Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the U.S. (GAAP) and include all of the accounts of Americold Realty Trust and Subsidiaries and the operating partnership and the subsidiaries of the operating partnership. Intercompany balances and transactions have been eliminated. Investments in which the Company does not have control and is not considered to be the primary beneficiary of a Variable Interest Entity (VIE), but where the Company exercises significant influence over the operating and financial policies of the investee, are accounted for using the equity method of accounting.

The notes to the consolidated financial statements of Americold Realty Trust and the operating partnership have been combined to provide the following benefits:


•	enhancing investors’ understanding of the Company and the operating partnership by enabling investors to view the business as a whole in the same manner as management views and operates the business;


•	eliminating duplicative disclosure and providing a more streamlined and readable presentation since a substantial portion of the disclosure applies to both the Company and the operating partnership; and


•	creating time and cost efficiencies through the preparation of one set of notes instead of two separate sets of notes.

There are few differences between the Company and the operating partnership, which are reflected in these consolidated financial statements and the accompanying notes. We believe it is important to understand the differences between the Company and the operating partnership in the context of how we operate as an interrelated consolidated company. Americold Realty Trust’s only material asset is its ownership of partnership interests of the operating partnership. As a result, Americold Realty Trust generally does not conduct business itself, other than acting as the sole general partner of the operating partnership, issuing public securities from time to time and guaranteeing certain unsecured debt of the operating partnership and certain of its subsidiaries and affiliates. Americold Realty Trust itself has not issued any indebtedness but guarantees the unsecured debt of the operating partnership and certain of its subsidiaries and affiliates, as disclosed in these notes.

The operating partnership holds substantially all the assets of the Company and holds the ownership interests in the Company’s joint ventures. The operating partnership conducts the operations of the business and is structured as a partnership with no publicly traded equity. Except for net proceeds from public equity issuances by Americold Realty Trust, which are generally contributed to the operating partnership in exchange for partnership units, the operating partnership generally generates the capital required by the Company’s business primarily through the operating partnership’s operations, by the operating partnership’s or its affiliates’ direct or indirect incurrence of indebtedness or through the issuance of partnership units.

The presentation of stockholders’ equity and partners’ capital are the main areas of difference between the consolidated financial statements of Americold Realty Trust and those of the operating partnership. As of December 31, 2018 and for each of the years ended December 31, 2018, 2017 and 2016, the general partner, Americold Realty Trust held a 99% interest in partnership units, and the limited partner, Americold Realty Operations, Inc. held a 1% interest in partnership units. The general partnership interests held by Americold Realty Trust in the operating partnership are presented as general partner’s capital within partners’ capital in the operating partnership’s consolidated financial statements and as common stock, additional paid-in capital and accumulated dividends in excess of earnings within stockholders’ equity in Americold Realty Trust’s consolidated financial statements. The limited partnership interests held by Americold Realty Operations, Inc., a wholly owned subsidiary of ART, in the operating partnership are presented as limited partners’ capital within partners’ capital in the operating partnership’s consolidated financial statements and within equity in Americold Realty Trust’s consolidated financial statements. The differences in the presentations between stockholders’ equity and partners’ capital result from the differences in the equity presented at the Americold Realty Trust and the operating partnership levels.

To help investors understand the significant differences between the Company and the operating partnership, these consolidated financial statements present the following notes to the consolidated financial statements for each of the Company and the operating partnership:

•Debt of the Company and Debt of the operating partnership

•Partners' Capital

•Selected Quarterly Financial Information

In the sections that combine disclosure of Americold Realty Trust and the operating partnership, these notes refer to actions or holdings as being actions or holdings of the Company. Although the operating partnership is generally the entity that enters into contracts and joint ventures and holds assets and debt, reference to the Company is appropriate because the business is one enterprise and the Company generally operates the business through the operating partnership.

Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses and the disclosure of contingent assets and liabilities. Actual results could differ from those estimates.

Property, Plant and Equipment

Property, plant and equipment is stated at cost, less accumulated depreciation. Depreciation is computed on a straight-line basis over the estimated useful lives of the respective assets or, if less, the term of the underlying lease. Depreciation begins in the month an asset is placed into service. Useful lives range from 5 to 40 years for buildings and building improvements and 3 to 20 years for machinery and equipment. Depletion on the limestone quarry is computed by the units-of-production method based on estimated recoverable units. The Company periodically reviews the appropriateness of the estimated useful lives of its long-lived assets.

Costs of normal maintenance and repairs and minor replacements are charged to expense as incurred. When non-real estate assets are sold or otherwise disposed of, the cost and related accumulated depreciation are removed, and any resulting gain or loss is included in the other expense, net line on the accompanying consolidated statements of operations. Gains or losses from the sale of real estate assets are reported in the consolidated statement of operations as an operating expense.

