SIGNIFICANT ACCOUNTING POLICIES

6 Months Ended

Jun. 30, 2020

Accounting Changes and Error Corrections [Abstract]

SIGNIFICANT ACCOUNTING POLICIES

SIGNIFICANT ACCOUNTING POLICIES

Our significant accounting policies, including a description of our business combination valuation methodologies, are included in Note 1 to the consolidated financial statements in our 2019 10-K. The policies that follow primarily represent updates to certain of our policies or disclosures since January 1, 2020.

Credit Losses. Effective January 1, 2020, we adopted Financial Accounting Standards Board ("FASB") Accounting Standards Codification 326, "Current Expected Credit Losses" ("ASC 326"). While the prior accounting rules used a model of incurred losses to estimate credit losses on certain types of financial instruments, including trade accounts receivable, ASC 326 requires entities to use a forward-looking approach based on expected losses, which may result in the earlier recognition of allowances for losses. We applied the new credit loss model on a prospective basis and recorded a cumulative-effect adjustment, net of taxes, of $3.3 million to opening retained earnings for the increase to the allowance for doubtful accounts. With the adoption of ASC 326, we amended our accounting policy for accounts receivable, which follows.

Accounts receivable consist primarily of receivables from contracts with customers for the sale of ready-mixed concrete, aggregates and other products.  Accounts receivable initially are recorded at the transaction amount.  We utilize liens or other legal remedies in our collection efforts of certain accounts receivable.  Each reporting period, we evaluate the collectability of the receivables and record an allowance for doubtful accounts and customer disputes for our estimated losses on balances that may not be collected in full, which reduces the accounts receivable balance.  Additions to the allowance result from a provision for bad debt expense that is recorded to selling, general and administrative expenses.  A provision for customer disputes recorded as a reduction to revenue also increases the allowance.  Accounts receivable are written off if and when we determine the receivable will not be collected and are reflected as a reduction to the allowance.

We determine the amount of bad debt expense and customer dispute losses each reporting period and the resulting adequacy of the allowance at the end of each reporting period by using a combination of historical loss experience, customer-by-customer analysis, and subjective assessments of our loss exposure. For accounts receivable balances as of and prior to December 31, 2019, our estimate of allowance for doubtful accounts was based on our estimated probable losses. Beginning

January 1, 2020, upon our adoption of ASC 326, our allowance for doubtful accounts is based on our estimated expected losses, and the underlying evaluations include analysis of forward-looking information, including economic conditions.

Fair Value Measurements. As of January 1, 2020, we adopted a FASB update to disclosure requirements for fair value measurement, which removed, modified and added certain disclosure requirements related to fair value measurements covered in Topic 820, "Fair Value Measurement." The adoption of this update did not have a material impact on the consolidated financial statements. See Note 10 for additional information.

Subsidiary Guarantees. In March 2020, the SEC adopted amendments to the financial disclosure requirements applicable to registered debt offerings that include credit enhancements, such as subsidiary guarantees, in Rule 3-10 of Regulation S-X. The amended rule focuses on providing material, relevant and decision-useful information regarding guarantees and other credit enhancements, while eliminating certain prescriptive requirements. The Company adopted these amendments as of March 31, 2020. Accordingly, combined summarized financial information has been presented only for the issuers and guarantors of our registered securities for the most recent fiscal year and the year-to-date interim period, and the required disclosures have been moved from the notes to these condensed consolidated financial statements to Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

Leases. During the quarter ended June 30, 2020, we entered into agreements to defer $6.2 million of finance lease payments to mitigate the cash flow impact from the COVID-19 pandemic. In April 2020, the FASB issued interpretive guidance providing companies with the option to elect to account for lease concessions related to the effects of the COVID-19 pandemic as though the enforceable rights and obligations existed in the original lease. Entities may make the elections as long as the concession does not result in a substantial increase in the rights of the lessor or the obligations of the lessee.

For concessions that provide a deferral of payments with no substantive changes to the consideration in the original contract, we can evaluate whether to account for these concessions (i) as if there were no changes made to the lease agreement and accordingly, continue to recognize expense and increase accounts payable, (ii) as a resolution of a contingency that fixes previously variable lease payments and remeasure the lease liability without reconsideration of the lease classification, or (iii) as negative variable lease payments and accordingly, negative lease expense. We elected to account for the lease payment deferrals as a resolution of a contingency that fixes previously variable lease payments and remeasure the lease obligations, with no reconsideration of lease classification during the quarter ended June 30, 2020. Given the nature of the lease concessions and our election, there was no material impact to our total finance lease liability other than a $1.5 million reclassification from current to long-term liabilities in the accompanying condensed consolidated balance sheet as of June 30, 2020.

Debt. During the quarter ended June 30, 2020, we entered into agreements to defer $2.2 million of promissory note payments to mitigate the cash flow impact from the COVID-19 pandemic. The promissory note deferrals resulted in changes to the effective interest rates of these agreements.