Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2019

Accounting Policies [Abstract]

Cash and Cash Equivalents

Summary of Significant Accounting Policies

This Note 2 to Notes to Condensed Consolidated Financial Statements provides information and disclosure regarding certain of our significant accounting policies and should be read in conjunction with Note 2 to Notes to Consolidated Financial Statements included in our Annual Report, which may provide additional information with regard to the accounting policies set forth herein and other of our significant accounting policies.

a.    Cash, Cash Equivalents and Restricted Cash

Cash and cash equivalents include cash on hand and cash invested in highly liquid short-term securities, which have remaining maturities at the date of purchase of less than 90 days. Cash and cash equivalents are carried at cost, which approximates fair value.

At March 31, 2019 and December 31, 2018, we had approximately $15,250 and $15,141, respectively, of restricted cash held by certain financial institutions related to bank guarantees.

b.    Goodwill and Other Intangible Assets and Liabilities

Goodwill

Since December 31, 2018, there have been no changes to our accounting polices related to the accounting for goodwill. As of March 31, 2019 and December 31, 2018, no factors were identified that would alter our October 1, 2018 goodwill impairment analysis.

Our reporting units as of December 31, 2018 are described in detail in Note 2.h. to Notes to Consolidated Financial Statements included in our Annual Report. On March 19, 2019, we divested the business included in our former Consumer Storage reporting unit, which had no goodwill associated with it at December 31, 2018 or at the date of the divestment. See Note 9 for additional information.

The goodwill associated with acquisitions completed during the first three months of 2019 (which are described in Note 3) has been incorporated into our reporting units as they existed as of December 31, 2018.

The changes in the carrying value of goodwill attributable to each reportable operating segment for the three months ended March 31, 2019 are as follows:

	North American Records and Information Management Business		North American Data Management Business		Western European Business		Other International Business		Global Data Center Business			Corporate and Other Business			Total Consolidated
Goodwill balance, net of accumulated amortization as of December 31, 2018	$	2,251,795	$	493,491	$	381,806	$	818,223	$	425,956		$	69,759		$	4,441,030
Deductible goodwill acquired during the year	5,501		—		—		—		—			—			5,501
Non-deductible goodwill acquired during the year	—		—		4,991		3,767		—			1,874			10,632
Fair value and other adjustments(1)	31		—		92		3,350		(871		)	(468		)	2,134
Currency effects	3,921		1,067		1,393		1,126		(1,566		)	140			6,081
Goodwill balance, net accumulated amortization as of March 31, 2019	$	2,261,248	$	494,558	$	388,282	$	826,466	$	423,519		$	71,305		$	4,465,378
Accumulated Goodwill Impairment Balance as of December 31, 2018	$	85,909	$	—	$	46,500	$	—	$	—		$	3,011		$	135,420
Accumulated Goodwill Impairment Balance as of March 31, 2019	$	85,909	$	—	$	46,500	$	—	$	—		$	3,011		$	135,420

_______________________________________________________________________________

(1) Total fair value and other adjustments primarily include $2,565 in net adjustments related to property, plant and equipment, customer relationships and data center lease-based intangible assets and deferred income taxes and other liabilities offset by $431 of cash received related to certain acquisitions completed in 2018.

Finite-lived Intangible Assets and Liabilities

Finite-lived intangible assets and liabilities are primarily comprised of customer relationship intangible assets, customer inducements and data center intangible assets and liabilities (which include data center in-place lease intangible assets, data center tenant relationship intangible assets, data center above-market in-place lease intangible assets and data center below-market in-place lease intangible assets). Since December 31, 2018, there have been no changes to our accounting policies related to the accounting for any of our finite-lived intangible assets and liabilities as disclosed in Note 2.i. to Notes to Consolidated Financial Statements included in our Annual Report.