Costs incurred to develop software for internal use and purchased software are capitalized and included in the machinery and equipment line on the consolidated balance sheet. Capitalized software is amortized over the estimated life of the software which ranges from 3 to 10 years. Amortization of previously capitalized amounts was $5.2 million, $5.0 million and $4.6 million for 2018, 2017 and 2016, respectively, and is included in the depreciation, depletion, and amortization expense line on the accompanying consolidated statements of operations.

Activity in real estate facilities during the years ended December 31, 2018 and 2017 is as follows:



	2018			2017
	(In thousands)
Operating facilities, at cost:
Beginning balance	$	2,506,656		$	2,382,343
Capital expenditures	50,680			52,555
Acquisitions	—			27,958
Newly developed warehouse facilities	62,353			60,598
Disposition	(30,199		)	(20,780		)
Impairment	(747		)	(9,473		)
Conversion of leased assets to owned	8,405			—
Impact of foreign exchange rate changes	(21,781		)	13,455
Ending balance	2,575,367			2,506,656
Accumulated depreciation:
Beginning balance	(770,006		)	(692,390		)
Depreciation expense	(87,355		)	(86,169		)
Dispositions	24,672			11,143
Impact of foreign exchange rate changes	4,797			(2,590		)
Ending balance	(827,892		)	(770,006		)
Total real estate facilities	$	1,747,475		$	1,736,650

Non-real estate assets	92,226			98,235
Total property, plant and equipment and capital leases, net	$	1,839,701		$	1,834,885

The total real estate facilities amounts in the table above include $80.3 million and $90.5 million of assets under sale-leaseback agreements accounted for as a financing lease as of December 31, 2018 and 2017, respectively. The Company does not hold title in these assets under sale-leaseback agreements. During the second quarter of 2018, the Company sold a facility resulting in an $8.4 million gain on sale of real estate. In preparation of the warehouse disposal, the Company transferred most of its customers inventory to other owned warehouses within the same region. During the fourth quarter of 2018, the Company disposed of an idle facility resulting in a $0.9 million loss on sale of real estate, and purchased a portion of a facility that was previously operated under a lease agreement for $13.8 million.

In addition to purchasing and selling facilities, the Company also supported construction development projects throughout 2018. During the third quarter of 2018, the Company commenced operations in a production-advantaged facility in Middleboro, MA which cost approximately $23.4 million to construct. As of December 31, 2018, the Company is also investing in an expansion opportunity at the Rochelle, IL facility. The expansion is expected to be completed during the first quarter of 2019, with an approximate total cost of $73.4 million incurred as of December 31, 2018. Refer to Note 20 for the remaining construction commitment on this project.

In 2017, the Company acquired a new facility for a total cost of $31.9 million, which included $3.9 million of intangible assets associated with an in-place lease. In addition, the Company disposed of two idle warehouse facilities and one operating warehouse facility with a net book value of $9.2 million for an aggregate amount of $9.2 million. As of December 31, 2017, the Company held for sale an idle facility of the Warehouse segment with a carrying amount of $2.6 million, which is included in "Property, plant, and equipment – net" in the accompanying consolidated balance sheet. This warehouse was sold in 2018 for a $0.9 million loss, as previously mentioned.

Impairment of Long-Lived Assets

The Company reviews its long-lived assets for impairment when events or changes in circumstances (such as decreases in operating income and declines in occupancy) indicate that the carrying amounts may not be recoverable. A comparison is made of the expected future operating cash flows of the long-lived assets on an undiscounted basis to their carrying amounts.

If the carrying amounts of the long-lived assets exceed the sum of the expected future undiscounted cash flows, an impairment charge is recognized in an amount equal to the excess of the carrying amount over the estimated fair value of the long-lived assets, which the Company calculates based on projections of future cash flows and appraisals with significant unobservable inputs classified as Level 3 of the fair value hierarchy. The Company determined that individual warehouse properties constitute the lowest level of independent cash flows for purposes of considering possible impairment.

For the years ended December 31, 2018, 2017 and 2016, the Company recorded impairment charges of $0.7 million, $9.5 million and $9.8 million, respectively, in the "Impairment of long-lived assets" line item of the accompanying consolidated statements of operations. These charges were associated with the planned disposal of certain facilities, and other idle facilities of the Company, with a net book value in excess of their estimated fair value based on third-party appraisals or purchase offers. These impaired assets related to the Warehouse segment.

Impairment of Other Assets

In 2017, the Company evaluated the limestone inventory held at its Quarry operations, and determined that approximately $2.1 million of that inventory was not of saleable quality. As a result, the Company recognized an impairment charge for that amount, which is included in the “Cost of operations related to other revenues” line item of the accompanying consolidated statement of operations for the year ended December 31, 2017.

