Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2019

Summary Of Significant Accounting Policies

2. Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The accompanying unaudited interim consolidated financial statements include the accounts of the Company after elimination of intercompany transactions and balances and have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”) and therefore do not include all disclosures required for financial statements prepared in conformity with accounting principles generally accepted in the U.S. (“GAAP”). In the opinion of management, these financial statements include all adjustments (consisting of normal recurring accruals and adjustments) necessary to present fairly, in all material respects, the Company’s interim financial position, results of operations and cash flows. However, the results of operations for the periods presented are not necessarily indicative of the results of operations that may be expected for the full year. Certain reclassifications have been made to prior period amounts to conform to the current period presentation. Such reclassifications had no material impact on prior period amounts.

Significant Accounting Policies

The Company’s significant accounting policies are described in “Note 2. Summary of Significant Accounting Policies” of the Notes to Consolidated Financial Statements in its Annual Report on Form 10-K for the year ended December 31, 2018 (“2018 Annual Report”) and are supplemented by the notes included in this Quarterly Report on Form 10-Q. The financial statements and related notes included in this report should be read in conjunction with the Company’s 2018 Annual Report.

Recently Adopted Accounting Standards

Leases. Effective January 1, 2019, the Company adopted ASU No. 2016-02, Leases (Topic 842) (“ASC 842”), using the modified retrospective approach and did not have a cumulative-effect adjustment in retained earnings as a result of the adoption. ASC 842 significantly changes accounting for leases by requiring that lessees recognize a liability representing the obligation to make lease payments and a related right-of-use (“ROU”) asset for virtually all lease transactions. However, ASC 842 does not apply to leases of mineral rights to explore for or use crude oil and natural gas. Upon adoption, the Company implemented policy elections and practical expedients which include the following:


•	package of practical expedients which allows the Company to avoid reassessing contracts that commenced prior to adoption that were properly evaluated under legacy lease accounting guidance;


•	excluding ROU assets and lease liabilities for leases with terms that are less than one year;


•	combining lease and non-lease components and accounting for them as a single lease (elected by asset class);


•	excluding land easements that existed or expired prior to adoption; and


•	policy election that eliminates the need for adjusting prior period comparable financial statements prepared under legacy lease accounting guidance.

As a result of adopting ASC 842, the Company recorded lease liabilities of approximately $75.2 million and associated ROU assets of approximately $69.1 million on its consolidated balance sheets. The difference between the lease liabilities and ROU assets is due to a rent holiday and lease build-out incentives that were recorded as deferred lease liabilities under legacy lease accounting guidance. The adoption of ASC 842 did not materially change the Company’s consolidated statements of income or consolidated statements of cash flows. See “Note 6. Leases” for further discussion.

Subsequent Events

The Company evaluates subsequent events through the date the financial statements are issued. See “Note 16. Subsequent Events” for further discussion.