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Build-to-Suit Lease Obligation
3 Months Ended
Mar. 31, 2015
Build To Suit Lease Obligation [Abstract]  
Build-to-Suit Lease Obligation

7. Build-to-Suit Lease Obligation

In February 2015, the Company entered into a lease for an approximately 68,000 square foot manufacturing facility in Bothell, Washington (the “Bothell Lease”), which lease commenced in March 2015. The Company is responsible for the leasehold improvements required to remodel the facility and bears the majority of the construction risk. ASC 840-40, Leases – Sale-Leaseback Transactions, requires the Company to be considered the owner of the building solely for accounting purposes during the construction period, even though it is not the legal owner. In connection with the accounting for this transaction, the Company capitalized $9.9 million as a build-to-suit property within property and equipment, net and recognized a corresponding build-to-suit lease obligation for the same amount.

 

The Company bifurcates its lease payments into a portion allocated to the building and a portion allocated to the parcel of land on which the building has been built. The portion of the lease payments allocated to the land is treated for accounting purposes as operating lease payments, and therefore is recorded as rent expense in the statement of operations. The portion of the lease payments allocated to the building is further bifurcated into a portion allocated to interest expense and a portion allocated to reduce the build-to-suit lease obligation.

At March 31, 2015, $0.3 million of the build-to-suit lease obligation, representing the expected reduction in the liability over the next twelve months, is classified as a current liability and the remaining $9.5 million is classified as a non-current liability on the balance sheet.