Adoption of New Accounting Standards

6 Months Ended

Jun. 30, 2019

Adoption of New Accounting Standards [Text Block]

3.	Adoption of New Accounting Standards
	The Company adopted Topic 842 Leases with a date of the initial application of January 1, 2019. As a result, the Company has changed its accounting policy for leases as detailed below.
	The Company adopted Topic 842 using a modified retrospective approach with a date of initial application of January 1, 2019, which requires the recognition of the right-of-use assets and related operating and finance lease liabilities on the balance sheet. As a result, the consolidated balance sheet prior to January 1, 2019 was not restated, continues to be reported under ASC Topic 840, Leases, or ASC 840, which did not require the recognition of operating lease liabilities on the balance sheet, and is not comparative. Under ASC 842, all leases are required to be recorded on the balance sheet and are classified as either operating or finance leases. The lease classification affects the expense recognition in the income statement. Operating lease charges are recorded entirely in selling, general and administrative expense. Finance lease charges are split, where amortization of the right-of-use asset is recorded in selling, general and administrative expense and an implied interest component is recorded in financing and interest expense. At the moment of initial application, the Company did not hold any finance leases. The expense recognition for operating leases under ASC 842 is substantially consistent with ASC 840. As a result, there is no significant difference in our results of operations presented in our consolidated income statement and consolidated statement of comprehensive loss for each period presented.

The adoption of ASC 842 had a substantial impact on the Company’s balance sheet. The most significant impact was the recognition of the operating lease right-of-use asset and operating lease liability. Upon adoption, leases that were classified as operating leases under ASC 840 were classified as operating leases under ASC 842, and the Company recorded an adjustment of $726 to operating lease right-of-use asset and the related operating lease liability. The operating lease liability is based on the present value of the remaining minimum lease payments, determined under ASC 840, discounted using our secured incremental borrowing rate at the effective date of January 1, 2019, using the original lease term and the tenor. As permitted under ASC 842, the Company elected to use the practical expedient that permits to use hindsight in determining the lease term. The application of the practical expedients did not have a significant impact on the measurement of the operating lease liability.

The impact of the adoption of ASC 842 on the balance sheet as at December 31, 2018 was:

		As reported		Adoption of ASC 842			Balance
		December 31, 2018		Increase (Decrease)			January 1, 2019
Operating lease right-of-use assets	$	-	$	726		$	726
Total assets		20,018		726			20,744
Total current liabilities		2,722		127			2,849
Deferred lease obligations		49		(49	)		-
Operating lease liability		-		599			599
Total liabilities		10,031		677			10,708
Total shareholders’ equity		9,987		49			10,036
Total liabilities and shareholders’ equity		20,018		726			20,744

The FASB issued ASU 2018-07 to expand the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from non-employees. These amendments are effective for a public business entity for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The adoption of this statement did not have a material effect on the Company’s financial position of results.