and do not result in significant customization of the software.
Step 3 – Determine the transaction price
In general, consideration earned by the Company consists of fixed amounts only. The impact of variable consideration has not been material in any year because the Company generally does not offer refunds, rebates or credits to customers. The Company’s contracts do not contain a significant financing component.
The Company is generally the principal and controls the delivery of products and services, and revenue is recorded as the gross amounts billed and receivable. Indirect transactions are those where subscriptions, professional services and/or training is provided to an end customer through a partner (reseller). Revenue from transactions with reseller partners is recorded based on the amount billed to the reseller partner. In cases where the Company is not the principal, revenue is recorded net of amounts payable to partners.
Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction that are collected by the Company from a customer, are excluded from revenue.
Step 4 – Allocate the transaction price to the performance obligations in the contract
Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on a relative standalone selling price (“SSP”)
The SSP is determined based on the prices at which the Company separately sells the products and services, assuming the majority of these separate transactions fall within an observable range of prices when sold separately in comparable circumstances to similar customers. In instances where SSP is not directly observable, such as when the Company does not sell the software license or the maintenance and support separately, the Company determines the SSP using information that may include market conditions and other observable inputs that can require significant judgment. The Company’s self-managed subscription term licenses and perpetual licenses have not historically been sold on a standalone basis, as the Company always sells theses licenses together with support and maintenance contracts. License support and maintenance contracts are generally priced as a percentage of the net fees paid by the customer to access the license. The Company is unable to establish SSP for ForgeRock’s self-managed subscription term and perpetual licenses and SaaS subscriptions based on observable prices given the same products are sold for a broad range of amounts (that is, the selling price is highly variable) and a representative SSP is not discernible from past transactions or other observable evidence. As a result, the SSP for self-managed subscription term and perpetual licenses and SaaS subscriptions included in a contract with multiple performance obligations is determined by applying a residual approach whereby all other performance obligations within the contract are first allocated a portion of the transaction price based upon their respective SSPs, with any residual amount of transaction price allocated to the self-managed subscription term and perpetual licenses or SaaS subscription.
Step 5 – Recognize revenue when (or as) performance obligations are satisfied
Revenue is generally recognized when the software is delivered or made available to the customer, at which time the Company’s performance obligation is satisfied.
Support & Maintenance
Revenue from support and maintenance represent fees earned from providing customers unspecified future updates, upgrades and enhancements and technical product support on an if and when available basis. Support and maintenance revenue is recognized ratably over the subscription term license period or the support period.
Identity and Access Management Service (SaaS)
Revenue from SaaS is earned by providing customers stand-ready access to the Company’s hosted Identity Cloud-based Access Management Service and support. Revenue is recognized ratably over the contract period as the Company satisfies its performance obligation.
Revenue from professional services and training services are recognized when such services or training are delivered.
Cost of Revenue
Subscriptions and perpetual licenses cost of revenue consists primarily of employee compensation costs for employees associated with supporting the Company’s subscriptions and perpetual license arrangements and certain third-party expenses such as contractors, cloud infrastructure and customer support costs.
Professional services cost of revenue consists primarily of employee compensation costs and third-party hosting costs.
The Company has determined sales commissions as well as payroll tax and other costs associated with and directly attributable to the contract obtained are incremental and recoverable costs of obtaining a contract with a customer. These costs are recorded as deferred commissions in the consolidated balance sheets, current and noncurrent. Sales commissions for renewals of customer contracts are not commensurate with the commissions paid for the acquisition of the initial contract. Accordingly, commissions paid upon the initial acquisition of a contract are amortized over the estimated period of benefit of to five years, which may exceed the term of the initial contract because of expected renewals. Commissions paid upon multi-year renewal are amortized over the renewal contract term. The Company amortizes these commissions consistent with the pattern of satisfaction of the performance obligation to which the asset relates. Amortization expense is included in sales and marketing expense in the consolidated statements of operations.