The gross carrying amount and accumulated amortization of our finite-lived intangible assets as of March 31, 2019 and December 31, 2018 are as follows:

	March 31, 2019							December 31, 2018
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Assets:
Customer relationship intangible assets	$	1,754,794	$	(482,971	)	$	1,271,823	$	1,718,919	$	(455,705	)	$	1,263,214
Customer inducements	51,405		(28,711		)	22,694		56,478		(34,181		)	22,297
Data center lease-based intangible assets(1)	265,834		(65,013		)	200,821		271,818		(50,807		)	221,011
Third-party commissions asset(2)	30,861		(737		)	30,124		30,071		(1,089		)	28,982
	$	2,102,894	$	(577,432	)	$	1,525,462	$	2,077,286	$	(541,782	)	$	1,535,504
Liabilities:
Data center below-market leases	$	12,715	$	(2,451	)	$	10,264	$	12,318	$	(1,642	)	$	10,676

_______________________________________________________________________________

(1) Includes data center in-place lease intangible assets, data center tenant relationship intangible assets and data center above-market in-place lease intangible assets.

(2) Third-party commissions asset is included in Other, a component of Other assets, net in the accompanying Condensed Consolidated Balance Sheets as of March 31, 2019 and December 31, 2018. The third-party commissions asset is primarily comprised of additional payments associated with the execution of future customer contracts through the one-year anniversary of the acquisition of IODC, as described in Note 3.

Other finite-lived intangible assets, including trade names, noncompetition agreements and trademarks, are capitalized and amortized and are included in depreciation and amortization in the accompanying Condensed Consolidated Statements of Operations for the three months ended March 31, 2019 and 2018. The other finite-lived intangible assets as of March 31, 2019 and December 31, 2018 are as follows:

	March 31, 2019							December 31, 2018
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Other finite-lived intangible assets (included in Other, a component of other assets, net)	$	20,290	$	(15,794	)	$	4,496	$	20,310	$	(14,798	)	$	5,512

Amortization expense associated with finite-lived intangible assets, revenue reduction associated with the amortization of customer inducements and net revenue reduction associated with the amortization of data center above-market leases and data center below-market leases for the three months ended March 31, 2019 and 2018 are as follows:

	Three Months Ended March 31,
	2019		2018
Amortization expense included in depreciation and amortization associated with:
Customer relationship and customer inducement intangible assets	$	27,881	$	28,806
Data center in-place leases and tenant relationships	12,609		10,838
Third-party commissions asset and other finite-lived intangible assets	757		1,185
Revenue reduction associated with amortization of:
Customer inducements	$	2,740	$	2,585
Data center above-market leases and data center below-market leases	905		1,079

c.    Revenues

Since December 31, 2018, there have been no changes to our accounting policies related to the accounting for revenues as disclosed in Note 2.l. to Notes to Consolidated Financial Statements included in our Annual Report.

The costs of the initial intake of customer records into physical storage ("Intake Costs") and capitalized commissions asset (collectively, "Contract Fulfillment Costs") as of March 31, 2019 and December 31, 2018 are as follows:

		March 31, 2019							December 31, 2018
Description	Location in Balance Sheet	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Intake Costs asset	Other (within Other Assets, Net)	$	36,155	$	(21,041	)	$	15,114	$	39,748	$	(24,504	)	$	15,244
Capitalized commissions asset	Other (within Other Assets, Net)	52,485		(24,923		)	27,562		58,424		(34,637		)	23,787

Amortization expense associated with the Intake Costs asset and capitalized commissions asset for the three months ended March 31, 2019 and 2018 are as follows:

	Three Months Ended March 31,
	2019		2018
Intake Costs asset	$	2,679	$	2,730
Capitalized commissions asset	3,946		3,587

Deferred revenue liabilities are reflected as follows in our Condensed Consolidated Balance Sheets:

Description	Location in Balance Sheet	March 31, 2019		December 31, 2018
Deferred revenue - Current	Deferred revenue	$	266,314	$	264,823
Deferred revenue - Long-term	Other Long-term Liabilities	25,625		26,401

Data Center Lessor Considerations

Our data center business features storage rental provided to customers at contractually specified rates over a fixed contractual period. Prior to January 1, 2019, our data center revenue contracts were accounted for in accordance with Accounting Standards Codification (“ASC”) No. 840, Leases ("ASC 840"). On January 1, 2019, we adopted ASU 2016-02, as described in more detail in Note 2.d. Beginning on January 1, 2019, our data center revenue contracts will be accounted for in accordance with ASU 2016-02. ASU 2016-02 provides a practical expedient which allows lessors to account for nonlease components (such as power and connectivity, in the case of our data center business) with the related lease component if both the timing and pattern of transfer are the same for nonlease components and the lease component, and the lease component would be classified as an operating lease. The single combined component is accounted for under ASU 2016-02 if the lease component is the predominant component and is accounted for under ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) ("ASU 2014-09"), if the nonlease components are the predominant components. We have elected to take this practical expedient. Storage rental revenue associated with our data center business was $59,718 for the three months ended March 31, 2019, which includes approximately $9,100 of revenue associated with power and connectivity. The revenue related to the service component of our data center business remains unchanged from the adoption of ASU 2016-02 and is recognized in the period the related services are provided. Our accounting treatment for data center revenue was not significantly impacted by the adoption of ASU 2016-02.

