Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2022

Summary of Significant Accounting Policiies

Summary of Significant Accounting Policies

3.    Summary of Significant Accounting Policies

The Company’s significant accounting policies are described in Note 2 of Notes to Consolidated Financial Statements included in its Annual Report on 10-K for the year ended December 31, 2021. With the exception of the accounting for held for sale assets and liabilities and discontinued operations under ASC 205-20, Presentation of Financial Statements:

Discontinued Operations (“ASC 205”), there have been no material changes in the Company’s significant accounting policies as compared to the significant accounting policies described in the Annual Report, other than the adoption of the accounting pronouncements below.

Held for Sale and Discontinued Operations

Assets and liabilities of a group of components of an entity are classified as held for sale when all of the following criteria for a plan of sale have been met: (1) management, having the authority to approve the action, commits to a plan to sell the entities to be sold; (2) the entities to be sold are available for immediate sale, in their present condition, subject only to terms that are usual and customary for sales of such entities to be sold; (3) an active program to locate a buyer and other actions required to complete the plan to sell the entities have been initiated; (4) the sale of the entities is probable and is expected to be completed within one year; (5) the entities are being actively marketed for a price that is reasonable in relation to their current fair value; and (6) actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or the plan will be withdrawn.

Components of an entity that are classified as held for sale and have operations and cash flows that can be clearly distinguished from the rest of the entity are required to be reported as assets and liabilities held for sale.  A disposal of a group of components that is classified as held for sale is reported as discontinued operations if the disposal represents a strategic shift that has and will have a major effect on our operations and financial results.

In the period in which the components meet held-for-sale or discontinued operations criteria, the major current assets, other assets, current liabilities, and noncurrent liabilities shall be reported as components of total assets and liabilities separate from those balances of the continuing operations. Assets classified as held for sale are reported at the lower of their carrying value or fair value less costs to sell. Depreciation and amortization of assets ceases upon designation as held for sale. For components that meet the discontinued operations criteria, the results of operations for the discontinued operation are reclassified into separate line items in the condensed consolidated statements of operations, net of income taxes for all periods presented.

The Company accounts for contingent consideration received as a gain contingency, and recognizes such contingent consideration when it is realized or realizable, once the contingency is resolved.

Additional details surrounding the Company's assets and liabilities held for sale and discontinued operations are included in Note 4.

Recent Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In August 2020, the FASB issued ASU No. 2020-06, “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which simplifies the accounting for convertible instruments by eliminating the requirement to separately account for embedded conversion features as an equity component in certain circumstances. A convertible debt instrument will be reported as a single liability instrument with no separate accounting for an embedded conversion feature unless separate accounting is required for an embedded conversion feature as a derivative or under the substantial premium model. The ASU simplifies the diluted earnings per share calculation by requiring that an entity use the if-converted method and that the effect of potential share settlement be included in diluted earnings per share calculations. Further, the ASU requires enhanced disclosures about convertible instruments. The Company adopted ASU 2020-06 on January 1, 2022 using the modified retrospective method. Upon adoption at January 1, 2022, the Company made certain adjustments in its condensed consolidated balance sheets which consisted of an increase of $176.3 million in Long-term debt, a net decrease of $307.4 million in Additional paid-in capital and a net decrease of $131.1 million in Accumulated deficit resulting from the reversal of previously recognized non-cash interest expense.

After adoption, the Company accounts for the Convertible Notes as single liabilities measured at amortized cost. The Company did not elect the fair value option. Additionally, the Company will no longer incur non-cash interest expense for the amortization of debt discount related to the previously separated equity components. The Company will apply the if-converted methodology in computing diluted earnings per share if and when profitability is achieved.

The following table summarizes the adjustments made to the Company’s condensed consolidated balance sheet as of January 1, 2022 as a result of applying the modified retrospective method in adopting ASU 2020-06: 

		As Reported		ASU 2020-06		As Adjusted
		December 31, 2021		Adjustments		January 1, 2022
		(in thousands)
Convertible Notes	$	539,782	$	176,303	$	716,085
Additional paid-in capital	$	2,308,653	$	(307,371)	$	2,001,282
Accumulated deficit	$	(2,489,772)	$	131,068	$	(2,358,704)

Under the modified retrospective method, comparative prior periods are not adjusted. The adoption did not impact previously reported amounts in the Company’s condensed consolidated statements of operations, cash flows and the basic and diluted net loss per share amounts.