Leases (Tables)

9 Months Ended

Sep. 30, 2020

Lease expense [Abstract]

Details of Impairment of Long-Lived Assets Held and Used by Asset

5. Impairments

The Company evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company vacated its leased facility in Mountain View, California during the three months ended September 30, 2020, resulting in its classification as a separate asset group. This facility was previously used by the Intelligent Audio product line, which is included within the Audio segment. Based on current market conditions, in particular the impact of the COVID-19 pandemic, the Company determined that the carrying amount of the related operating lease right-of-use asset was not recoverable through undiscounted future cash flows, which included estimated sublease proceeds. The fair value of the operating lease right-of-use asset was determined by an estimate of discounted future cash flows that included estimated sublease proceeds and the determination of an appropriate discount rate based on market participant assumptions. The fair value measurements of operating lease right-of-use assets are based on significant unobservable inputs, and thus represent Level 3 inputs. Based on the excess of the carrying amount of the operating lease right-of-use asset over its fair value, the Company recorded an impairment loss of $5.4 million within Impairment charges in Operating expenses during the three months ended September 30, 2020.

Leases not yet Commenced - As of September 30, 2020, the Company has an operating lease for a research and development facility in Santa Clara, California that has not yet commenced with fixed lease payments of approximately $5 million. The lease is expected to commence in the first quarter of fiscal 2021 with a lease term of approximately five years. The Company plans to sublet a significant portion of the facility due to the restructuring of the Intelligent Audio product line. During the three months ended September 30, 2020, the Company determined a loss was probable and reasonably estimable under ASC 450, Contingencies, based on its current plans and the continuing negative impact of the COVID-19 pandemic on market conditions. The estimated loss was determined by comparing the estimated carrying amount of the operating lease right-of-use asset to be recognized for the sublet portion of the facility upon lease commencement to an estimate of discounted future cash flows that included estimated sublease proceeds and the determination of an appropriate discount rate based on market participant assumptions. These measurements are based on significant unobservable inputs, and thus represent Level 3 inputs. The Company recorded an estimated loss of $2.2 million within Impairment charges in Operating expenses during the three months ended September 30, 2020. The corresponding estimated liability, which will reduce the operating lease right-of-use asset upon lease commencement, is recorded in Other liabilities on the Consolidated Balance Sheets as of September 30, 2020.

If actual results differ from estimated amounts, additional impairment charges may be recorded in the future.