The Company determines the estimated period of benefit based on the duration of relationships with the Company’s customers, which includes the expected renewals of customer contracts, customer retention data, the Company’s technology development lifecycle and other factors. The Company applies a practical expedient to expense costs as incurred for costs to obtain a contract with a customer when the amortization period would have been one year or less.
As of December 31, 2021 and 2020 capitalized commissions were $24.1 million and $14.7 million, respectively. Amortization of capitalized commissions was $14.0 million, $13.4 million and $11.1 million for the years ended December 31, 2021, 2020 and 2019, respectively.
Foreign Currency Translation and Re-measurement
The functional currencies of the Company’s foreign subsidiaries are their local currencies. All assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the exchange rate on the balance sheet date. Subsidiaries’ equity balances are translated using historical exchange rates. Revenues and expenses are translated at the average exchange rate during the period. Adjustments arising from translation of those financial statements into the Company’s reporting currency, the U.S. dollar, are included in accumulated other comprehensive income (loss) within stockholders’ equity deficit.
Several of the Company’s foreign subsidiaries transact in currencies other than their local functional currency. Transactions, including intercompany transactions, in foreign currencies are initially recorded at the rates of exchange prevailing on the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are re-measured into the subsidiary’s functional currency at the rates prevailing on the balance sheet date. Non-monetary items that are denominated in foreign currencies are measured using historical exchange rates. Gains and losses recognized from foreign currency transactions denominated in currencies other than the foreign subsidiary’s local currency are included in foreign currency (loss) gain in the consolidated statements of operations. The Company recorded ($3.8 million), $3.1 million and ($0.1 million) in foreign exchange gains (losses) in the years ended December 31, 2021, 2020 and 2019, respectively.
Concentrations of Credit Risk, Significant Customers and Third Party Hosted Services
The Company’s financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents, short-term investments and accounts receivable. Cash and cash equivalents and short-term investments are currently held in one financial institution and, at times, may exceed federally insured limits.
No single customer represented over 10% of revenue for the years ended December 31, 2021, 2020 and 2019. No single customer represented over 10% of accounts receivable for the years ended December 31, 2021 and 2020. The Company does not require collateral to secure trade receivable balances.
Refer to Note 3. “Segment and Revenue Disclosures” for additional revenue disclosures.
Third Party Hosted Services
The Company relies on the technology, infrastructure, and software applications, including software-as-a-service offerings, of third parties in order to host or operate certain key products and functions of its business.
The Company has entered into collaborative arrangements with two partners in order to develop future versions of and enhance the features and functionality of its identity software and SaaS services. These arrangements have been determined to be within the scope of ASC 808, Collaborative Arrangements, as the parties are active participants and exposed to the risks and rewards of the collaborative activity. These arrangements also include research, development and commercial activities. The terms of the Company’s collaborative arrangements include (i) revenue on sales of licensed products, (ii) royalties on net sales of licensed products, (iii) reimbursements for research and development expenses, and (iv) sales-based milestone warrants which expire after ten years. In the year ended December 31, 2021, 2020 and 2019 the Company had recognized revenue of $5.4 million, $1.9 million and $0.1 million and royalty expenses of $0.9 million, $0.6 million and $0.3 million related to collaborative arrangements.
Research and Development Expenses
Research and development expenses include all direct costs, primarily salaries and stock-based compensation costs for Company personnel and outside consultants, related to the development of new software products, significant enhancements to existing software products, allocated overhead including depreciation, office rent, software and maintenance expenses. Research and development costs are generally expensed as incurred.
Sales and Marketing Expenses
Sales and marketing expenses primarily consist of personnel costs for the Company’s sales, marketing and business development employees, commissions earned by the Company’s sales personnel and third-party partners, the cost of marketing programs such as brand awareness and lead generation programs, marketing events, industry analyst fees, website design and maintenance costs, allocated overhead including depreciation and office rent. Marketing and advertising costs are expensed as incurred and are included in sales and marketing expenses. Advertising costs were $6.7 million, $5.5 million, and $6.1 million for the years ended December 31, 2021, 2020 and 2019, respectively.
