SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Cash Equivalents

Cash equivalents consist of highly liquid temporary cash investments with maturities no greater than three months at the time of purchase.

Accounts Receivable and Allowance for Doubtful Accounts

The Company's accounts receivable is stated at historical carrying value net of write-offs and allowance for doubtful accounts. The Company assesses the collectability of receivables and records adjustments to an allowance for doubtful accounts, which is recorded as an offset to accounts receivable, to cover the risk of credit losses. Any allowance is based on historical and other factors that predict collectability, including write-offs, recoveries and the evaluation and monitoring of credit quality. No allowance for doubtful accounts was required at December 31, 2018 or 2017.

The following table sets forth the components of Receivables - Trade and Other at December 31 (in millions):



	2018		2017
Trade	$	231.7	$	195.8
Income tax	12.0		8.0
Other	7.5		9.0
Total receivables - trade and other	$	251.2	$	212.8

Property and Depreciation

The Company provides depreciation for financial reporting purposes under the straight-line method over the asset’s estimated useful life from the date the asset is placed into service until it is sold or becomes fully depreciated. Estimated useful lives and salvage values are presented below:



	Life (in years)	Salvage Value
Jack-up drilling rigs:
Hulls	25 to 35	10	%
Legs	25 to 30	10	%
Quarters	25	10	%
Drilling equipment	2 to 25	0% to 10%

Drillships:
Hulls	35	10	%
Drilling equipment	2 to 25	0% to 10%

Drill pipe and tubular equipment	4	10	%
Other property and equipment	3 to 30	various

Expenditures for new property or enhancements to existing property are capitalized and depreciated over the asset’s estimated useful life. As assets are sold or retired, property cost and related accumulated depreciation are removed from the accounts, and any resulting gain or loss is included in results of operations.

Expenditures for maintenance and repairs are charged to expense as incurred and totaled $139 million in 2018, $113 million in 2017 and $118 million in 2016.

Impairment of Long-lived Assets

The Company reviews the carrying values of long-lived assets for impairment whenever events or changes in circumstances indicate their carrying amounts may not be recoverable. For assets held and used, the Company determines recoverability by evaluating the undiscounted estimated future net cash flows based on projected day rates, operating costs, capital requirements and utilization of the asset under review. When the impairment of an asset is indicated, the Company measures the amount of impairment as the amount by which the asset’s carrying amount exceeds its estimated fair value. The Company measures fair value by estimating discounted future net cash flows under various operating scenarios (an income approach) and by assigning probabilities to each scenario in order to determine an expected value. The lowest level of inputs the Company uses to value assets held and used in the business are categorized as “significant unobservable inputs,” which are Level 3 inputs in the fair value hierarchy. For assets held for sale, the Company measures fair value based on equipment broker quotes, less anticipated selling costs, which are considered Level 3 inputs in the fair value hierarchy.

Subsequent to the October 2018 announcement of the proposed combination with Ensco, the Company conducted an impairment test of our assets; however, the test resulted in no impairment as the estimated undiscounted cash flows from the assets exceeded the assets' carrying values.

During the fourth quarter of 2017, the Company conducted an impairment test of its assets; however, the tests resulted in no impairment as the estimated undiscounted cash flows from the assets exceeded the assets' carrying values.

In 2016, the Company conducted an impairment test of its assets and determined that the carrying values for five of its jack-up drilling units aggregating $43.6 million were not recoverable and as a result, the Company recognized a non-cash impairment charge of $34.3 million in 2016. The Company measured fair values using the income approach described above. The fair value estimates required the Company to use significant unobservable inputs, which are internally developed assumptions not observable in the market, including assumptions related to future demand for drilling services, estimated availability of rigs and future day rates, among others. The impairments recognized in 2016 on the jack-up rigs are included in jack-up operations in the segment information in Note 14. Impairment charges are included in Material charges and other operating items on the Consolidated Statements of Operations.

Share-based Compensation

The Company generally recognizes compensation cost for employee share-based awards on a straight-line basis over a 36-month service period. For employees who are retirement-eligible at the grant date or who will become retirement-eligible within six months of the grant date, compensation cost is generally recognized over a minimum period of six months. Generally, compensation cost for employees who become retirement eligible after six months following the grant date but before the maximum service period which is typically 36 months is amortized over the period from the grant date to the date the employee meets the retirement eligibility requirements.