d. Leases

We lease facilities for certain warehouses, data centers and office space. We also have land leases, including those on which certain facilities are located. The majority of our leased facilities are classified as operating leases that, on average, have initial lease terms of five to 10 years, with one or more lease renewal options to extend the lease term. Our lease renewal option terms generally range from one to five years. The exercise of the lease renewal option is at our sole discretion and may contain fixed rent, fair market value based rent or Consumer Price Index rent escalation clauses. We include option periods in the lease term when our failure to renew the lease would result in an economic disincentive, thereby making it reasonably certain that we will renew the lease. We recognize straight line rental expense over the life of the lease and any fair market value or Consumer Price Index rent escalations are recognized as variable lease expense in the period in which the obligation is incurred. In addition, we lease certain vehicles and equipment. Vehicle and equipment leases have lease terms ranging from one to seven years.

In February 2016, the Financial Accounting Standards Board ("FASB") issued ASU 2016-02, Leases (Topic 842) which requires lessees to recognize assets and liabilities on the balance sheet for the rights and obligations created by all leases, both operating and financing (formerly referred to as capital leases under ASC 840). ASU 2016-02 requires certain qualitative and quantitative disclosures designed to give financial statement users information on the amount, timing, and uncertainty of cash flows arising from leases.

We adopted ASU 2016-02 on January 1, 2019 on a modified retrospective basis under which we recognized and measured leases existing at, or entered into after, the beginning of the period of adoption. Therefore, we applied ASC 840 to all earlier comparative periods (prior to the adoption of ASU 2016-02), including disclosures, and recognized the effects of applying ASU 2016-02 as a cumulative-effect adjustment to retained earnings as of January 1, 2019, the effective date of the standard. As such, the comparative Condensed Consolidated Balance Sheet as of December 31, 2018 has not been restated to reflect the adoption of ASU 2016-02. Accordingly, the majority of the amount presented as deferred rent liabilities on our Consolidated Balance Sheet as of December 31, 2018 is now included in the calculation of operating lease right-of-use assets and any remaining amounts are now classified within other liability line items on our Condensed Consolidated Balance Sheet as of March 31, 2019. The transition guidance associated with ASU 2016-02 also permitted certain practical expedients. We elected the "package of 3" practical expedients permitted under the transition guidance which, among other things, allowed us to carryforward our historical lease classifications. We also adopted an accounting policy which provides that leases with an initial term of 12 months or less will not be included within the lease right-of-use assets and lease liabilities recognized on our Condensed Consolidated Balance Sheets after the adoption of ASU 2016-02. We will continue to recognize the lease payments for those leases with an initial term of 12 months or less in the Consolidated Statements of Operations on a straight-line basis over the lease term.

The lease right-of-use assets and related lease liabilities are classified as either operating or financing. Lease right-of-use assets are calculated as the net present value of future payments plus any capitalized initial direct costs less any tenant improvements or lease incentives. Lease liabilities are calculated as the net present value of future payments. In calculating the present value of the lease payments, we will utilize the rate stated within the lease (in the limited circumstances when such rate is available) or, if no rate is explicitly stated, we have elected to utilize a rate that reflects our securitized incremental borrowing rate by geography for the lease term. In July 2018, the FASB issued ASU 2018-11, Leases - Targeted Improvements ("ASU 2018-11"). ASU 2018-11 provides a practical expedient which allows lessees to account for nonlease components (which include common area maintenance, taxes, and insurance) with the related lease component. Any variable nonlease components are not included within the lease right-of-use asset and lease liability on the Condensed Consolidated Balance Sheets, and instead, are reflected as an expense in the period incurred. We have elected to take this practical expedient upon adoption of ASU 2016-02.