Stock-based Compensation Expense
The Company accounts for the measurement and recognition of stock-based compensation expense in accordance with the provisions of ASC 718, Compensation-Stock Compensation (“ASC 718”). ASC 718 requires compensation expense for all stock-based compensation awards made to employees, non-employees and directors to be measured and recognized based on the grant date fair value of the awards. Stock-based compensation expense is recognized net of forfeitures. The Company recognizes forfeitures as they occur. Following the IPO, the Company grants equity awards under the 2021 Equity Incentive Plan four times each year, on February 20th, May 20th, August 20th and November 20th, or prior business day.
Restricted Stock Units (RSUs)
The fair value of RSUs is estimated based on the fair value of our common stock on the date of grant.
2016 - 2018 RSU Grants: The Company issued 240,000 and 111,111 RSUs in 2016 and 2018, respectively. The fair value of RSUs that are subject to vesting is recognized as a compensation expense over the requisite service or performance period, using the accelerated attribution method, once the liquidity event-related vesting condition becomes probable of being achieved. Our RSUs vest upon the satisfaction of (i) either a performance-based vesting condition or a service-based vesting condition and a (ii) liquidity event-related vesting condition. The performance-based vesting condition is satisfied by our achievement of certain contracted ARR targets. The service-based vesting condition is satisfied by the award holder providing services to us over a specific period. The liquidity event-related vesting condition is satisfied on the earlier of: (i) a Change in Control (as defined in the 2012 Plan) or (ii) this offering. All performance-based and time-based vesting conditions of our RSUs have been satisfied. On IPO we recorded a cumulative stock-based compensation expense of $0.9 million for those RSUs for which the performance-based and service-based vesting conditions had been satisfied. There were no RSU grants in 2019 and 2020.
2021 RSU Grants: After the IPO, the Company primarily grants RSUs to its employees and the Company’s practice is to convey the grant in the form of a dollar value to the employee. To translate that dollar value to quantity of shares granted, the Company uses the 30 day average market closing price of the Company’s Class A common stock ending on the date of grant to calculate the quantity of RSUs to be awarded. The RSU quantity granted is then multiplied by the grant date closing price of the Company’s Class A common stock to estimate the fair value. Stock-based compensation expense for service-based awards is determined based on the grant-date fair value and is recognized on a straight-line basis over the requisite service period of the award, which is typically the vesting term of the award.
Stock-based compensation expense for stock options is determined based on the grant-date fair value and is recognized on a straight-line basis over the requisite service period of the stock option, which is typically the vesting term of the award. The Company accounts for stock option awards issued to employees and non-employees based on the fair value of the award, determined using the Black-Scholes option valuation model. The model requires some highly subjective assumptions as inputs, including the following:
•Risk-free rate: The risk-free interest rate is based on the implied yield currently available on U.S. Treasury securities with a remaining term commensurate with the estimated expected term.
•Expected term: For time-based awards, the estimated expected term of options granted is generally calculated as the vesting period plus the midpoint of the remaining contractual term, as the Company does not have sufficient historical information to develop reasonable expectations surrounding future exercise patterns and post-vesting employment termination behavior.
•Dividend yield: The Company uses a dividend yield of zero, as it does not currently issue dividends and has no plans to issue dividends in the foreseeable future.
•Volatility: Since the Company does not have a substantive trading history of its Class A common stock, expected volatility is estimated based on the average of the historical volatilities of the common stock of publicly-traded entities in the Company’s peer group within the Company’s industry and with characteristics similar to those of the Company.
•Fair value: Prior to the IPO, there was no public market for the Company’s common stock, so the fair value of the shares of common stock was established by the Board of Directors. The Company’s Board of Directors considered numerous objective and subjective factors to determine the fair value of the Company’s common stock at each meeting in which awards were approved. The factors included, but were not limited to: (i) contemporaneous third-party valuations of the Company’s common stock; (ii) the value of the Company’s tangible and intangible assets, (iii) the present value of anticipated future cash flows, (iv) the market value and volatility of publicly-traded entities engaged in substantially similar businesses; (v) recent arm’s-length transactions involving the sale or transfer of common and preferred stock, (vi) control premiums, (vii) discounts for lack of marketability, (viii) the Company’s operating history, its lack of profitability to date, and anticipated operating results, and (ix) liquidation preferences and other rights held by preferred stockholders.