Fair value of RSAs and RSUs awarded to employees is based on the average of the high and low market price of the shares on the date of grant. Prior to January 1, 2017, compensation cost was recognized for awards that were expected to vest and were adjusted in subsequent periods if actual forfeitures differed from estimates. Pursuant to the adoption of ASU No. 2016-09 as of January 1, 2017, the Company no longer estimates forfeitures, but rather adjusts its compensation costs in the period that actual forfeitures occur.

Non-employee directors may annually elect to receive either Directors RSUs or Directors ND RSUs. Both Directors RSUs and Directors ND RSUs vest at the earlier of the first anniversary of the grant date or the next annual meeting of shareholders following the grant date. Directors ND RSUs are settled on the vesting date, while Director RSUs are not settled until the director terminates service from the Board. Both Directors ND RSUs and Directors RSUs are settled in cash, shares or a combination thereof at the discretion of the Company Compensation Committee. Compensation cost for both Director RSUs and Director ND RSUs are recognized over the service period which is up to one year. Directors RSUs and Directors ND RSUs are accounted for under the liability method of accounting, the fair value is based on the market price of the underlying shares on the grant date, and compensation expense is adjusted for changes in fair value at each report date through the settlement date.

Performance-based awards consist of P-Units, in which the payment for 2018 awards is contingent on the Company's absolute TSR performance and relative TSR performance as measured against a group of companies selected by the Company Compensation Committee. For 2016 and 2017 awards, payment is contingent on the Company's TSR relative to the selected industry peer group. Fair value of P-Units is determined using a Monte-Carlo simulation model. P-Units may be settled in cash, shares or a combination thereof at the Company Compensation Committee's discretion. All P-Units are accounted for under the liability method of accounting. Compensation cost is generally recognized on a straight-line basis over the service period and is adjusted for changes in fair value at each report date through the end of the performance period. For P-Units granted in 2017 and 2018, the Company recognizes compensation cost on the accelerated method for those retirement eligible or who will become retirement eligible during the vesting period as such awards provide for pro-rata vesting rather than full vesting if a retirement eligible employee retires prior to the end of the 36 month service period.

Fair value of options is determined using the Black-Scholes option pricing model. The Company uses the simplified method for determining the expected life of options, because it does not have sufficient historical exercise data to provide a reasonable basis on which to estimate expected term, as permitted under US GAAP. The Company intends to share-settle options that are exercised and has therefore accounted for them as equity awards.

Fair value of SARs is determined using the Black-Scholes option pricing model. The Company uses the simplified method for determining the expected life of SARs, because it does not have sufficient historical exercise data to provide a reasonable basis on which to estimate expected term, as permitted under US GAAP. The Company has not granted any SARs since 2013. The Company intends to share-settle SARs that are exercised and has therefore accounted for them as equity awards.

Foreign Currency Transactions

A substantial majority of the Company's revenue is received in USD, which is the Company's functional currency. However, in certain countries in which the Company operates, local laws or contracts may require some payments to be received in the local currency. The Company is exposed to foreign currency exchange risk to the extent the amount of its monetary assets denominated in the foreign currency differs from its obligations in that foreign currency. In order to mitigate the effect of exchange rate risk, the Company attempts to limit foreign currency holdings to the extent they are needed to pay liabilities in the local currency.

At December 31, 2018 and 2017, the Company held Egyptian pounds in the amount of $1.7 million and $2.8 million, respectively, of which $0.7 million and $2.2 million are classified as Other Assets on the Consolidated Balance Sheets. At December 31, 2018 and 2017, the Company held Angolan Kwanza in the amount of $2.0 million and $4.3 million, respectively, of which $1.7 million and $4.3 million are classified as Other Assets on the Consolidated Balance Sheets. See the "Assets and Liabilities Measured at Fair Value on a Recurring Basis" section of Note 8 for further information.

Non-USD transaction gains and losses are recognized in “other - net” on the Consolidated Statements of Income. The Company recognized net currency exchange losses of $3.4 million, $0.4 million and $9.7 million in 2018, 2017 and 2016, respectively. In 2016, the exchange loss was primarily due to the devaluation of the Egyptian pound.

Income Taxes

Rowan recognizes deferred income tax assets and liabilities for the estimated future tax consequences of differences between the financial statement and tax basis of assets and liabilities. Valuation allowances are provided against deferred tax assets that are not likely to be realized. Interest and penalties related to income taxes are included in income tax expense.