Also during 2017, the Company recognized an impairment charge totaling $6.5 million related to its investments in two joint ventures in China accounted for under the equity method. It was determined that the recorded investments were no longer recoverable from the projected future cash flows expected to be received from the ventures. The estimated fair value of each investment was determined based on an assessment of the proceeds expected to be received from the potential sale, of the Company’s investment interests to the joint venture partner. The impairment charge is included in the “Impairment of partially owned entities” line item in the accompanying consolidated statement of operations for the year ended December 31, 2017.

There were no other asset impairment charges recorded during the year ended December 31, 2018.

Capitalized Leases

Capitalized leases are recorded at the lower of the present value of future minimum lease payments or the fair market value of the property. Capital lease assets are depreciated on a straight-line basis over the estimated asset life if ownership of the leased assets is transferred by the end of the lease term or there is a bargain purchase option. If the lease does not transfer ownership at the end of the lease term or there is no bargain purchase option, then the capital lease assets are depreciated on a straight-line basis using the lesser of the asset’s useful life or the lease term. Depreciation expense on assets acquired under capitalized leases is included in the "Depreciation, depletion, and amortization" expense line on the accompanying consolidated statements of operations.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash on hand, demand deposits, and short-term liquid investments purchased with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value. As of December 31, 2018 and 2017, the Company held $37.3 million and $26.8 million, respectively, of cash and cash equivalents in bank accounts of its foreign subsidiaries.

Restricted Cash

Restricted cash relates to cash on deposit and cash restricted for the payment of certain property repairs or obligations related to warehouse properties collateralized by mortgage notes, cash on deposit for certain workers’ compensation programs and cash collateralization of certain outstanding letters of credit.

Restricted cash balances as of December 31, 2018 and 2017 are as follows:



	2018		2017
	(In thousands)
2010 mortgage notes’ escrow accounts	$	—	$	15,149
2013 mortgage notes’ escrow accounts	974		795
2013 mortgage notes’ cash managed accounts	2,410		2,612
Cash on deposit for workers’ compensation program in Australia	2,635		2,130
Term deposit for New Zealand subsidiary office lease bond	—		404
Total restricted cash	$	6,019	$	21,090

Accounts Receivable

Accounts receivable are recorded at the invoiced amount. The Company periodically evaluates the collectability of amounts due from customers and maintains an allowance for doubtful accounts for estimated amounts uncollectable from customers. Management exercises judgment in establishing these allowances and considers the balance outstanding, payment history, and current credit status in developing these estimates. Specific accounts are written off against the allowance when management determines the account is uncollectable.

The following table provides a summary of activity of the allowance for doubtful accounts:



	Balance at beginning of year		Provision for doubtful accounts	Amounts written off, net of recoveries		Balance at end of year
Allowance for doubtful accounts:	(In thousands)
Year ended December 31, 2016	$	2,363	1,135	574		$	4,072
Year ended December 31, 2017	$	4,072	1,229	8		$	5,309
Year ended December 31, 2018	$	5,309	2,324	(1,927	)	$	5,706

The Company records interest on delinquent billings within "Interest income" in the consolidated statements of operations, offset by a bad debt provision equal to the amount of interest charged until collected.

Identifiable Intangibles Assets

Identifiable intangibles consist of a trade name and customer relationships.

Indefinite-Lived Asset

The trade name asset, with a carrying amount of $15.1 million as of December 31, 2018 and 2017, relates to "Americold" and has an indefinite life; thus, it is not amortized. The Company evaluates the carrying value of its trade name each year as of October 1, and between annual evaluations if events occur or circumstances change that would more likely than not reduce the fair value of the trade name below its carrying amount. There were no impairments to the Company’s trade name for the years ended December 31, 2018, 2017 and 2016.

Finite-Lived Assets

Customer relationship assets are the Company’s largest finite-lived assets amortized over 6 to 20 years using a straight-line or accelerated amortization method dependent on the estimated benefits, which reflects the pattern in which economic benefits of intangible assets are expected to be realized by the Company. Customer relationship amortization expense for the years ended December 31, 2018, 2017 and 2016 was $0.8 million, $0.9 million and $1.8 million, respectively. The weighted-average remaining life of the customer relationship assets is 9.1 years as of December 31, 2018. The Company reviews these intangible assets for impairment when circumstances indicate the carrying amount may not be recoverable. There were no impairments to customer relationship assets for the years ended December 31, 2018, 2017 and 2016.

Leasehold Interests - Below Market Leases, Above Market Leases and In-place Lease

In reference to certain temperature-controlled warehouses where the Company is the lessee in an acquired business, below-market and above-market leases are amortized on a straight-line basis over the remaining lease terms in a manner that adjusts lease expense to the market rate in effect as of the acquisition date. In reference to certain temperature-controlled warehouses where the Company has a tenant lease assigned through an acquisition, the resulting intangible asset is amortized over the remaining term of the tenant lease and recorded to amortization expense. There were no impairments to leasehold interests for the years ended December 31, 2018, 2017 or 2016.