After the IPO, the Company uses the market closing price of its Class A common stock on the date of grant for the fair value.
The following assumptions were used to estimate the fair value of stock options granted during the years ended December 31, 2021, 2020 and 2019:
Employee Stock Purchase Plan (the “2021 ESPP”)
All stock-based compensation to employees, including the purchase rights issued under the Company's 2021 ESPP, is based on the fair value of the awards on the date of grant. This cost is recognized as an expense following the straight-line attribution method, over the requisite service period and over the offering period, for the purchase rights issued under the 2021 ESPP. The Company uses the Black-Scholes option pricing model to measure the fair value of its stock options and the purchase rights issued under the 2021 ESPP. See Note 11. Stock-based Compensation for a discussion of the the assumptions used to estimate the fair value of stock options granted during the years ended December 31, 2021.
The following assumptions were used to estimate the fair value of ESPP purchase rights using a Black-Scholes option pricing model with the following assumptions:
Convertible Preferred Stock Warrants Liability and Preferred Stock Tranche Option Liability
The Company accounts for contingently redeemable freestanding warrants and preferred stock tranche option to purchase shares of convertible preferred stock as liabilities on its consolidated balance sheets at their estimated fair value. Convertible preferred stock warrants and the preferred stock tranche option were subject to re-measurement at each balance sheet date, and any change in fair value was recognized as fair value adjustment on warrants and preferred stock tranche option in the consolidated statements of operations.
The Company uses the liability method to account for income taxes, under which deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases as well as for net operating losses and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be realized or settled. The Company recognizes the deferred income tax effects of a change in tax rates in the period of enactment.
The Company records valuation allowances to reduce deferred tax assets to the amount that it believes is more likely than not to be realized. The Company considers all available evidence, both positive and negative, including historical levels of income, expectations and risks associated with estimates of future taxable income, the expected timing of the reversals of existing temporary differences and tax planning strategies in assessing the need for a valuation allowance. Realization of its deferred tax assets is dependent primarily upon future U.S, United Kingdom and Norwegian taxable income.
The calculation of the Company’s tax liabilities involves assessing uncertainties in the application of complex tax regulations in multiple tax jurisdictions. In evaluating the exposure associated with various filing positions, the Company records estimated reserves when it is more-likely-than-not that an uncertain tax position will not be sustained upon examination by a taxing authority, including resolutions of any related appeals or litigation processes, based on the technical merits of the position.
The Company recognizes interest and penalties related to unrecognized tax benefits within income tax expense in the consolidated statements of operations and income taxes payable in the consolidated balance sheets.
Net Loss Per Share
The Company computes its basic and diluted net loss per share attributable to common stockholders using the two-class method required for companies with participating securities. Basic net loss per share attributable to common stockholders is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of shares (including Class A common stock and Class B common stock in 2021 and common stock in 2020 and 2019) outstanding during the period. Diluted net loss per share attributable to common stockholders is computed giving effect to all potential dilutive Class A common stock and Class B common stock equivalents outstanding for the period. For purposes of this calculation, options to purchase Class A common stock and Class B common stock in 2021 and common stock in 2020 and 2019, unvested RSUs, shares subject to repurchase from early exercised options, unvested common stock and warrants are considered common stock equivalents but have been excluded from the calculation of diluted net loss per share attributable to common stockholders as the effect is antidilutive.
In the event of liquidation, dissolution, distribution of assets or winding-up of the Company, the holders of all classes of common stock have equal rights to receive all the assets of the Company. We have not presented net loss per share under the two-class method for our Class A common stock and Class B common stock in 2021 and common stock in 2020 and 2019 because it would be the same for each class due to equal dividend and liquidation rights for each class.