The Company has elected the portfolio approach to release the stranded or disproportionate income tax effect in Accumulated other comprehensive income (loss) related to the pension and employee benefits plans. Under the portfolio approach, the disproportionate tax effect created by the release of the U.S. valuation allowance is reclassified from Accumulated other comprehensive income (loss) to continuing operations when the Company terminates the related plans.

The Company has not provided deferred income taxes on certain undistributed earnings of non-U.K. subsidiaries. If facts and circumstances cause a change in expectations regarding future tax consequences, the resulting tax impact could have a material effect on the Company’s consolidated financial statements.

Principles of Consolidation

The consolidated financial statements include the Company's accounts and those of its wholly-owned subsidiaries. Intercompany balances and transactions have been eliminated in consolidation. Investments in operating entities where the Company has the ability to exercise significant influence, but where it does not control operating and financial policies are accounted for using the equity method. Significant influence generally exists if the Company has an ownership interest representing between 20% and 50% of the voting stock of the investee. Under the equity method of accounting, investments are stated at initial cost and are adjusted for subsequent additional investments and the Company's proportionate share of earnings or losses and distributions. Equity in earnings of ARO, in the consolidated statements of operations, reflects the Company's proportionate share of ARO's net income, including any associated affiliate taxes. See the Note 4 for additional details related to the Company's equity method investment.

Income (Loss) Per Common Share

Basic income (loss) per share is computed by dividing net income (loss) available to common shareholders by the weighted-average number of common shares outstanding during the period. Diluted income per share includes the additional weighted effect of dilutive securities outstanding during the period, which includes RSAs, RSUs, P-Units, share options and SARs granted under share-based compensation plans. The effect of share equivalents is not included in the computation for periods in which a net loss occurs because to do so would be anti-dilutive.

A reconciliation of net income (loss) for basic and diluted income (loss) per share is set forth below (in millions):



	2018			2017		2016
Net income (loss)	$	(347.4	)	$	72.7	$	320.6
Income allocated to non-vested share awards	—			0.1		1.5
Net income (loss) - adjusted for income allocated to non-vested share awards	$	(347.4	)	$	72.8	$	322.1

A reconciliation of shares for basic and diluted income (loss) per share is set forth below (in millions):



	2018	2017	2016
Average common shares outstanding	126.9	126.1	125.3
Effect of dilutive securities - share based compensation	—	1.6	1.0
Average shares for diluted computations	126.9	127.7	126.3

Share options, SARs, RSAs, P-Units and RSUs granted under share-based compensation plans are anti-dilutive and excluded from diluted earnings per share when the hypothetical number of shares that could be repurchased under the treasury stock method exceeds the number of shares that can be exercised, or when the Company reports a net loss from continuing operations. Anti-dilutive shares, which could potentially dilute earnings per share in the future, are set forth below (in millions):



	2018		2017		2016
Share options and appreciation rights	$	1.4	$	1.5	$	1.6
P-Units, RSAs and RSUs	5.7		2.1		0.9
Total potentially dilutive shares	$	7.1	$	3.6	$	2.5

Revenue Recognition

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (ASC 606), which sets forth a global standard for revenue recognition and replaces most existing industry-specific guidance. ASC 606 requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Company adopted ASC 606, effective January 1, 2018, utilizing the modified retrospective approach and applied ASC 606 to all outstanding revenue contracts. The adoption of this standard did not have a material impact on our statements of operations or statements of cash flows.

In adopting ASC 606, the Company's revenue recognition differs from its historical revenue recognition pattern primarily as it relates to demobilization revenue. Such revenue, which was recognized upon completion of a contract under legacy accounting, is now estimated at contract inception and recognized over the term of the contract under the new guidance for customer contracts that have unconstrained demobilization provisions. Upon adoption of this standard as of January 1, 2018, the Company recognized a $5.5 million increase to retained earnings related to unconstrained demobilization provisions. Subsequently, during the first quarter of 2018, the Company received a $5.5 million cash payment for such demobilization related to one of the Company's contracts.

Typical contractual arrangements

The Company contracts its drilling rigs, related equipment and work crews primarily on a “day rate” basis. Under day rate contracts, the Company generally receives a fixed amount per day for each day it is performing drilling or related services. In addition, customers may pay all or a portion of the cost of moving equipment and personnel to and from the well site. Contracts generally range in duration from one month to multiple years or alternatively may be based on a set number of wells. Both duration types can include additional option periods at the discretion of the customer which can be at a set price or may be determined upon exercise of the option. The contractual day rate generally varies based on the status of the drilling operations and generally includes an operating rate, move rate, repair rate, force majeure rate, standby rate, or other fixed type of day rate specified in the contract. Other fees may be stipulated in the contract related to mobilization and demobilization of the rig, upfront preparation and/or upgrades, penalties, performance bonuses and reimbursements for third party charges or requested modifications. Termination clauses are also specified and generally allow the customer to cancel for lack of performance by the contractor with no related fee or for convenience for an early termination fee, typically calculated as a standby rate multiplied by the days remaining in the firm term in the contract often reduced by a specified percentage.