Deferred Financing Costs

Direct financing costs are deferred and amortized over the terms of the related agreements as a component of interest expense. The Company amortizes such costs based on the effective interest rate or on a straight-line basis. The Company uses the latter approach when the periodic amortization approximates the amounts calculated under the effective-interest rate method. Deferred financing costs related to revolving line of credits are classified as other assets, whereas deferred financing costs related to long-term debt are offset against "Mortgages notes, senior unsecured notes and term loans", as applicable in the consolidated balance sheets.

Goodwill

The Company evaluates the carrying value of goodwill each year as of October 1 and between annual evaluations if events occur or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. When evaluating whether goodwill is impaired, the Company compares the fair value of its reporting units to its carrying amounts, including goodwill. The Company estimates the fair value of its reporting units based upon a combination of the net present value of future cash flows and a market-based approach. Future cash flows are estimated based upon certain economic assumptions. Significant assumptions are revenue growth rates, operating costs, maintenance costs, and a terminal value calculation. The assumptions are based on risk-adjusted growth rates and discount factors accommodating multiple viewpoints that consider the full range of variability contemplated in the current and potential future economic situations. The market-based multiples approach assesses the financial performance and market values of other market-participant companies. If the estimated fair value of each of the reporting units exceeds the corresponding carrying value, no impairment of goodwill exists. If a reporting unit’s carrying amount exceeds its fair value, an impairment loss would be calculated by comparing the implied fair value of goodwill to the reporting unit’s carrying amount. The excess of the fair value of the reporting unit over the amount assigned for fair value to its other assets and liabilities is the implied fair value of goodwill. There were no goodwill impairment charges for the years ended December 31, 2018, 2017 and 2016.

Revenue Recognition

Revenues for the Company include rent, storage and warehouse services (collectively, Warehouse Revenue), third-party managed services for locations or logistics services managed on behalf of customers (Third-Party Managed Revenue), transportation services (Transportation Revenue), and revenue from the sale of quarry products (Other Revenue).

Warehouse Revenue

The Company’s customer arrangements generally include rent, storage and service elements that are priced separately. Revenues from storage and handling are recognized over the period consistent with the transfer of the service to the customer. Multiple contracts with a single counterparty are accounted for as separate arrangements.

Third-Party Managed Revenue

The Company provides management services for which the contract compensation arrangement includes: reimbursement of operating costs, fixed management fee, and contingent performance-based fees (Managed Services). Managed Services fixed fees are recognized as revenue as the management services are performed ratably over the service period. Managed Services performance-based fees are recognized ratably over the service period based on the likelihood of achieving performance targets.

Cost reimbursements related to Managed Services arrangements are recognized as revenue as the services are performed and costs are incurred. Managed Services fees and related cost reimbursements are presented on a gross basis as the Company is the principal in the arrangement. Multiple contracts with a single counterparty are accounted for as separate arrangements.

Transportation Revenue

The Company records transportation revenue and expenses upon delivery of the product. Since the Company is the principal in the arrangement of transportation services for its customers, revenues and expenses are presented on a gross basis.

Other Revenue

Other Revenue primarily includes the sale of limestone produced by the Company’s quarry business. Revenues from the sale of limestone are recognized upon delivery to customers.

Contracts with Multiple Service Lines

When considering contracts containing more than one service to a customer, a contract’s transaction price is pre-defined or allocated to each distinct performance obligation and recognized as revenue when, or as the performance obligation is satisfied, either over time as work progresses, or at a point in time. For contracts with multiple service lines or distinct performance obligations, the Company evaluates and allocates the contract’s transaction price to each performance obligation using our best estimate of the standalone selling price of each distinct good or service in the contract. The primary method used to estimate standalone selling price is the expected cost plus a margin approach, under which the Company forecasts expected costs of satisfying a performance obligation and then adds an appropriate margin for that distinct good or service.

Income Taxes

The Company operates in a manner intended to enable it to continue to qualify as a REIT under Sections 856-860 of the Code. Under those sections, a REIT that distributes at least 100% of its REIT taxable income, as defined in the Code, as a dividend to its shareholders each year and that meets certain other conditions will not be taxed on that portion of its taxable income that is distributed to its shareholders for U.S. federal income tax purposes. Through cash dividends, the Company, for tax purposes, has distributed an amount equal to or greater than its REIT taxable income for the years ended December 31, 2018, 2017 and 2016. As of December 31, 2018 and 2017, the Company has met all the requirements to qualify as a REIT. Thus, no provision for federal income taxes was made for the years ended December 31, 2018, 2017 and 2016, except as needed for the Company’s U.S. Taxable REIT Subsidiaries (TRSs), for the Company’s foreign entities, and a REIT excise tax payment in 2017 disclosed in Note 18 of these financial statements. To qualify as a REIT, an entity cannot have at the end of any taxable year any undistributed earnings and profits that are attributable to a non-REIT taxable year (undistributed E&P). The Company believes that it has no undistributed E&P as of December 31, 2018. However, to the extent there is a determination (within the meaning of Section 852(e)(1)) of the Code that the Company has undistributed earnings and profits (as determined for U.S. federal income tax purposes) accumulated (or acquired from another entity) from any taxable year in which the Company (or any other entity that converts to a Qualified REIT Subsidiary (QRS) that was acquired during the year) was not a REIT or a QRS, the Company will take all necessary steps to permit the Company to avoid the loss of its REIT status, including, but not limited to: 1) within the 90-day period beginning on the date of the determination, making one or more qualified designated distributions (within the meaning of the Section 852(e)(2)) of the Code in an amount not less than such undistributed earnings and profits over the interest payable under section 852(e)(3) of the Code; and 2) timely paying to the IRS the interest payable under Section 852(e)(3) of the Code resulting from such a determination.

