Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2019

Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The consolidated financial statements include the results of wholly-owned and partially-owned subsidiaries in which the Company has a controlling interest with all significant intercompany accounts and transactions eliminated in consolidation.

Unaudited Interim Financial Information

The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP) for interim financial information and Article 10 of Regulation S-X issued by the U.S. Securities and Exchange Commission (SEC). Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, the interim financial information reflects all adjustments of a normal recurring nature, necessary for a fair statement of the Company’s financial position at September 30, 2019, the results of operations and comprehensive income (loss) for the three and nine months ended September 30, 2019 and 2018, respectively, and the cash flows for the nine months ended September 30, 2019 and 2018, respectively. The consolidated balance sheet at December 31, 2018 has been derived from the audited financial statements at that date, but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements. This Form 10-Q should be read in conjunction with the consolidated financial statements and accompanying notes contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.

Use of Estimates

The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates, and such differences may be material to the consolidated financial statements.

Reconciliation of Cash and Cash Equivalents and Restricted Cash as Presented on the Statements of Cash Flows

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the consolidated balance sheets that sum to the total of the same such amounts shown in the consolidated statements of cash flows (in millions):



	September 30, 2019		December 31, 2018
Cash and cash equivalents	$	106	$	101
Restricted cash - current	—		4
Restricted cash	13		18
Cash, cash equivalents and restricted cash shown in the consolidated statements of cash flows	$	119	$	123

Leases

The Company determines if an arrangement is a lease at contract inception by evaluating if the contract conveys the right to control the use of an identified asset during the period of use. A right-of-use (ROU) asset represents the Company's right to use an identified asset for the lease term and lease liability represents the Company's obligation to make payments as set forth in the lease arrangement. ROU assets and lease liabilities are included on the Company's consolidated balance sheets beginning January 2019 and are recognized based on the present value of the future lease payments at lease commencement date. The interest rate used to determine the present value of the future lease payments is the Company's incremental borrowing rate, because the interest rate implicit in the lease is generally not readily determinable. A ROU asset initially equals the lease liability, adjusted for any lease payments made prior to lease commencement and any lease incentives. All leases are recorded on the consolidated balance sheets except for leases with an initial term of less than 12 months. All of the Company's leases are operating leases. Lease expense is generally recognized on a straight-line basis over the lease term and is recorded in project expense or general and administrative expense in the consolidated statements of operations.

The Company has lease agreements with lease and non-lease components. Non-lease components primarily include payments for maintenance. The Company combines lease components and non-lease components to account for them together as a single lease component. As such, lease payments represent payments on both lease and non-lease components.

Sales Tax Receivable

Sales tax receivable includes consumption or sales taxes paid by the Company most of which relate to exempt construction costs at Tsugaru and are expected to reimbursed by the local Japan tax authorities.

Development Expenses

Development expenses include changes to contingent consideration related to agreed purchase price adjustments in certain acquisitions. See Note 13, Fair Value Measurements for additional discussion of these changes.

Recently Adopted Accounting Standards

In August 2017, the Financial Accounting Standards Board (FASB) issued ASU 2017-12, Targeted Improvements to Accounting for Hedging Activities (ASU 2017-12), which amends the presentation and disclosure requirements and changes how companies assess effectiveness. The amendments are intended to more closely align hedge accounting with companies’ risk management strategies, simplify the application of hedge accounting, and increase transparency as to the scope and results of hedging programs. ASU 2017-12 is effective for annual periods beginning after December 15, 2018, including interim periods within those periods. The Company adopted the standard on January 1, 2019 using a modified retrospective method and recorded an immaterial cumulative effect adjustment to the opening balance of accumulated income (loss) as of January 1, 2019. The adoption did not have a material impact on the Company's consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (ASU 2016-02 or ASC 842), as amended by subsequent standards updates, which requires lessees to recognize ROU assets and lease liabilities, for all leases, with the exception of short-term leases, at the commencement date of each lease. Under the new guidance, lessor accounting is largely unchanged. ASU 2016-02 simplifies the accounting for sale and leaseback transactions primarily because lessees must recognize lease assets and liabilities.

The Company adopted the new standard effective January 1, 2019 using a modified retrospective method and did not restate comparative periods. The most significant impact of the adoption was the initial recognition of $65 million of ROU assets and $79 million of lease liabilities for operating leases primarily related to corporate offices and land leases in Japan. The difference between the ROU assets and lease liabilities was primarily due to adjustments to the ROU assets to offset a sublease liability and an intangible leasehold interest liability acquired as part of a past business combination. There was no cumulative-effect adjustment for the adoption and the adoption did not have a significant effect on the Company's consolidated statements of operations. The Company elected the practical expedient related to land easements, allowing the Company to carry forward its accounting treatment for land easements on certain existing agreements as its intangible assets. The Company elected to not separate lease and non-lease components and instead treats them as a single lease component. The Company also elected to not record short-term leases with an initial term of 12 months or less on its consolidated balance sheets. Since the Company did not elect the package of practical expedients to carry forward historical lease classification, the Company reassessed its PSAs and land arrangements and determined that all PSAs and the majority of land arrangements were not accounted for as leases under the new standard. The Company further reassessed the PSAs under ASC 815, Derivatives and Hedging (ASC 815) and ASC 606, Revenue from Contracts with Customers (ASC 606) and determined all PSAs previously accounted for under the previous U.S. GAAP leasing standard, ASC 840, Leases (ASC 840) should be accounted for under ASC 606. The reassessment of the PSAs did not have a material impact to the Company's consolidated financial statements. See Note 3, Revenue and Note 11, Leases for further details.

Recently Issued Accounting Standards

Except for the evaluation of recently adopted accounting standards set forth above and the evaluation of recently issued accounting standards set forth below, there have been no changes to the Company's evaluation of other recently issued accounting standards not yet adopted disclosed in Note 2, Summary of Significant Accounting Policies, in the Notes to Consolidated Financial Statements, contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.

In April 2019, the FASB issued ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments (ASU 2019-04), that clarifies and improves areas of guidance related to the recently issued standards on credit losses (ASU 2016-13), hedging (ASU 2017-12), and recognition and measurement of financial instruments (ASU 2016-01). The amendments generally have the same effective dates as their related standards. If already adopted, the amendments of ASU 2016-01 and ASU 2016-13 are effective for fiscal years beginning after December 15, 2019 and the amendments of ASU 2017-12 are effective as of the beginning of the Company’s next annual reporting period. Early adoption is permitted. As discussed above, the Company adopted ASU 2017-12 on January 1, 2019 and does not expect the amendments of ASU 2019-04 will have a material impact on the its consolidated financial statements. The Company continues to evaluate the impact of ASU 2016-13 and will consider the amendments of ASU 2019-04 as part of that process.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (ASU 2016-13), which requires the measurement of all expected credit losses for financial assets including trade receivables held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. In November 2018, the FASB issued ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments - Credit Losses (ASU 2018-19). ASU 2018-19 clarifies that receivables from operating leases are accounted for using the lease guidance and not as financial instruments. In May 2019, the FASB issued ASU 2019-05, Targeted Transition Relief (ASU 2019-05), which amends Topic 326. ASU 2019-05 provides an option to irrevocably elect to measure certain individual financial assets at fair value instead of amortized cost. ASU 2016-13 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company continues to evaluate the impact of ASU 2016-13 and will consider the amendments of ASU 2019-05 as part of that process.