Performance obligations and transaction price

Customers generally contract for a comprehensive agreement to provide integrated services to operate a rig and drill a well. Drillers are seen by the operator as the overseer of all services and are compensating the driller to provide that entire suite of services. In identifying performance obligations, ASC 606 series guidance states that a contract may contain a single performance obligation composed of a series of distinct goods or services if 1) each distinct good or service is substantially the same and would meet the criteria to be a performance obligation satisfied over time and 2) each distinct good or service is measured using the same method as it relates to the satisfaction of the overall performance obligation. The Company determined that the delivery of day rate drilling services is within the scope of the series guidance as both criteria noted above are met. Specifically, 1) each distinct increment of service (i.e. hour available to drill) that the driller promises to transfer represents a performance obligation that would meet the criteria for recognizing revenue over time, and 2) the driller would use the same method for measuring progress toward satisfaction of the performance obligation for each distinct increment of service in the series.

Consideration for activities that are not distinct within the scope of our contracts, such as mobilization, demobilization and upgrade/modification, and do not align with a distinct time increment within the contract term are allocated across the single performance obligation and are recognized over the expected recognition period in proportion to the passage of each hour available to drill. Consideration for activities which align with a distinct time increment within the contract term is recognized in the period when the services are performed.

The transaction price for a drilling contract is based on the amount of consideration the Company expects to be entitled for providing drilling services over the specified term and includes both fixed amounts and unconstrained variable amounts. Typically, at contract commencement, the only fixed/known consideration components of a drilling contract are negotiated lump-sum amounts to be received for reimbursement of costs incurred for mobilization, demobilization (where it is contractually guaranteed) and/or rig modifications or upgrades. The Company estimates variable consideration using the expected value method and includes the amount in transaction price to the extent it is not constrained. Variable consideration is generally constrained if it is probable that a significant reversal in the amount of cumulative revenue recognized will occur when the uncertainty associated with the variable consideration is subsequently resolved.

Recognition of revenue

Drilling services are consumed as the services are performed and generally enhance a well site which the customer/operator controls. Work performed on a well site does not create an asset with an alternative use to the contractor since the well/asset being worked on is owned by the customer. Therefore, the Company’s measure of progress for a drilling contract is hours available to drill over the contracted duration. This unit of measure is representative of an output method as described in ASC 606. The following chart details the types of fees found in a typical drilling contract and the related recognition method under ASC 606:



Fee type		Revenue Recognition
Day rate		Recognition is based on the day rates earned/invoiced as it relates to the level of service provided for each fractional-hour throughout the contract.
Mobilization and upgrade/modification		Revenue (both lump-sum and day rate amounts) is estimated at contract inception and included in the transaction price to be recognized over the expected recognition period.
Demobilization		Unconstrained demobilization revenue (both lump-sum and day rate amounts) is estimated at contract inception, included in the transaction price, and recognized over the expected recognition period in proportion to the passage of each hour available to drill.
Bonuses and penalty		Unconstrained bonus and/or penalty revenue is estimated at contract inception and included in the transaction price. Amounts are recognized in the period corresponding to the distinct hourly increment(s) of service provided (i.e. the specific period which the bonus or penalty relates to).
Reimbursement		Recognized (gross of costs incurred), at the point the product or service is consumed, and in the amount billed to the customer.

Future performance obligation and financing arrangements

Due to the recognition of day rate, as described above, the Company's primary future promised service relates to unconstrained demobilization. Under ASC 606 the Company recognizes unconstrained demobilization revenue over the life of the contract whereas in a typical drilling contract the demobilization, and the resulting cash payment for demobilization, does not occur until the end of the contract. At December 31, 2018, the Company had a contract asset of $5.5 million for unconstrained demobilization revenue (see Note 3) related to the Company recognizing $5.5 million in unconstrained demobilization revenue into income during the year ended December 31, 2018. We expect to recognize the remaining $5.9 million of our total estimated $11.4 million of unconstrained demobilization into revenue in 2019. We have applied the optional exemption afforded in ASU No. 2014-09 and have not disclosed the variable consideration related to the estimated future day rate revenues. Upon adoption of this standard as of January 1, 2018, the Company recognized a $5.5 million increase to retained earnings related to unconstrained demobilization provisions. Subsequently, during the first quarter of 2018, the Company received a $5.5 million cash payment for such demobilization related to one of the Company's contracts.