At January 1, 2019, we recognized the cumulative effect of initially applying ASU 2016-02 as an adjustment to the opening balance of (distributions in excess of earnings) earnings in excess of distributions, resulting in an increase of approximately $5,800 to stockholders' equity due to certain build to suit leases that were accounted for as financing leases under ASC 840, Leases,but are accounted for as operating leases under ASU 2016-02 at January 1, 2019.

Operating and financing lease right-of-use assets and lease liabilities as of March 31, 2019 and January 1, 2019 (date of adoption of ASU 2016-02) are as follows:

Description	Location in Balance Sheet	March 31, 2019		January 1, 2019 (Date of Adoption of ASU 2016-02)
Assets:
Operating lease right-of-use assets(1)	Operating lease right-of-use assets	$	1,791,536	$	1,825,721
Financing lease right-of-use assets, net of accumulated depreciation(2)	Property, plant and equipment, net	351,750		361,078
Total		$	2,143,286	$	2,186,799
Liabilities:
Current
Operating lease liabilities	Accrued expenses and other current liabilities	$	206,286	$	209,911
Financing lease liabilities	Current portion of long-term debt	51,222		50,437
Total current lease liabilities		257,508		260,348
Long-term
Operating lease liabilities	Long-term operating lease liabilities, net of current portion	1,656,659		1,685,771
Financing lease liabilities	Long-term Debt, net of current portion	338,728		350,263
Total long-term lease liabilities		1,995,387		2,036,034
Total		$	2,252,895	$	2,296,382

______________________________________________________________

(1) At March 31, 2019, these assets are comprised of approximately 98% real estate related assets (which include land, buildings and racking) and 2% non-real estate related assets (which include warehouse equipment, vehicles, furniture and fixtures and computer hardware and software).

(2) At March 31, 2019, these assets are comprised of approximately 66% real estate related assets and 34% non-real estate related assets.

The components of the lease expense for the three months ended March 31, 2019 is as follows:

Description	Location in Statement of Operations	Amount
Operating lease cost(1)	Cost of sales and Selling, general and administrative	$	111,906
Financing lease cost:
Depreciation of financing lease right-of-use assets	Depreciation and amortization	$	16,329
Interest expense for financing lease liabilities	Interest expense, net	6,142
Total financing lease cost		$	22,471

______________________________________________________________

(1) Of the $111,906 of operating lease cost incurred for the three months ended March 31, 2019, $108,601 is included within Cost of sales and $3,305 is included within Selling, general and administrative expenses. Operating lease cost includes variable lease costs of $25,489.

We sublease certain real estate to third parties. The sublease income recognized for the three months ended March 31, 2019 is $3,047.

Weighted average remaining lease terms and discount rates as of March 31, 2019 are as follows:

Remaining Lease Term:
Operating leases	11.1 Years
Financing leases	11.0 Years
Discount Rate:
Operating leases	7.1%
Financing leases	5.7%

The estimated minimum future lease payments as of December 31, 2018, are as follows:

Year	Operating Leases(1)		Sublease Income			Capital Leases(1)(2)
2019	$	323,454	$	(7,525	)	$	80,513
2020	293,276		(7,200		)	71,335
2021	267,379		(7,063		)	61,269
2022	246,128		(6,694		)	52,832
2023	221,808		(6,409		)	44,722
Thereafter	1,287,807		(6,279		)	377,750
Total minimum lease payments	2,639,852		$	(41,170	)	688,421
Less amounts representing interest						(241,248		)
Present value of finance lease obligations						$	447,173

The estimated minimum future lease payments as of March 31, 2019, are as follows:

Year	Operating Leases(1)			Sublease Income			Financing Leases(1)
2019 (excluding the three months ended March 31, 2019)	$	251,699		$	(6,039	)	$	59,411
2020	308,267			(7,337		)	68,333
2021	280,931			(7,228		)	59,710
2022	257,598			(6,851		)	49,997
2023	234,035			(6,548		)	39,643
Thereafter	1,409,241			(6,922		)	287,609
Total minimum lease payments	2,741,771			$	(40,925	)	564,703
Less amounts representing interest or imputed interest	(878,826		)				(174,753		)
Present value of lease obligations	1,862,945						$	389,950

_______________________________________________________________________________

(1) Estimated minimum future lease payments exclude variable common area maintenance charges, insurance and taxes. Differences in estimated lease payments between December 31, 2018 and March 31, 2019 are primarily related to adjustments to account for certain build to suit leases that were accounted for as financing obligations under ASC 840 but are accounted for as operating leases under ASU 2016-02 and foreign currency exchange rate impacts.

