The significant accounting policies and estimates used in preparation of the condensed consolidated financial statements are described in the Company’s audited financial statements as of and for the year ended December 31, 2018, and the notes thereto, which are included in the Annual Report. There have been no material changes to the Company’s significant accounting policies during the nine months ended September 30, 2019 except for the adoption of the new lease accounting standard discussed in Note 9, Leases.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting periods. Significant estimates and assumptions reflected in these consolidated financial statements include, but are not limited to, revenue recognition and the accrual of research and development expenses. Estimates are periodically reviewed in light of changes in circumstances, facts and experience. Actual results could differ from the Company’s estimates.

Basic net loss per share is computed using the weighted average number of common shares outstanding during the period. Diluted net loss per share is computed using the sum of the weighted average number of common shares outstanding during the period and, if dilutive, the weighted average number of potential shares of common stock, including the assumed exercise of stock options and unvested restricted stock.

The restricted stock units granted by the Company entitle the holder of such awards to ordinary cash dividends paid to substantially all holders of the Company’s common stock, as if such shares were outstanding common shares at the time of the dividend. The dividends are paid in cash or shares of common stock when the applicable restricted stock unit vests. However, the unvested restricted stock units are not entitled to share in the residual net assets (deficit) of the Company. Accordingly, in periods in which the Company reports a net loss attributable to common stockholders, diluted net loss per share attributable to common stockholders is the same as basic net loss per share attributable to common stockholders, since dilutive common shares are not assumed to have been issued if their effect is anti-dilutive.

The following potential common shares, presented based on amounts outstanding at each period end, were excluded from the calculation of diluted net loss per share attributable to common stockholders for the periods indicated because including them would have had an anti-dilutive effect:

	Three and Nine Months Ended September 30,
	2019		2018
Stock options to purchase common stock		8,258,031		7,444,040
Unvested restricted stock units		145,900		289,908
Shares issuable under ESPP		13,171		44
Total common stock equivalents		8,417,102		7,733,992

The Company evaluates arrangements at inception to determine if an arrangement is or contains a lease. Operating lease assets represent the Company’s right to use an underlying asset for the lease term and operating lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease assets and liabilities are recognized at the commencement date of the lease based upon the present value of lease payments over the lease term. When determining the lease term, the Company includes options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. The Company uses an incremental borrowing rate that the Company would expect to incur for a fully collateralized loan over a similar term under similar economic conditions to determine the present value of the lease payments. The lease payments used to determine the Company’s operating lease assets may include lease incentives and stated rent increases and are recognized in the Company’s operating lease assets in the Company’s condensed consolidated balance sheets. Lease expense for operating lease payments is recognized on a straight-line basis over the term of the lease. Variable lease payments are recognized as the associated obligation is incurred.

Restructuring costs are comprised of severance costs related to workforce reductions. The Company recognizes restructuring charges when the liability is incurred. Employee termination benefits are accrued at the date management has committed to a plan of termination and employees have been notified of their termination dates and expected severance payments.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), (“Topic 842”), which establishes principles that lessees and lessors shall apply to report useful information to users of financial statements about the amount, timing and uncertainty of cash flows arising from a lease. The most notable change is lessees recognizing an asset and liability on their balance sheet for operating leases. In 2018, the FASB issued ASU 2018-01, and ASU 2018-11, which collectively adds two practical expedients, provides a second modified retrospective transition method which does not require retrospective adjustment of prior periods, and provides certain narrow scope improvements to the new lease guidance. ASU 2016-02 and the amending ASUs are effective for the Company for annual periods beginning after December 15, 2018 and interim periods therein, with early adoption permitted.

The Company adopted the new guidance as of January 1, 2019 using the modified retrospective transition approach with no restatement of prior periods or cumulative adjustment to accumulated deficit. Upon adoption, the Company elected the package of transition practical expedients, which allowed the Company to carry forward prior conclusions related to whether any expired or existing contracts are or contain leases, the lease classification for any expired or existing leases and initial direct costs for existing leases. The Company also made an accounting policy election not to recognize leases with an initial term of 12 months or less within its condensed consolidated balance sheets and to recognize those lease payments on a straight-line basis in its condensed consolidated statements of operations and comprehensive loss over the lease term. Upon adoption of the new leasing standards, the Company recognized an operating lease asset of approximately $13,737 and a corresponding operating lease liability of approximately $24,497, which are included in the Company’s condensed consolidated balance sheet. The adoption of the new leasing standards did not have any impact on the Company’s condensed consolidated statements of operations and comprehensive loss. The impact to the Condensed Consolidated Balance Sheets for the opening balances is as follows (in thousands):

	December 31, 2018		Impact of adoption of ASC 842			January 1, 2019
Operating lease assets	$	—	$	13,737		$	13,737
Accrued expenses and other current liabilities		15,207		(1,768	)		13,439
Operating lease liabilities		—		4,285			4,285
Lease incentive obligation, net of current portion		6,776		(6,776	)		—
Deferred rent		2,216		(2,216	)		—
Operating lease liabilities, net of current portion		—		20,212			20,212

In June 2018, the FASB issued ASU 2018-07, “Compensation – Stock Compensation (Topic 718)” (“ASU 2018-07”). ASU 2018-07 simplifies the accounting for nonemployee share-based payment transactions. This ASU is effective for public entities for interim and annual reporting periods beginning after December 15, 2018. The Company adopted the ASU effective January 1, 2019, the impact of adoption of this standard was immaterial to the Company’s condensed consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-13, Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”). This standard eliminates, adds and modifies certain disclosure requirements for fair value measurements as part of its disclosure framework project. ASU 2018-13 is effective for annual reporting periods beginning after December 15, 2019 and interim periods within those annual periods and early adoption is permitted. The Company is currently evaluating the impact of its adoption of ASU 2018-13 on its condensed consolidated financial statements.

In November 2018 the FASB issued ASU No. 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606. This standard makes targeted improvements for collaborative arrangements as follows:

•

Clarifies that certain transactions between collaborative arrangement participants should be accounted for as revenue under ASC 606, Revenue from Contracts with Customers, when the collaborative arrangement participant is a customer in the context of a unit of account. In those situations, all the guidance in ASC 606 should be applied, including recognition, measurement, presentation and disclosure requirements;

•

Adds unit-of-account guidance to ASC 808, Collaborative Arrangements, to align with the guidance in ASC 606 (that is, a distinct good or service) when an entity is assessing whether the collaborative arrangement or a part of the arrangement is within the scope of ASC 606; and

•

Requires that in a transaction with a collaborative arrangement participant that is not directly related to sales to third parties, presenting that transaction together with revenue recognized under ASC 606 is precluded if the collaborative arrangement participant is not a customer.

This standard will be effective on January 1, 2020; however, early adoption is permitted. A retrospective transition approach is required for either all contracts or only for contracts that are not completed at the date of initial application of ASC 606, with a cumulative adjustment to opening retained earnings. The Company is currently evaluating the potential impact that this standard may have on its consolidated financial position and results of operations.