Under ASC 606, a significant financing component may exist, regardless of whether the promise is explicitly stated or implied by the payment terms stipulated in a contract, where there is a separation between the timing of services provided and the timing of payment in contracts with terms exceeding one year. Generally, a typical drilling contract stipulates for billings on a monthly basis and payment terms vary by contract and customer but are customarily paid within 90 days. It is rare for a drilling contract to explicitly address a financing component and payments of up-front fees correspond to cash outlays which Rowan must undertake in order to complete a given drilling contract.

Recently Adopted Accounting Pronouncements - In addition to Revenue from Contracts with Customers (ASC 606) (see "Revenue Recognition" above), the Company has recently adopted the following accounting pronouncements:

Statement of Cash Flows - In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (ASC 230): Classification of Certain Cash Receipts and Cash Payments, which provides guidance on eight cash flow classification issues with the objective of reducing differences in practice. As of January 1, 2018, the Company adopted this guidance on a retrospective basis with no material impact on its consolidated financial statements.

Statement of Cash Flows Restricted Cash - In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (ASC 230): Restricted Cash, which requires restricted cash to be presented with cash and cash equivalents in the statement of cash flows. The changes in restricted cash and restricted cash equivalents during the period should be included in the beginning and ending cash and cash equivalents balance reconciliation on the statement of cash flows. When cash, cash equivalents, restricted cash or restricted cash equivalents are presented in more than one line item within the statement of financial position, an entity shall calculate a total cash amount in a narrative or tabular format that agrees with the amount shown on the statement of cash flows. Details on the nature and amounts of restricted cash should also be disclosed. As of January 1, 2018, the Company adopted this guidance on a retrospective basis with no impact on its consolidated financial statements.

Other Income - In February 2017, the FASB issued ASU No. 2017-05, Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (“ASU 2017-05”), which clarifies the scope of the original guidance within Subtopic 610-20 that was issued in connection with ASU 2014-09, which provides guidance for recognizing gains and losses from the transfer of nonfinancial assets in contracts with non-customers. ASU 2017-05 also adds guidance for partial sales of nonfinancial assets. As of January 1, 2018, the Company adopted this guidance on a modified retrospective basis concurrently with ASC 606. This adoption had no impact on the Company's consolidated financial statements.

Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost - In March 2017, the FASB issued ASU No. 2017-07, Compensation - Retirement Benefits (ASC 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, which requires entities to present the service cost component of the net periodic benefit cost in the same income statement line item as other employee compensation costs. The other components of net benefit cost, including interest cost, expected return on plan assets, amortization of prior service cost/credit and actuarial gain/loss, and settlement and curtailment effects, are to be presented outside of any subtotal of operating income. Entities will have to disclose the line(s) used to present the other components of net periodic benefit cost, if the components are not presented separately in the income statement. The ASU also allows only the service cost component to be eligible for capitalization. As of January 1, 2018, the Company adopted this guidance on a retrospective basis with no material impact on its consolidated financial statements.

Accumulated Other Comprehensive Income – In February 2018, the FASB issued ASU No. 2018-02, Income Statement - Reporting Comprehensive Income (ASC 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which allow a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act of 2017. As permitted under this ASU, the Company elected early adoption of this ASU as of January 1, 2018 and recorded a $45.6 million increase to Retained earnings as a reclassification from Accumulated other comprehensive income. The stranded tax effects are for the U.S. income tax rate reduction recognized in the Consolidated Statements of Operations for the year ended December 31, 2017 for the deferred tax asset associated with employee benefit plans.

