Leases

12 Months Ended

Sep. 30, 2020

NOTE 12: LEASES

The weighted-average remaining lease term for operating leases as of September 30, 2020 was 5.2 years, which includes options to extend when it is reasonably certain that we will exercise the option. We used incremental borrowing rates that match the duration of the remaining lease terms of our operating leases on a fully collateralized basis upon adoption as of October 1, 2019 to initially measure our lease liability. The weighted average incremental borrowing rate used to measure the lease liability as of September 30, 2020 was 7.37%.

The details of our right-of-use asset and lease liability recognized upon adoption of ASC 842 was computed based on the consumer price index and foreign currency exchange rate as applicable then in effect and excluding executory costs on October 1, 2019, were as follows (in thousands):


Right-of-use asset	$	246,028
Straight-line rent accrual	(8,479)
Net lease right-of-use asset	$	237,549

Lease liability, current	$	45,272
Lease liability, non-current	200,756
Total lease liability	$	246,028

In connection with the preparation of our consolidated financial statements for the year ended September 30, 2020, we identified an error relating to certain leases on the adoption of ASC 842 at October 1, 2019. The error impacted the lease right-of-use asset and total lease liability, both of which were overstated by approximately $18.0 million on adoption. We concluded the impact on the interim financial statements during fiscal 2020 was immaterial and corrected the balances as of September 30, 2020. The income statement impact of this correction was immaterial.

The components of lease expense included in "Operations" and "Administrative" expense, based on the underlying lease use, in our consolidated statements of operations is as follows (in thousands):


	Fiscal Year Ended September 30,
	2020

Operating lease expense	$	62,925
Variable lease expense	11,846
Total lease expense	$	74,771

As of September 30, 2020, maturities of lease liabilities under ASC 842 by fiscal year were as follows (in thousands):


2021	$	66,079
2022	50,895
2023	39,076
2024	28,602
2025	19,877
Thereafter	41,639
Total lease liabilities	246,168
Less: Portion representing interest	43,386
Total net lease liabilities	202,782
Less: Current portion	49,742
Total long term net lease liabilities	$	153,040

In December 2014, we entered into a non-cancelable 13-year operating lease for our corporate offices, with rent payments beginning February 2016 and ending March 2029. Annual rent, net of square footage subsequently terminated as a result of negotiations with the landlord, escalate from $2.5 million at lease inception to $3.9 million in the terminal year of the lease.

The lease includes two five-year extension options at the end of the initial lease term. The estimated minimum future rental payments under the lease are approximately $38.1 million. During fiscal 2017 and 2016, we initiated subleases for a portion of our corporate operating office lease for estimated minimum future sublease payments of approximately $12.2 million. In addition to the above subleases, during fiscal 2018 we entered into an amendment to the operating lease surrendering another 15% of the initial leased premises. As a result, sublease payments were expected to fully offset our original operating lease obligations through August 2023, with renewal options available until the end of the master operating lease in March 2029.

During the second quarter of fiscal 2015, we entered into cancellable subleases for our Miami office for an estimated minimum future sublease payment of approximately $2.9 million. Sublease payments are expected to offset substantially all of our original operating lease obligations over the nine-year period beginning March 2015 and ending September 2024.

Prior to the adoption of ASC 842, future minimum undiscounted lease payments due under non-cancelable leases as of September 30, 2019 for each subsequent year were as follows (in thousands):


2020	$	69,291
2021	60,588
2022	46,720
2023	32,062
2024	19,969
Thereafter	39,256
	$	267,886

The following table presents the amount of net rent recognized as expense under ASC Topic 840 - Leases (in thousands):


	Fiscal Year Ended September 30,
	2019		2018

Gross rent expense from continuing operations	$	65,295	$	61,821
Sublease rent revenue from continuing operations	(35)		(109)
Net rent expense from continuing operations	$	65,260	$	61,712

As a result of the COVID-19 pandemic, we believe there was a significant adverse change in the business climate that impacted the office leasing market and a significant decrease in the market prices of an asset or asset group that affected the value of the right of use asset for our corporate office. We determined the undiscounted cash flows of the subleases did not exceed the net book value of the right of use asset. We then determined the discounted cash flows of the subleases did not exceed the book value of the right of use asset, and an impairment charge of $5.0 million was recorded in the fourth quarter of fiscal 2020 and is recorded under "Impairment of goodwill, intangible and other assets" in the Consolidated Statements of Operations.

We recorded $29.2 million in non-cash additions to our right of use assets and lease liabilities for the fiscal year ended September 30, 2020.