SECURITY NATIONAL FINANCIAL CORP Leases Disclosure

 

16)

Leases

 

A lease is defined as a contract, or part of a contract, that conveys the right to control the use of identified property, plant, or equipment (an identified asset) for a period in exchange for consideration. The Company determines if a contract is a lease at the inception of the contract. At the commencement date of a lease, the Company measures the lease liability at the present value of the lease payments over the lease term, discounted using the discount rate for the lease. The Company uses the rate implicit in the lease, if available, otherwise the Company uses its incremental borrowing rate. Also, at the commencement date of a lease, the Company measures the cost of the related right-of-use asset which consists of the amount of the initial measurement of the lease liability, any lease payments made to the lessor at or before the commencement date, minus any lease incentives received and any initial direct costs incurred by the Company.

 

Information about the Nature of Leases and Subleases

 

The Company leases office space and equipment from third parties under various non-cancelable agreements. The Company has operating leases for office space for its segments in areas where it conducts business. The Company subleases some of this office space. The Company also has finance leases for certain equipment, such as copy machines and postage machines. The Company does not have any lease agreements with variable lease payments. The Company has not included any options to extend or terminate leases in the recognition of the right-of-use assets or lease liabilities because of the uncertainty that they will be exercised. No residual value guarantees have been provided to the Company. The Company does not have any restrictions or covenants imposed by leases.

 

Leases that have not Commenced

 

The Company does not have any leases that have not commenced that create significant rights or obligations for the Company.

 

Related Party Lease Transactions

 

The Company does not have any related party lease transactions that require disclosure as of December 31, 2025.

 

Short-term Leases

 

The Company made an accounting policy election not to apply the recognition requirements of ASC 842 to short-term leases, which are leases that, at the commencement date, have a lease term of 12 months or less and do not include an option to purchase the underlying assets that the lessee is reasonably certain to exercise.

 

Significant Judgments and Assumptions

 

The Company does not use any significant judgments or assumptions regarding the determination of whether a contract contains a lease; the allocation of the consideration in a contract between lease and non-lease components; or the determination of the discount rates for the leases. The following table presents the Company’s total lease cost recognized in earnings, amounts capitalized as right-of-use assets and cash flows from lease transactions.

 

 

SECURITY NATIONAL FINANCIAL CORPORATION

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Years Ended December 31, 2025 and 2024

 

16)	Leases (Continued)

 Schedule of Lease Cost Recognized in Earnings

		Years Ended December 31
		2025				2024
Lease Cost
Finance lease cost:
Amortization of right-of-use assets (1)		$	86,515			$	48,687
Interest on lease liabilities (2)			10,361				6,553
Operating lease cost (3)			2,655,969				3,102,662
Short-term lease cost (3)(4)			1,232,176				1,419,524
Sublease income (3)			(958,038	)			(562,675	)
Total lease cost		$	3,026,983			$	4,014,751
Other Information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases		$	2,879,018			$	3,622,607
Operating cash flows from finance leases			10,361				6,553
Financing cash flows from finance leases			84,643				46,425
Right-of-use assets obtained in exchange for lease liabilities:
Operating leases		$	2,582,742			$	1,770,873
Finance leases			33,500				176,040
Weighted-average remaining lease term (in years)
Finance leases			1.83				1.80
Operating leases			2.81				2.66
Weighted-average discount rate
Finance leases			7.70	%			7.89	%
Operating leases			6.33	%			5.37	%

 

(1)	Included in Depreciation on property and equipment on the consolidated statements of earnings
(2)	Included in Interest expense on the consolidated statements of earnings
(3)	Included in Rent and rent related expenses on the consolidated statements of earnings
(4)	Includes leases with a term of 12 months or less

 

 

SECURITY NATIONAL FINANCIAL CORPORATION

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Years Ended December 31, 2025 and 2024

 

16)	Leases (Continued)

 

The following table presents the maturity analysis of the Company’s lease liabilities.

 Schedule of Future Minimum Rental Payments for Finance Leases and Operating Leases

		Finance Leases				Operating Leases
Lease payments due in:
2026		$	72,074			$	2,256,398
2027			11,157				957,728
2028			9,504				624,120
2029			7,217				477,929
2030			1,034				252,836
Thereafter			–				–
Total undiscounted lease payments			100,986				4,569,011
Less: Discount on cash flows			(6,963	)			(431,953	)
Present value of lease liabilities		$	94,023			$	4,137,058

 

The following table presents the Company’s right-of-use assets and lease liabilities.

 Schedule of Right-of-Use Assets and Lease Liabilities

				Year Ended December 31,
		Balance Sheet Location		2025				2024
Operating Leases
Right-of-use assets		Other assets		$	3,911,710			$	4,837,045
Lease liabilities		Other liabilities and accrued expenses		$	4,137,058			$	5,285,440
Finance Leases
Right-of-use assets				$	232,133			$	207,127
Accumulated amortization					(142,992	)			(64,971	)
Right-of-use assets, net		Property and equipment, net		$	89,141			$	142,156
Lease liabilities		Bank and other loans payable		$	94,023			$	145,167

 

The Company is also a lessor and has operating lease agreements with various tenants that lease its commercial properties. See Note 2 for information about the Company’s real estate held for investment.

 

 

SECURITY NATIONAL FINANCIAL CORPORATION

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Years Ended December 31, 2025 and 2024