If the Company fails to qualify as a REIT in any taxable year, it will be subject to U.S. federal income taxes at regular corporate rates and may not be able to qualify as a REIT for the four subsequent taxable years. Even as a REIT, it may be subject to certain state and local income and franchise taxes, and to U.S. federal income and excise taxes on undistributed taxable income and on certain built-in gains.

The Company has elected TRS status for certain wholly-owned subsidiaries. This allows the Company to provide services at those consolidated subsidiaries that would otherwise be considered impermissible for REITs. Many of the foreign countries in which we have operations do not recognize REITs or do not accord REIT status under their respective tax laws to our entities that operate in their jurisdiction. Accordingly, the Company recognizes income tax expense for the U.S. federal and state income taxes incurred by the TRSs, taxes incurred in certain U.S. states and foreign jurisdictions, and interest and penalties associated with unrecognized tax benefit liabilities, as applicable.

Taxable REIT Subsidiary

The Company has elected to treat certain of its wholly owned subsidiaries as TRSs. A TRS is subject to U.S. federal and state income taxes at regular corporate tax rates. Thus, income taxes for the Company’s TRSs are accounted for using the asset and liability method, under which deferred income taxes are recognized for (i) temporary differences between the financial reporting and tax bases of assets and liabilities and (ii) operating loss and tax credit carryforwards based on enacted tax rates expected to be in effect when such amounts are realized or settled.

The Company records a valuation allowance for deferred tax assets when it estimates that it is more likely than not that future taxable income will be insufficient to fully use a deduction or credit in a specific jurisdiction. In assessing the need for the recognition of a valuation allowance for deferred tax assets, we consider whether it is more likely than not that some portion, or all, of the deferred tax assets will not be realized and adjust the valuation allowance accordingly. We evaluate all significant available positive and negative evidence as part of our analysis. Negative evidence includes the existence of losses in recent years. Positive evidence includes the forecast of future taxable income by jurisdiction, tax-planning strategies that would result in the realization of deferred tax assets, reversal of existing deferred tax liabilities, and the presence of taxable income in prior carryback years. The underlying assumptions we use in forecasting future taxable income require significant judgment and take into account our recent performance. The ultimate realization of deferred tax assets depends on the generation of future taxable income during the periods in which temporary differences are deductible or creditable.

The Company accrues liabilities when it believes that it is more likely than not that it will not realize the benefits of tax positions that it has taken in its tax returns or for the amount of any tax benefit that exceeds the cumulative probability threshold in accordance with ASC 740-10, Uncertain Tax Positions. The Company recognizes interest and penalties related to unrecognized tax benefits within income tax (expense) benefit in the accompanying consolidated statements of operations.

The earnings of certain foreign subsidiaries, including any other components of the outside basis difference, are considered to be indefinitely reinvested except for Canada which the Company elected to repatriate a portion of the unremitted earnings in the form of dividends 2018. If our plans change in the future for any other foreign subsidiary or if we elect to repatriate the unremitted earnings of our other foreign subsidiaries in the form of dividends or otherwise, we would be subject to additional income taxes which would result in a higher effective tax rate. As disclosed in Note 18 of these financial statements, the U.S. government enacted comprehensive tax legislation on December 22, 2017 which imposed a one-time inclusion for our REIT or tax for our TRS on the deemed repatriation of unremitted foreign earnings and profits.

With respect to the foreign subsidiaries owned directly by the REIT, any unremitted earnings would not be subject to additional U.S. level taxes because the REIT would distribute 100% of such earnings or would be subject to a participation exemption beginning in 2018.