(2) Includes capital lease and financing obligations associated with build to suit lease transactions at December 31, 2018.

As of March 31, 2019, we do not have any material operating or financing leases that are signed but have not yet commenced and we have certain leases with related parties which are not material to our consolidated financial statements.

Other information: Supplemental cash flow information relating to our leases for the three months ended March 31, 2019 is as follows:

Cash paid for amounts included in measurement of lease liabilities:	Three Months Ended March 31, 2019
Operating cash flows used in operating leases	$	83,676
Financing cash flows used in financing leases	$	16,675
Non-cash items:
Operating lease modifications and reassessments	$	1,842
New operating leases (including acquisitions)	$	21,535
Financing lease modifications and reassessments	$	—
New financing leases	$	7,523

e.    Stock-Based Compensation

We record stock-based compensation expense, utilizing the straight-line method, for the cost of stock options, restricted stock units ("RSUs"), performance units ("PUs") and shares of stock issued under our employee stock purchase plan (together, "Employee Stock-Based Awards"). There have been no significant changes to our accounting policies, assumptions and valuation methodologies related to the accounting for our Employee Stock-Based Awards as disclosed in Note 2.n. to Notes to Consolidated Financial Statements included in our Annual Report.

For our Employee Stock-Based Awards made on or after February 20, 2019, we have included the following retirement provision: Upon an employee’s retirement on or after attaining age 58, if the sum of (i) the award recipient’s age at retirement and (ii) the award recipient’s years of service with the company totals at least 70, the award recipient is entitled to continued vesting of any outstanding Employee Stock-Based Awards which include the 2019 Retirement Criteria subsequent to their retirement, provided that, for awards granted in the year of retirement, their retirement occurs on or after July 1st (the “2019 Retirement Criteria”). Accordingly, (i) grants of Employee Stock-Based Awards to an employee who has met the 2019 Retirement Criteria on or before the date of grant, or will meet the Retirement Criteria before July 1^st of the year of the grant, will be expensed between the date of grant and July 1^st of the grant year and (ii) grants of Employee Stock-Based Awards to employees who will meet the 2019 Retirement Criteria during the award’s normal vesting period will be expensed between the date of grant and the date upon which the award recipient meets the 2019 Retirement Criteria. Stock options and RSUs granted to recipients who meet the 2019 Retirement Criteria will continue vesting on the original vesting schedule, and the stock options will remain exercisable up to three years after retirement, or the original expiration date of the stock options, if earlier. PUs granted to recipients who meet the 2019 Retirement Criteria will continue to vest and be delivered in accordance with the original vesting schedule of the applicable PU award and remain subject to the same performance conditions.

Stock-based compensation expense for Employee Stock-Based Awards for the three months ended March 31, 2019 and 2018 was $8,519 ($7,935 after tax or $0.03 per basic and diluted share) and $7,384 ($6,833 after tax or $0.02 per basic and diluted share), respectively, the substantial majority of which is included in Selling, general and administrative expenses in the accompanying Condensed Consolidated Statements of Operations. As of March 31, 2019, unrecognized compensation cost related to the unvested portion of our Employee Stock-Based Awards was $72,353 and is expected to be recognized over a weighted-average period of 2.2 years.

Stock Options

A summary of stock option activity for the three months ended March 31, 2019 is as follows:

	Stock Options
Outstanding at December 31, 2018	4,271,834
Granted	920,706
Exercised	(99,334	)
Forfeited	(6,007	)
Expired	(9,629	)
Outstanding at March 31, 2019	5,077,570
Options exercisable at March 31, 2019	3,258,982
Options expected to vest	1,691,146

Restricted Stock Units

The fair value of RSUs vested during the three months ended March 31, 2019 and 2018 is as follows:

	Three Months Ended March 31,
	2019		2018
Fair value of RSUs vested	$	15,333	$	15,330

A summary of RSU activity for the three months ended March 31, 2019 is as follows:

