Leases, Codification Topic 842

12 Months Ended

Dec. 31, 2019

Adoption of ASC Topic 842, Leases On January 1, 2019, the Company adopted ASC Topic 842, Leases ("Topic 842") using the modified retrospective transition method. Topic 842 requires the recognition of lease assets and liabilities for operating leases. Beginning on January 1, 2019, the Company's consolidated financial statements are presented in accordance with the revised policies, while prior period amounts are not adjusted and continue to be reported in accordance with the Company's historical policies. The modified retrospective transition method required the cumulative effect, if any, of initially applying the guidance to be recognized as an adjustment to the Company's accumulated deficit as of our adoption date. There was no cumulative effect adjustment to the Company's accumulated deficit as a result of initially applying the guidance. As a result of adopting Topic 842, the Company recognized additional operating lease assets of $26,449 and operating lease liabilities of $32,932 as of January 1, 2019. The discount rate used to calculate that adjustment was the Company's incremental borrowing rate as of the adoption date, January 1, 2019.

Management elected to utilize the practical expedients permitted under the transition guidance within Topic 842, which allowed the Company to carry forward prior conclusions about lease identification, classification and initial direct costs for leases entered into prior to adoption of Topic 842. Additionally, management elected not to separate lease and non-lease components for all of the Company's leases. For leases with a term of 12 months or less, management elected the short-term lease exemption, which allowed the Company to not recognize right-of-use assets or lease liabilities for qualifying leases existing at transition and new leases the Company may enter into in the future.

General Description of Leases

The Company has entered into various non-cancelable operating lease agreements for its facilities. The Company classifies leases at their commencement as either operating or finance leases and may receive renewal or expansion options, rent holidays and leasehold improvement or other incentives on certain lease agreements. The Company’s operating leases primarily consist of leases for real estate throughout the world with lease expirations between 2019 and 2029. These arrangements typically do not transfer ownership of the underlying asset as the Company does not assume, nor does it intend to assume, the risks and rewards of ownership.

The Company recognizes a right-of-use asset and lease liability for all of its leases at the commencement of the lease. Lease liabilities are measured based on the present value of the minimum lease payments discounted by a rate determined as of the date of commencement. Right-of-use assets are measured based on the lease liability adjusted for any initial direct costs, prepaid rent, lease incentives and restructuring. The following summarizes right-of-use assets as of December 31, 2019 (in thousands):


	2019
Beginning balance at January 1, operating lease right-of-use, asset gross	$	26,449
Additional Leases in 2019	1,385
Total operating lease right-of-use asset, gross	27,834
Less: accumulated amortization	(4,041)
Operating lease right-of-use asset, net	$	23,793

Significant Assumptions and Judgments

Significant judgment is required when determining whether a contract is or contains a lease. The Company reviews contracts to determine whether the language conveys the right to control the use of an identified asset for a period of time in exchange for consideration. As discussed above, the present value of minimum lease payments is used in determining the value of the Company's operating and finance leases. The discount rate used to calculate the present value for lease payments is the Company's incremental borrowing rate, which is determined based on information available at lease commencement and is equal to the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term in an amount equal to the lease payments in a similar economic environment. The incremental borrowing rate used for our lease obligations as of December 31, 2019 and January 1, 2019 ranged from 4.08% to 7.36%. As of December 31, 2019, the weighted-average remaining lease term for our operating leases was 6.34 years. As of December 31, 2019, the weighted-average discount rate for our operating leases was 6.82%.

The following table summarizes the Company's lease cost and sublease income for the year ended December 31, 2019:


	December 31, 2019

Operating lease cost	$	6,116
Variable lease cost	762
Short-term lease cost	345
Sublease income, gross	(4,330)
Total lease cost	$	2,893

As of December 31, 2019, the future payments under the Company's operating leases for each of the next five years and thereafter are as follows:


2020	$	7,293
2021	6,084
2022	5,119
2023	5,092
2024	5,124
Thereafter	8,073
Subtotal	36,785
Less: imputed interest	(7,252)
Present value of minimum lease payments	29,533
Less: current portion of operating lease obligations	(5,487)
Total long-term lease obligations	$	24,046