Pension and Post-Retirement Benefits

The Company has defined benefit pension plans that cover certain union and nonunion employees. The Company also participates in multi-employer union defined benefit pension plans under collective bargaining agreements for certain union employees. The Company also has a post-retirement benefit plan to provide life insurance coverage to eligible retired employees. The Company also offers defined contribution plans to all of its eligible employees. Contributions to multi-employer union defined benefit pension plans are expensed as incurred, as are the Company’s contributions to the defined contribution plans. For the defined benefit pension plans and the post-retirement benefit plan, an asset or a liability is recorded in the consolidated balance sheet equal to the funded status of the plan, which represents the difference between the fair value of the plan assets and the projected benefit obligation at the consolidated balance sheet date. The Company utilizes the services of a third-party actuary to assist in the assessment of the fair value of the plan assets and the projected benefit obligation at each measurement date. Certain changes in the value of plan assets and the projected benefit obligation are not recognized immediately in earnings but instead are deferred as a component of accumulated other comprehensive income (loss) and amortized to earnings in future periods.

Foreign Currency Gains and Losses

The local currency is the functional currency for the Company’s operations in Australia, New Zealand and Canada. For these operations, assets and liabilities are translated at the rates of exchange on the consolidated balance sheet date, while income and expense items are translated at average rates of exchange during the period. The resulting gains or losses arising from the translation of accounts from the functional currency into U.S. dollars are included as a separate component of shareholders’ equity in accumulated other comprehensive income (loss) until a partial or complete liquidation of the Company’s net investment in the foreign operation.

From time to time, the Company’s foreign operations may enter into transactions that are denominated in a currency other than their functional currency. These transactions are initially recorded in the functional currency of the subsidiary based on the applicable exchange rate in effect on the date of the transaction. On a monthly basis, these transactions are remeasured to an equivalent amount of the functional currency based on the applicable exchange rate in effect on the remeasurement date. Any adjustment required to remeasure a transaction to the equivalent amount of functional currency is recorded in the consolidated statements of operations of the foreign subsidiary as a component of foreign exchange gain or loss.

During the fourth quarter of 2018, the Company entered into two intercompany loan agreements, whereby the Australia and New Zealand entities borrowed from the U.S. entity. These intercompany loan agreements were denominated in the functional currency of the respective entities. The intercompany loan receivable balances as of December 31, 2018 are AUD $153.5 million and NZD $37.5 million, and are remeasured at the end of each month to the United States Dollar (USD) with any required adjustment recorded in "Foreign currency exchange gain (loss), net" in the consolidated statements of operations. Foreign currency transaction gains and losses on the remeasurement of short-term intercompany loans denominated in currencies other than a subsidiary’s functional currency are recognized as a component of foreign currency gain or loss, except to the extent that the transaction is effectively hedged. For loans that are effectively hedged, the transaction gains and losses on remeasurement are recorded to accumulated other comprehensive income (loss). Foreign currency transaction gains and losses resulting from the remeasurement of long-term intercompany loans denominated in currencies other than a subsidiary’s functional currency are recognized as a component of accumulated other comprehensive income (loss) if a repayment of these loans is not anticipated.

Recently Adopted Accounting Standards

Intangibles - Goodwill and Other - Internal-Use Software

In August 2018, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (a consensus of the FASB Emerging Issues Task Force). The ASU requires entities that are customers in cloud computing arrangements to defer implementation costs if they would be capitalized by the entity in software licensing arrangements under the internal-use software guidance. ASU 2018-15 is effective for all entities for annual periods, including interim periods within those annual periods, beginning after December 15, 2019. Early adoption is permitted and can be applied retrospectively or in the period of adoption. The Company early adopted ASU 2018-15 in the third quarter of 2018 on a prospective basis and it did not have a material effect on our consolidated financial statements.

Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income

In February 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (AOCI). The ASU permits entities to reclassify tax effects stranded in AOCI as a result of tax reform to retained earnings. The guidance is effective for the Company in interim and annual periods beginning in 2019. Early adoption is permitted and can be applied retrospectively or in the period of adoption. The Company early adopted the ASU during the first quarter of 2018. Because the deferred tax asset in OCI is currently subject to a full valuation allowance, there is no net reclassification amount from AOCI to retained earnings during the year. However, our adoption of the principle will enable us to apply a 21% rate to the deferred tax asset when the valuation allowance no longer applies.

Compensation—Stock Compensation (Topic 718)

In May 2017, the FASB issued ASU 2017-09, Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting. This update provides guidance on determining which changes to the terms and conditions of share-based payment awards require an entity to apply modification accounting under Topic 718. ASU 2017-09 was effective for all entities for annual periods, including interim periods within those annual periods, beginning after December 15, 2017. The Company adopted ASU 2017-09 in the first quarter of 2018 and it did not have a material effect on our consolidated financial statements.