	RSUs
Non-vested at December 31, 2018	1,196,566
Granted	621,281
Vested	(453,167	)
Forfeited	(18,075	)
Non-vested at March 31, 2019	1,346,605

Performance Units

The fair value of earned PUs that vested during the three months ended March 31, 2019 and 2018 is as follows:

	Three Months Ended March 31,
	2019		2018
Fair value of earned PUs that vested	$	6,503	$	3,033

A summary of PU activity for the three months ended March 31, 2019 is as follows:

	Original PU Awards		PU Adjustment(1)		Total PU Awards
Non-vested at December 31, 2018	967,049		(299,948	)	667,101
Granted	380,856		—		380,856
Vested	(169,523	)	—		(169,523	)
Forfeited/Performance or Market Conditions Not Achieved	(4,816	)	(14,850	)	(19,666	)
Non-vested at March 31, 2019	1,173,566		(314,798	)	858,768

_______________________________________________________________________________

(1) Represents an increase or decrease in the number of original PUs awarded based on either the final performance criteria or market condition achievement at the end of the performance period of such PUs or a change in estimated awards based on the forecasted performance against the predefined targets.

As of March 31, 2019, we expected 100% achievement of the predefined revenue, return on invested capital and Adjusted EBITDA (as defined in Note 6) targets associated with the awards of PUs made in 2019, 2018 and 2017.

f.    Income (Loss) Per Share—Basic and Diluted

Basic income (loss) per common share is calculated by dividing income (loss) by the weighted average number of common shares outstanding. The calculation of diluted income (loss) per share is consistent with that of basic income (loss) per share, but gives effect to all potential common shares (that is, securities such as stock options, RSUs or PUs) that were outstanding during the period, unless the effect is antidilutive.

The calculation of basic and diluted income (loss) per share for the three months ended March 31, 2019 and 2018 is as follows:

	Three Months Ended March 31,
	2019			2018
Income (loss) from continuing operations	$	30,476		$	45,614
Less: Net income (loss) attributable to noncontrolling interests	891			468
Income (loss) from continuing operations (utilized in numerator of Earnings Per Share calculation)	$	29,585		$	45,146
(Loss) income from discontinued operations, net of tax	$	(24	)	$	(462	)
Net income (loss) attributable to Iron Mountain Incorporated	$	29,561		$	44,684
Weighted-average shares—basic	286,528,000			285,259,000
Effect of dilutive potential stock options	231,402			249,564
Effect of dilutive potential RSUs and PUs	732,421			484,314
Weighted-average shares—diluted	287,491,823			285,992,878
Earnings (losses) per share—basic:
Income (loss) from continuing operations	$	0.10		$	0.16
(Loss) income from discontinued operations, net of tax	—			—
Net income (loss) attributable to Iron Mountain Incorporated(1)	$	0.10		$	0.16
Earnings (losses) per share—diluted:
Income (loss) from continuing operations	$	0.10		$	0.16
(Loss) income from discontinued operations, net of tax	—			—
Net income (loss) attributable to Iron Mountain Incorporated(1)	$	0.10		$	0.16
Antidilutive stock options, RSUs and PUs, excluded from the calculation	3,985,161			3,242,141

_______________________________________________________________________________

(1) Columns may not foot due to rounding.

g.    Income Taxes

We provide for income taxes during interim periods based on our estimate of the effective tax rate for the year. Our estimate of the effective tax rates for the years ending December 31, 2019 and 2018 reflect the impact of the U.S. tax reform legislation, commonly referred to as the Tax Cuts and Jobs Act (the “Tax Reform Legislation”). See Note 7 to Notes to Consolidated Financial Statements included in our Annual Report for additional information regarding the impact the Tax Reform Legislation had on us. Discrete items and changes in our estimate of the annual effective tax rate are recorded in the period they occur. Our effective tax rate is subject to variability in the future due to, among other items: (1) changes in the mix of income between our qualified REIT subsidiaries ("QRSs") and our domestic taxable REIT subsidiaries ("TRSs"), as well as among the jurisdictions in which we operate; (2) tax law changes; (3) volatility in foreign exchange gains and losses; (4) the timing of the establishment and reversal of tax reserves; and (5) our ability to utilize net operating losses that we generate.

