Nature of Operations and Basis of Presentation

12 Months Ended

Jan. 03, 2020

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Nature of Operations and Basis of Presentation

Note 1—Nature of Operations and Basis of Presentation

Nature of Operations and Basis of Presentation

Leidos Holdings, Inc. ("Leidos"), a Delaware corporation, is a holding company whose direct 100%-owned subsidiary and principal operating company is Leidos, Inc. Leidos is a FORTUNE 500^® science, engineering and information technology company that provides services and solutions in the defense, intelligence, civil and health markets. Leidos' domestic customers include the U.S. Department of Defense ("DoD"), the U.S. Intelligence Community, the U.S. Department of Homeland Security ("DHS"), the Federal Aviation Administration, the Department of Veterans Affairs and many other U.S. government civilian agencies, as well as state and local government agencies. Leidos' international customers include foreign governments and their agencies, primarily located in Australia and the United Kingdom ("U.K."). Unless indicated otherwise, references to the "Company," "we," "us" and "our" refer collectively to Leidos Holdings, Inc. and its consolidated subsidiaries. The Company operates in three reportable segments: Defense Solutions, Civil and Health. Additionally, the Company separately presents the unallocable costs associated with corporate functions as Corporate.

The Company has an 88% controlling interest in Mission Support Alliance, LLC ("MSA"), a joint venture with Centerra Group, LLC, which includes 41% purchased from Jacobs Group, LLC on January 26, 2018. The Company consolidates the financial results for MSA into its consolidated financial statements.

The consolidated financial statements also include the balances of all voting interest entities in which Leidos has a controlling voting interest ("subsidiaries") and a variable interest entity ("VIE") in which Leidos is the primary beneficiary. The consolidated balances of the Company's VIE are not material to the Company's consolidated financial statements for the periods presented. Intercompany accounts and transactions between consolidated companies have been eliminated in consolidation.

Effective December 29, 2018, the Company adopted the requirements of Accounting Standards Update ("ASU") 2016-02 using the modified retrospective approach (see "Note 2—Accounting Standards"). Comparative information for the prior fiscal year has not been retrospectively adjusted.

Effective the beginning of fiscal 2019, certain contracts were reassigned between the Civil and Defense Solutions reportable segments (see "Note 24—Business Segments"). While this activity did not have a material impact on the Company's reportable segments, fiscal 2018 and 2017 segment results and disclosures have been recast to reflect this change.

Certain amounts in the prior year financial statements have been reclassified to conform to the current year presentation. The Company classifies indirect costs incurred within or allocated to its U.S. government customers as overhead (included in "Cost of revenues") or general administrative expenses in the same manner as such costs are defined in the Company's disclosure statements under U.S. government Cost Accounting Standards ("CAS"). Effective the beginning of fiscal 2018, the Company established a new CAS structure and revised its disclosure statements accordingly to reflect the related cost accounting practice changes. Consequently, $185 million was reclassified from "Cost of revenues" to "Selling, general and administrative expenses" on the consolidated statements of income for fiscal 2017.

The Company combined "Dividends payable" and "Income taxes payable" with "Accounts payable and accrued liabilities" on the consolidated balance sheets. Additionally, the Company separately disclosed "Deferred income taxes" and "Income taxes receivable/payable", as well as "Other long-term assets" and "Other long-term liabilities", within operating activities on the consolidated statements of cash flows. The Company also combined "Payments for debt issuance and modification costs" and "Payments for non-controlling interest acquired" with "Other" within financing activities on the consolidated statements of cash flows.