Comprehensive loss is comprised of net loss and other comprehensive income (loss). Other comprehensive income (loss) includes foreign currency translation adjustments, net of taxes and net changes in unrealized losses on available-for-sale securities.
Loss contingencies from legal proceedings and claims may occur from intellectual property (IP) infringement claims and product liability, contractual claims, tax and other matters. Accruals are recognized when it is probable that a liability will be incurred and the amount of loss can be reasonably estimated. Legal fees are expensed as incurred.
JOBS Act Accounting Election
As an emerging growth company (“EGC”), the Jumpstart Our Business Startups Act (“JOBS Act”) allows the Company to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are applicable to private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). The Company may elect to use this extended transition period under the JOBS Act until such time as the Company is no longer considered to be an EGC. The adoption date for recently adopted accounting standard discussed below reflects this election, where applicable.
Recently Adopted Accounting Pronouncement
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). ASU 2016-02 requires that a lessee recognize the assets and liabilities that arise from operating leases. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use (ROU) asset representing its right to use the underlying asset for the lease term. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach.
The Company adopted ASU 2016-02 and related amendments on January 1, 2021, using the optional transition method and recorded an initial adjustment of $5.8 million to operating lease right-of-use assets, $6.5 million to operating lease liabilities and $0.7 million of unamortized deferred rent included in other liabilities in the consolidated balance sheet on January 1, 2021. The Company elected the package of practical expedients permitted under the transition guidance within Topic 842, which allowed the Company to carry forward the historical lease classification, retain the initial direct costs for any leases that existed prior to the adoption of the standard and not reassess whether any contracts entered into prior to the adoption are leases. The Company also elected to account for lease and non-lease components in its real estate lease agreements as a single lease component in determining lease assets and liabilities. In addition, the Company elected not to recognize the right-of-use assets and liabilities for leases with lease terms of one year or less. The Company did not elect the practical expedient allowing the use-of-hindsight, which would require the Company to reassess the lease term of its leases based on all facts and circumstances through the effective date and did not elect the practical expedient pertaining to land easements as this is not applicable to the current contract portfolio.
As of December 31, 2021, the aggregate balances of lease right-of-use assets and lease liabilities were $12.6 million and $12.9 million, respectively. The standard did not materially affect the Company’s consolidated statements of operations. The Company will continue to disclose comparative reporting periods prior to January 1, 2021 under the previous accounting guidance, ASC 840 Leases. See Note 8 Leases for further information.
Recently Issued Accounting Pronouncement Not Yet Adopted
In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance, which requires business entities to disclose information about certain government assistance including government grants and money contributions they receive. Such disclosure requirements include the nature of the transactions and the related accounting policy used, the line items on the balance sheet and income statement that are affected and the amounts applicable to each financial statement line item and significant terms and conditions of the transactions. ASU 2021-10 will be effective for annual periods beginning after December 15, 2021 and should be applied either prospectively or retrospectively. Early adoption is permitted. The Company is currently evaluating the impact the adoption of ASU 2021-10 will have on our Consolidated Financial Statements. The Company will adopt ASU 2021-10 on January 1, 2022.
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740. ASU 2019-12 is effective for fiscal years beginning January 1, 2022, with early adoption permitted. The Company is currently evaluating the impact the adoption
of ASU 2019-12 will have on our Consolidated Financial Statements. The Company will adopt ASU 2019-12 on January 1, 2022.
In June 2016, the FASB issued ASU 2016-13 regarding ASC Topic 326, Financial Instruments–Credit Losses, which requires measurement and recognition of expected credit losses for financial assets held. ASU 2016-13 is effective for the Company beginning January 1, 2023. The Company is currently evaluating the impact that this updated standard will have on its consolidated financial statements and has not yet determined whether the effect will be material.
The entire disclosure for all significant accounting policies of the reporting entity.
Reference 1: http://www.xbrl.org/2003/role/disclosureRef