Our effective tax rates for the three months ended March 31, 2019 and 2018 is as follows:

	Three Months Ended March 31,
	2019(1)		2018(2)
Effective Tax Rate	25.7	%	2.5	%

_______________________________________________________________________________

(1) The primary reconciling items between the federal statutory tax rate of 21.0% and our overall effective tax rate for the three months ended March 31, 2019 were the benefit derived from the dividends paid deduction and the impact of differences in the tax rates at which our foreign earnings are subject, including foreign exchange gains and losses in different jurisdictions with different tax rates.  

(2) The primary reconciling items between the federal statutory tax rate of 21.0% and our overall effective tax rate for the three months ended March 31, 2018 were the benefit derived from the dividends paid deduction, a discrete tax benefit of approximately $14,000 associated with the resolution of a tax matter and the impact of differences in the tax rates at which our foreign earnings are subject, including foreign exchange gains and losses in different jurisdictions with different tax rates.

h.    Fair Value Measurements

Our financial assets or liabilities that are carried at fair value are required to be measured using inputs from the three levels of the fair value hierarchy. A financial asset or liability's classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.

The three levels of the fair value hierarchy are as follows:

Level 1—Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that we have the ability to access at the measurement date.

Level 2—Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (i.e., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).

Level 3—Unobservable inputs that reflect our assumptions about the assumptions that market participants would use in pricing the asset or liability.

The assets and liabilities carried at fair value measured on a recurring basis as of March 31, 2019 and December 31, 2018, respectively, are as follows:

			Fair Value Measurements at March 31, 2019 Using
Description	Total Carrying Value at March 31, 2019		Quoted prices in active markets (Level 1)			Significant other observable inputs (Level 2)			Significant unobservable inputs (Level 3)
Money Market Funds(1)	$	1,739	$	—		$	1,739		$	—
Trading Securities	10,160		9,490		(2)	670		(3)	—
Derivative Assets (4)	23		—			23			—
Derivative Liabilities(4)	109		—			109			—
Interest Rate Swap Agreements Liabilities(5)	3,647		—			3,647			—

			Fair Value Measurements at December 31, 2018 Using
Description	Total Carrying Value at December 31, 2018		Quoted prices in active markets (Level 1)			Significant other observable inputs (Level 2)			Significant unobservable inputs (Level 3)
Time Deposits(1)	$	956	$	—		$	956		$	—
Trading Securities	10,753		10,248		(2)	505		(3)	—
Derivative Assets(4)	93		—			93			—
Interest Rate Swap Agreements Liabilities(5)	973		—			973			—

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(1) Money market funds and time deposits are measured based on quoted prices for similar assets and/or subsequent transactions.

(2) Certain trading securities are measured at fair value using quoted market prices.

(3) Certain trading securities are measured based on inputs other than quoted market prices that are observable.

(4) Derivative assets and liabilities relate to short-term (six months or less) foreign currency contracts that we have entered into to hedge certain of our foreign exchange intercompany exposures. We calculate the value of such forward contracts by adjusting the spot rate utilized at the balance sheet date for translation purposes by an estimate of the forward points observed in active markets. As of March 31, 2019, we had outstanding forward contracts to (i) purchase 4,000 Euros and sell $4,610 United States dollars and (ii) purchase $4,515 United States dollars and sell 4,000 Euros. As of December 31, 2018, we had outstanding forward contracts to purchase 29,000 Euros and sell $33,374 United States dollars. We have not designated any of the forward contracts we have entered into as hedges.

(5) We have entered into interest rate swap agreements to limit our exposure to changes in interest rates on a portion of our floating rate indebtedness. As of March 31, 2019 and December 31, 2018, we have $350,000 in notional value of interest rate swap agreements outstanding, which expire in March 2022. Under the interest rate swap agreements, we receive variable rate interest payments associated with the notional amount of each interest rate swap, based upon one-month LIBOR, in exchange for the payment of fixed interest rate payments (at the fixed rate interest specified in the interest rate swap agreements). We have designated these interest rate swaps as cash flow hedges. Unrealized gains are recognized as assets while unrealized losses are recognized as liabilities. The fair value of the interest rate swaps are estimated using industry standard valuation models using market-based observable inputs, including interest rate curves.