Accounting Pronouncements - to be Adopted

Lease Accounting – In February 2016, the FASB issued ASU No. 2016-02, Leases (ASC 842): Amendments to the FASB ASC, which requires an entity to recognize lease assets and lease liabilities on the balance sheet and provide enhanced disclosures. Leases will continue to be classified as either finance (capital lease under ASC 840) or operating. Based on the original guidance, lessees and lessors would have been required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach, including a number of optional practical expedients that entities may elect to apply. In July 2018, the FASB issued ASU No. 2018-11, Leases (ASC 842): Targeted Improvements, which provides entities with an option to apply the guidance prospectively, instead of retrospectively, and allows for other classification provisions, as described below. ASC 842 is effective for annual and interim periods beginning after December 15, 2018. The Company adopted ASC 842 effective January 1, 2019 using a modified retrospective method and has elected to not retrospectively adjust amounts presented for prior periods. In addition, we will take advantage of various practical expedients, provided by the ASC 842, including:


•	use of the transition package of practical expedients which, among other things, allows us to carryforward the historical lease classification for existing leases;


•	making an accounting policy election that will keep leases with an initial term of 12 months or less off the balance sheet; and


•	not separating non-lease components from lease components for all classes of underlying lease assets.

Prior to the issuance of ASU No. 2018-11, the Company preliminarily determined that its drilling contracts contained a lease component, and the adoption would require the Company to separately recognize revenue associated with the lease and services components. In July 2018, the FASB issued ASU No. 2018-11, which provides a practical expedient that allows entities to combine lease and non-lease components where the revenue recognition pattern is the same and where the lease component, when accounted for separately, would be considered an operating lease. In connection with the adoption of ASC 842, the Company has been working with the International Association of Drilling Contractors Accounting Sub-committee and has determined that its drilling contracts (excluding bareboat charter contracts with ARO where the Company provides the rig without providing any drilling services) are predominantly service contracts in nature and will therefore account for these contracts under ASC 606.

The adoption of ASC 842 will have an impact on our consolidated balance sheets and disclosures contained in our notes to consolidated financial statements. Based on our portfolio of leases where we are the lessee, we will recognize between $10 million and $20 million of right of use lease assets and lease liabilities on our balance sheet upon adoption, primarily relating to real estate and other miscellaneous equipment. We do not expect the adoption of ASC 842 to have a material impact on our consolidated statements of operations or cash flows.

Financial Instruments – In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (ASC 326): Measurement of Credit Losses on Financial Instruments, which amends the FASB's guidance on the impairment of financial instruments. The ASU adds to US GAAP an impairment model that is based on expected losses rather than incurred losses. Under the new guidance, an entity recognizes as an allowance its estimate of expected credit losses. The Company will be required to adopt the amended guidance in annual and interim reports beginning January 1, 2020, with early adoption permitted for fiscal years beginning after December 15, 2018. The Company is in the process of evaluating the impact this amendment will have on its consolidated financial statements.

Fair Value Measurement - In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (ASC 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement, which removes, modifies and adds certain disclosure requirements on fair value measurements including (i) removal of the requirements to disclose the amounts and reasons for as well as the policy for timing of transfers between Level 1 and Level 2 as well as descriptions of valuation processes used for Level 3 fair value measurements; (ii) certain modifications including clarification that the measurement uncertainty disclosure is to communicate information about the uncertainty in measurement as of the reporting date and; (iii) add disclosures related to changes in unrealized gains and losses for the period included in other comprehensive income (loss) for recurring Level 3 fair value measurements held at the end of the reporting period as well as disclosures for the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. The Company will be required to adopt the amended guidance in annual and interim reports beginning January 1, 2020, with early adoption permitted. Adoption is required to be applied prospectively with respect to the amendments on changes in unrealized gains and losses, range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements and narrative description of measurement uncertainty. All other amendments are to be applied retrospectively to all periods presented. The Company is in the process of evaluating the impact this amendment will have on its consolidated financial statements.

Defined Benefit Plans - In August 2018, the FASB issued ASU No. 2018-14, Compensation – Retirement Benefits – Defined Benefit Plans – General (Subtopic 715-20): Disclosure Framework – Changes to the Disclosure Requirements for Defined Benefit Plans, which modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. The Company will be required to adopt the amended guidance in annual and interim reports beginning January 1, 2021, with early adoption permitted. Adoption is required to be applied on a retrospective basis to all periods presented. The Company is in the process of evaluating the impact this amendment will have on its consolidated financial statements.

Internal Use Software - In August 2018, the FASB issued ASU No. 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (a consensus of the FASB Emerging Issues Task Force), which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The Company will be required to adopt the amended guidance in annual and interim reports beginning January 1, 2020, with early adoption permitted. Adoption may be applied retrospectively or prospectively to implementation costs incurred after the date of adoption. The Company is in the process of evaluating the impact this amendment will have on its consolidated financial statements.