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Advanced Roofing, Inc. and Affiliates Notes to Consolidated Financial Statements Note 1. Nature of Business and Significant Accounting Policies (Continued) Recent accounting pronouncements: In January 2014, the Financial Accounting Standards Board (the FASB) issued guidance which permits a private company to elect an alternative to amortize goodwill on a straight-line basis over a period of ten years, or less if the company demonstrates that another useful life is more appropriate. It also permits a private company to apply a simplified impairment model to goodwill. Under the goodwill accounting alternative, goodwill should be tested for impairment when a triggering event occurs that indicates that the fair value of a company (or a reporting unit) may be below its carrying amount. A private company that elects the accounting alternative is further required to make an accounting policy election to test goodwill for impairment at either the company level or the reporting unit level. The Company adopted the alternative accounting approach for the year ended December 31, 2015. In December 2014, the FASB issued guidance which permits a private company to elect an alternative for recognizing or otherwise considering the fair value of identifiable intangible assets acquired as a result of certain specified transactions, including business combinations. An entity that elects this accounting alternative should no longer recognize separately from goodwill: (1) customer -related intangible assets unless they are capable of being sold or licensed independently from the other assets of the business, and (2) noncompetition agreements. An entity that elects this accounting alternative must also adopt the private company alternative to amortize goodwill. The Company adopted the alternative accounting approach for the year ended December 31, 2015. In May 2014, the FASB issued new accounting guidance for the recognition of revenue from contracts with customers. This guidance outlines a single comprehensive model for companies to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry -specific guidance. The core principle of the revenue model is that revenue is recognized when a customer obtains control of a good or service. A customer obtains control when it has the ability to direct the use of and obtain the benefits from the good or service. Transfer of control is not the same as transfer of risks and rewards, as it is considered in current guidance. The new guidance will also need to be applied to determine whether revenue should be recognized over time or at a point in time. This new guidance will be effective for annual reporting periods beginning after December 15, 2018, and permits the use of either a full retrospective or retrospective with cumulative effect transition method. The Company has not yet selected a transition method and is currently evaluating the effect that the updated standard will have on the consolidated financial statements. In February 2016, the FASB issued its new lease accounting guidance. Under the new guidance, lessees are required to recognize lease assets and lease liabilities on the balance sheet for all leases with terms longer than twelve months. Leases will be classified as either financing or operating, with the classification affecting the pattern of expense recognition in the income statement. The new standard is effective for fiscal years beginning after December 15, 2019, with early application permitted. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The Company is currently evaluating the effect that the updated standard will have on the consolidated financial statements. Subsequent events: Management has evaluated subsequent events through May 18, 2016, which is the date on which the consolidated financial statements were available to be issued. 11