Disclosures are required in the financial statements for items measured at fair value on a non-recurring basis. There were no material items that are measured at fair value on a non-recurring basis at March 31, 2019 and December 31, 2018, other than those disclosed in Note 2.s. to Notes to Consolidated Financial Statements included in our Annual Report, those acquired in acquisitions that occurred during the three months ended March 31, 2019 and our investment in Makespace LLC (as disclosed in Note 9), all of which are based on Level 3 inputs.

The fair value of our long-term debt, which was determined based on either Level 1 inputs or Level 3 inputs, is disclosed in Note 4. Long-term debt is measured at cost in our Condensed Consolidated Balance Sheets as of March 31, 2019 and December 31, 2018.

i.    Accumulated Other Comprehensive Items, Net

The changes in accumulated other comprehensive items, net for the three months ended March 31, 2019 and 2018 are as follows:

	Three Months Ended March 31,
	2019									2018
	Foreign Currency Translation Adjustments			Fair Value Adjustments for Interest Rate Swap Agreements			Total			Foreign Currency Translation Adjustments			Fair Value Adjustments for Interest Rate Swap Agreements			Total
Beginning of Period	$	(264,691	)	$	(973	)	$	(265,664	)	$	(103,989	)	$	—		$	(103,989	)
Other comprehensive income (loss):
Foreign currency translation adjustments(1)	17,378			—			17,378			30,092			—			30,092
Fair value adjustments for interest rate swap agreements	—			(2,674		)	(2,674		)	—			(185		)	(185		)
Total other comprehensive income (loss)	17,378			(2,674		)	14,704			30,092			(185		)	29,907
End of Period	$	(247,313	)	$	(3,647	)	$	(250,960	)	$	(73,897	)	$	(185	)	$	(74,082	)

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(1) This amount includes foreign exchange (gains) losses of $(6,141) and $5,635 for the three months ended March 31, 2019 and 2018, respectively, related to the change in fair value of the portion of our Euro Notes (as defined and discussed more fully in Note 4) designated as a hedge of net investment of certain of our Euro denominated subsidiaries. For the three months ended March 31, 2019, we designated, on average, 271,146 Euros of our Euro Notes as a hedge of net investment of certain of our Euro denominated subsidiaries. For the three months ended March 31, 2018, we designated, on average, 164,244 Euros of our Euro Notes as a hedge of net investment of certain of our Euro denominated subsidiaries. As of March 31, 2019, cumulative net gains of $20,399 net of tax, are recorded in accumulated other comprehensive items, net associated with this net investment hedge.

j.    Other Expense (Income), Net

Other expense (income), net for the three months ended March 31, 2019 and 2018 consists of the following:

	Three Months Ended March 31,
	2019			2018
Foreign currency transaction losses (gains), net	$	17,697		$	21,785
Other, net	(2,487		)	(1,634		)
	$	15,210		$	20,151

The gain or loss on foreign currency transactions, calculated as the difference between the historical exchange rate and the exchange rate at the applicable measurement date, include gains or losses related to (i) borrowings in certain foreign currencies under our Revolving Credit Facility (as defined and discussed more fully in Note 4), (ii) our Euro Notes, (iii) certain foreign currency denominated intercompany obligations of our foreign subsidiaries to us and between our foreign subsidiaries, which are not considered permanently invested, and (iv) amounts that are paid or received on the net settlement amount from forward contracts (as more fully discussed in Note 2.h.).

Other, net for the three months ended March 31, 2019 is primarily comprised of a gain on sale resulting from the Consumer Storage Transaction (as defined and discussed more fully in Note 9) of approximately $4,200. Other, net for the three months ended March 31, 2019 also includes the change in estimated fair value of the noncontrolling interests associated with our business in India, which are accounted for as mandatorily redeemable noncontrolling interests.

k.    New Accounting Pronouncements

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) ("ASU 2018-15"). ASU 2018-15 aligns the accounting for costs incurred to implement a cloud computing arrangement that is a service arrangement with the guidance on capitalizing costs associated with developing or obtaining internal-use software. We adopted ASU 2018-15 on January 1, 2019. ASU 2018-15 did not have a material impact on our consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02. We adopted ASU 2016-02 on January 1, 2019 on a modified retrospective basis. See Note 2.d. for information regarding the impact of the adoption of ASU 2016-02 on our consolidated financial statements.