Compensation - Retirement Benefits

In March 2017, the FASB issued ASU 2017-07, Compensation - Retirement Benefits (Topic 715), Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost (ASU 2017-07). This update requires that the service cost component of net periodic pension and other postretirement benefits (OPEB) (income) expense be presented in the same income statement line item as other employee compensation costs, while the remaining components of net periodic pension and OPEB (income) expense are to be presented outside operating income. Retrospective application of the change in income statement presentation is required, while the change in capitalized benefit cost is to be applied prospectively. ASU 2017-01 was effective for public business entities for fiscal years beginning after December 15, 2017. The Company’s adoption of this guidance in the first quarter of 2018 resulted in the reclassification of non-service cost components in the amount of $2.8 million and $3.5 million for the years ended December 31, 2017 and 2016, respectively, from “Selling, general and administrative” expense to “Other expense, net”. The Company adopted this guidance using a practical expedient which permitted the Company to use the amounts disclosed in its pension and other postretirement benefit plan note for the prior comparative periods as the estimation basis for applying the retrospective presentation requirements. The adoption and resulting reclassification had no impact on the Company's net income (loss), earnings per common share, earnings per unit or cash flows.

Statement of Cash Flows, Restricted Cash

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. Under this new guidance, entities will be required to show the changes in the total of cash, cash equivalents, restricted cash and restricted cash equivalents in the statement of cash flows. As a result, entities will no longer present transfers between cash and cash equivalents and restricted cash and restricted cash equivalents in the statement of cash flows. When cash, cash equivalents, restricted cash and restricted cash equivalents are presented in more than one line item on the balance sheet, a reconciliation of the totals in the statement of cash flows to the related captions in the balance sheet is required. For public business entities, the guidance was effective for fiscal years beginning after December 15, 2017, and interim periods within those years. The Company adopted ASU 2016-18 in the first quarter of 2018 and disclosure revisions have been made retrospectively for the periods presented on the consolidated statements of cash flows.

Recognition and Measurement of Financial Assets and Financial Liabilities

In January 2016, the FASB issued ASU 2016-01, Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The update primarily affects the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. In addition, the FASB clarified guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. For public companies, the amendments in this update were effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company adopted ASU 2016-01 prospectively in the first quarter of 2018 and it did not have a material effect on our consolidated financial statements.

Revenue Recognition

In May 2014, the FASB issued ASU 2014-09 (Topic 606), Revenue from Contracts with Customers, to clarify the principles used to recognize revenue for all entities. ASU 2014-09 provides new guidance related to the core principle that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new guidance results in enhanced disclosures about revenue, provides guidance for transactions that were not previously addressed comprehensively, and improves guidance for multiple element arrangements. During 2016, the FASB issued additional ASUs to clarify certain aspects of ASU 2014-09, including ASU 2016-08, Principal versus Agent Considerations (Reporting Revenue Gross versus Net), in March 2016, and ASU 2016-10, Identifying Performance Obligations and Licensing, in April 2016.

The Company adopted this standard effective January 1, 2018, applying the modified retrospective method, and determined that the standard did not have a material impact to the amount or timing of revenue recognized for its revenue arrangements. Additionally, the Company did not record any cumulative effect adjustment as of the date of adoption. The most significant impact of the standard relates to the addition of disclosures relating to contracts that contain performance obligations extending beyond the end of the reporting period, and quantifying and disclosing methods of transferring services as it pertains to satisfying performance obligations. See Note 26.

Adoption of the standards related to revenue recognition had no impact to cash from or used in operating, financing, or investing activities on the consolidated statements of cash flows, and had no material impact on the Company’s processes and controls.

Future Adoption of Accounting Standards

Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities

In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. This ASU refines and expands hedge accounting for both financial (e.g., interest rate) and commodity risks. Its provisions create more transparency around how economic results are presented, both on the face of the financial statements and in the footnotes. It also makes certain targeted improvements to simplify the application of hedge accounting guidance. ASU 2017-12 is effective for public business entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption, including adoption in an interim period, is permitted. The Company will adopt this standard effective January 1, 2019, and believes the adoption of ASU 2017-12 will not have a material effect on our consolidated financial statements.

Simplifying the Test for Goodwill Impairment

In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. This update eliminates step two of the goodwill impairment test, and specifies that goodwill impairment should be measured by comparing the fair value of a reporting unit with its carrying amount. Additionally, the amount of goodwill allocated to each reporting unit with a zero or negative carrying amount of net assets should be disclosed. For public business entities that are SEC filers, this ASU is effective for annual and any interim impairment tests for periods beginning after December 15, 2019. Early adoption is allowed for all entities as of January 1, 2017, for annual and any interim impairment tests occurring after January 1, 2017. The Company believes the adoption of ASU 2017-04 will not have a material effect on our consolidated financial statements.

Improvements to Nonemployee Share-Based Payment Accounting

In June 2018, the FASB issued ASU 2018-07, Improvements to Nonemployee Share-Based Payment Accounting, which more closely aligns the accounting for employee and nonemployee share-based payments. The standard will be effective for interim and annual reporting periods beginning after December 15, 2018. Early adoption is permitted, but no earlier than an entity’s adoption date of Topic 606. The Company will adopt this standard on January 1, 2019, and does not expect the provisions of ASU 2018-07 to have a material impact on our consolidated financial statements.

