Indian Gaming Association Notes to Financial Statements Note 1: Summary of Significant Accounting Policies (Continued) ASC 842 Lease Accounting
IGA is a lessee in multiple noncancelable operating leases. If the contract provides IGA the right to substantially all the economic benefits and the right to direct the use of the identified asset, it is considered to be or contain a lease. Right-of-use (ROU) assets and lease liabilities are recognized at the lease commencement date based on the present value of the future lease payments over the expected lease term. The ROU asset is also adjusted for any lease prepayments made, lease incentives received, and initial direct costs incurred. The lease liability is initially and subsequently recognized based on the present value of its future lease payments. Variable payments are included in the future lease payments when those variable payments depend on an index or a rate. Increases (decreases) to variable lease payments due to subsequent changes in an index or rate are recorded as variable lease expense (income) in the future period in which they are incurred. IGA has elected to use a risk-free rate for a term similar to the underlying lease as the discount rate if the implicit rate in the lease contract is not readily determinable. The ROU asset for operating leases is subsequently measured throughout the lease term at the amount of the remeasured lease liability (i.e., present value of the remaining lease payments), plus unamortized initial direct costs, plus (minus) any prepaid (accrued) lease payments, less the unamortized balance of lease incentives received, and any impairment recognized. For all underlying classes of assets, IGA has elected to not recognize ROU assets and lease liabilities for short-term leases that have a lease term of 12 months or less at lease commencement and do not include an option to purchase the underlying asset that IGA is reasonably certain to exercise. Leases containing termination clauses in which either party may terminate the lease without cause and the notice period is less than 12 months are deemed short-term leases with lease costs included in short-term lease expense. IGA recognizes short-term lease cost on a straight-line basis over the lease term. Accounting Pronouncement Adopted In July 2025, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2025-05, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets . This update is intended to simplify the measurement of expected credit losses for current accounts receivable and contract assets by providing practical expedients and accounting policy elections for non- public business entities. IGA early adopted this guidance for the year ended December 31, 2025, with prospective application to January 1, 2025. In connection with the adoption, IGA has elected the practical expedient to assume that current economic conditions will remain unchanged over the short-term life of the assets and has further elected the accounting policy to consider subsequent cash collections received up to the date the financial statements are available to be issued in its estimate of expected credit losses. The adoption of this standard resulted in the recognition of $47,350 in credit losses for the year ended December 31, 2025.
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