Summary of Significant Accounting Policies (Tables)

12 Months Ended

Dec. 31, 2019

Information about the Company’s financial assets and liabilities measured at fair value on a recurring basis is presented below:



		December 31, 2019
	Balance Sheet Classification	Carrying Value		Level 1		Level 2		Level 3
		(in thousands)
Liabilities:
Interest rate swaps	Accrued expenses	$	3,464	$	—	$	3,464	$	—
Interest rate swaps	Other long-term liabilities	$	10,550	$	—	$	10,550	$	—



		December 31, 2018
	Balance Sheet Classification	Carrying Value		Level 1		Level 2		Level 3
		(in thousands)
Assets:
Cash equivalents	Cash and cash equivalents	$	53,293	$	53,293	$	—	$	—

Opening and Closing Balances of the Company's Contract Assets and Deferred Revenue

The opening and closing balances of the Company’s contract assets and deferred revenue are as follows:



	Contract assets, current portion⁽¹⁾		Contract assets⁽²⁾		Deferred revenue, current portion		Deferred revenue
	(in thousands)
January 1, 2019	$	145	$	2,845	$	12,322	$	18,084
December 31, 2019	496		3,216		14,991		27,852
Increase	$	351	$	371	$	2,669	$	9,768

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(1)	Contract assets, current portion are included within other current assets of the Company’s consolidated balance sheet as of December 31, 2019.


(2)	Contract assets are included within other assets of the Company’s consolidated balance sheet as of December 31, 2019.

Portfolio Energy Credits

Amortization of PECs is recorded within cost of revenue on the consolidated statements of comprehensive income (loss) when PECs are utilized in operations. A summary of the Company’s PECs as of the end of each period presented is as follows:



	December 31,
	2019			2018
	(in thousands)
PECs, gross	$	5,352		$	3,649
Accumulated amortization	(5,352		)	(3,508		)
PECs, net	$	—		$	141

Cumulative Effect of the Changes Made to Company's Balance Sheet and Summary of the Effects of the Adoptions on the Consolidated Financial Statements

The below tables summarize the effects of adopting ASC 606 on the following consolidated financial statement line items:



Balance Sheets	As Reported December 31, 2019		Adjustment Due to Adoption of ASC 606			As If Presented Under Prior Standard
	(in thousands)
Other current assets	$	3,817	$	(887	)	$	2,930
Total current assets	$	59,040	$	(887	)	$	58,153
Deferred income taxes	$	114,372	$	97		$	114,469
Other assets	$	45,785	$	3,390		$	49,175
Total assets	$	1,773,743	$	2,600		$	1,776,343

Deferred revenue, current portion	$	14,991	$	(1,545	)	$	13,446
Total current liabilities	$	113,930	$	(1,545	)	$	112,385
Deferred revenue	$	27,852	$	6,097		$	33,949
Total liabilities	$	1,146,098	$	4,552		$	1,150,650

Retained earnings	$	2,420	$	(451	)	$	1,969
Total Switch, Inc. stockholders’ equity	$	207,451	$	(451	)	$	207,000
Noncontrolling interest	$	420,194	$	(1,501	)	$	418,693
Total stockholders’ equity	$	627,645	$	(1,952	)	$	625,693
Total liabilities and stockholders’ equity	$	1,773,743	$	2,600		$	1,776,343



Statements of Comprehensive Income (Loss)	As Reported Year Ended December 31, 2019		Adjustment Due to Adoption of ASC 606			As If Presented Under Prior Standard
	(in thousands, except per share data)
Revenue	$	462,310	$	(1,898	)	$	460,412
Cost of revenue	$	242,679	$	(1,066	)	$	241,613
Gross profit	$	219,631	$	(832	)	$	218,799
Income from operations	$	76,927	$	(832	)	$	76,095
Income before income taxes	$	34,255	$	(832	)	$	33,423
Income tax expense	$	2,713	$	(44	)	$	2,669
Net income	$	31,542	$	(788	)	$	30,754
Net income attributable to noncontrolling interest	$	22,625	$	(561	)	$	22,064
Net income attributable to Switch, Inc.	$	8,917	$	(227	)	$	8,690

Basic net income per share	$	0.12	$	0.00		$	0.12
Diluted net income per share	$	0.11	$	0.00		$	0.11



Statements of Cash Flows	As Reported Year Ended December 31, 2019			Adjustment Due to Adoption of ASC 606			As If Presented Under Prior Standard
	(in thousands)
Cash flows from operating activities:
Net income	$	31,542		$	(788	)	$	30,754
Deferred income taxes	$	2,713		$	(44	)	$	2,669
Other current assets	$	(545	)	$	(53	)	$	(598	)
Other assets	$	3,447		$	(1,013	)	$	2,434
Deferred revenue	$	12,437		$	1,898		$	14,335
Net cash provided by operating activities	$	209,413		$	—		$	209,413

The cumulative effect of the changes to the Company’s consolidated balance sheet as of January 1, 2019 from the adoption of ASC 842 was as follows:



	December 31, 2018		Adjustment Due to Adoption of ASC 842			January 1, 2019
	(in thousands)
Assets:
Operating lease ROU assets⁽¹⁾	$	—	$	35,486		$	35,486
Prepaid expenses	$	6,781	$	(419	)	$	6,362
Liabilities:
Accrued expenses	$	9,778	$	(722	)	$	9,056
Operating lease liability, current portion	$	—	$	4,455		$	4,455
Operating lease liability	$	—	$	31,334		$	31,334

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(1)	Operating lease ROU assets are included within other assets on the Company’s consolidated balance sheet as of December 31, 2019

The cumulative effect of the changes made to the Company’s consolidated balance sheet as of January 1, 2019 from the adoption of ASC 606 was as follows:



	December 31, 2018		Adjustment Due to Adoption of ASC 606			January 1, 2019
	(in thousands)
Assets:
Other current assets	$	2,332	$	940		$	3,272
Other assets	$	17,050	$	(2,377	)	$	14,673
Deferred income taxes	$	28,550	$	(53	)	$	28,497
Liabilities:
Deferred revenue, current portion	$	10,800	$	1,522		$	12,322
Deferred revenue	$	22,260	$	(4,176	)	$	18,084
Equity:
Retained earnings	$	2,693	$	224		$	2,917
Noncontrolling interest	$	565,142	$	940		$	566,082