Fair Value Measurement - Disclosure Framework

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. This ASU modifies the disclosure requirements on fair value measurements. The ASU removes the requirement to disclose: the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy; the policy for timing of transfers between levels; and the valuation processes for Level 3 fair value measurements. The ASU requires disclosure of changes in unrealized gains and losses for the period included in other comprehensive income (loss) for recurring Level 3 fair value measurements held at the end of the reporting period and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. For public business entities, this guidance is effective for fiscal years beginning after December 15, 2019 with early adoption permitted. The Company is currently evaluating the effect that this guidance will have on our consolidated financial statements.

Collaborative Arrangements

In November 2018, the FASB issued ASU 2018-18, Collaborative Arrangements (Topic 808): Clarifying the interaction between Topic 808 and Topic 606. ASU 2018-18 clarifies that certain transactions between participants in a collaborative arrangement should be accounted for under ASC 606 when the counterparty is a customer and precludes an entity from presenting consideration from a transaction in a collaborative arrangement as revenue from contracts with customers if the counterparty is not a customer for that transaction. For public business entities, these amendments are effective for fiscal years beginning after December 15, 2019, and interim periods therein. The Company believes the adoption of ASU 2018-18 will not have a material effect on our consolidated financial statements.

Lease Accounting

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which requires lessees to recognize leases on-balance sheet and disclose key information about leasing arrangements. Topic 842 was subsequently amended by ASU 2018-01, Land Easement Practical Expedient for Transition to Topic 842; ASU 2018-10, Codification Improvements to Topic 842, Leases; and ASU 2018-11, Targeted Improvements. The new standard establishes a right-of-use model (ROU) that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months. Leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the consolidated statements of operations.

The new standard is effective on January 1, 2019 with early adoption permitted. We will adopt the new standard on its effective date. A modified retrospective transition approach is required, applying the new standard to all leases existing at the date of initial application. An entity may choose to use either (1) its effective date or (2) the beginning of the earliest comparative period presented in the financial statements as its date of initial application. If an entity chooses the second option, the transition requirements for existing leases also apply to leases entered into between the date of initial application and the effective date. The entity must also recast its comparative period financial statements and provide the disclosures required by the new standard for the comparative periods. We will use the effective date as our date of initial application. Consequently, financial information will not be updated and the disclosures required under the new standard will not be provided for dates and periods before January 1, 2019.

The new standard provides a number of optional practical expedients in transition to both lessors and lessees. We will elect the “package of practical expedients” which permits us not to reassess our prior conclusions about lease identification, lease classification and initial direct costs. We will elect the practical expedient to continue to apply current accounting for all land easements that exist or expire before the effective date of the standard. We will not elect the use-of-hindsight practical expedient. We will elect the short-term lease recognition exemption for all leases that qualify. This means, for those leases that qualify, we will not recognize ROU assets or lease liabilities for existing short-term leases of those assets in transition. We also will make an accounting policy election to not separate lease and non-lease components for all of our leases.

While we continue to assess all of the effects of adoption, we currently believe the most significant effects on leasing arrangements where we are the lessee relate to (1) the recognition of new ROU assets and lease liabilities on our balance sheet for equipment and warehouses and (2) providing new disclosures about our leasing activities. We do not expect this standard to have an impact on our existing sale leaseback or capital lease arrangements.

On adoption, the Company's estimate for finance lease obligations is $40.8 million , with corresponding ROU assets of $39.2 million based on the present value of the remaining minimum rental payments under current leasing arrangements for existing finance leases. Additionally, we expect to recognize an additional operating lease obligation ranging from $77.6 million to $80.6 million, with corresponding ROU assets ranging from $74.3 million to $77.3 million based on the present value of the remaining minimum rental payments under current leasing arrangements for existing operating leases.

ASU 2016-02, Leases, also requires lessors to classify leases as a sales-type, direct financing, or operating lease. A lease is a sales-type lease if any one of five criteria are met, each of which indicate the lease, in effect, transfers control of the underlying asset to the lessee. If none of those five criteria are met, but two additional criteria are both met, indicating that the lessor has transferred substantially all the risks and benefits of the underlying asset to the lessee and a third party, the lease is a direct financing lease. All leases that are not sales-type or direct financing leases are operating leases.

For leasing arrangements where the Company is the lessor we will elect the practical expedient to present all funds collected from lessees for sales and other similar taxes net of the related sales tax expense. Also, while the the new standard identifies common area maintenance as a non-lease component of our real estate lease contracts, we will apply the practical expedient to account for our real estate leases and associated common area maintenance service components as a single, combined operating lease component. Consequently, we do not expect the new standard's changed guidance on contract components to significantly affect our financial reporting.

While we continue to evaluate certain aspects of the new standard, we do not expect the new standard will have a material effect on our accounting for leasing arrangements where the Company is the lessor.