10. Lease and Financing Obligations

In 2014, the Company's subsidiary in South Korea entered into a lease agreement (the "Lease") with a third-party landlord for a new regional headquarters. As part of the Lease, the landlord agreed to renovate an existing building (the "Existing Building") and construct a new building (the "New Building") adjacent to the Existing Building. The Lease provides that when such renovations and construction are completed, the Company and the landlord will enter into a new lease agreement (the "New Lease") for the Existing Building and the New Building.

The Company accounts for its lease of the Existing Building as an operating lease, and it expects to continue doing so under the New Lease. As an inducement to enter into the Lease, the landlord agreed to make certain improvements on behalf of the Company to the Existing Building. The improvements have been accounted for by the Company as a tenant incentive.

The Company has concluded that it is the deemed owner (for accounting purposes only) of the New Building during the construction period under build-to-suit lease accounting. Construction of the New Building began in June 2014. Since construction began, the Company has recorded estimated project construction costs as a construction in progress asset in "Property and equipment, net" and a corresponding long-term liability in "Other liabilities," respectively, in its consolidated balance sheets. The Company will continue to increase the asset and corresponding long-term liability as additional building costs are incurred by the landlord during the construction period. In addition, the amounts that the Company has paid or incurred for normal tenant improvements have also been recorded to the construction-in-progress asset.

Construction of the New Building is expected to be completed in June 2015. Once the landlord completes the construction of the New Building, the Company will evaluate whether the New Lease of the New Building meets the criteria for "sale-leaseback" accounting treatment under U.S. GAAP. If the New Lease of the New Building meets the "sale-leaseback" criteria, the Company will remove the asset and the related liability from its consolidated balance sheets and classify and account for the New Lease of the New Building as either an operating or capital lease. However, the Company currently expects that upon completion of construction, the New Lease of the New Building will not meet the "sale-leaseback" criteria.

If the New Lease of the New Building does not meet "sale-leaseback" criteria, the asset and obligation recognized during construction will remain recorded in the Company's consolidated balance sheets. The Company will account for the New Lease of the New Building as a financing with the associated lease payments allocated between the New Building and the underlying parcel of land on a relative fair value basis. Rent expense attributed to the underlying parcel of land, and representing the imputed cost to lease the land, will be accounted for on a straight-line basis as the land element will be considered an operating lease. Although the Company will not begin making lease payments pursuant to the New Lease until the renovations to the Existing Building and construction of the New Building are completed, the portion of the lease obligation attributed to the underlying parcel of land will be deemed to have commenced on the date construction of the New Building began.

Lease payments attributed to the New Building will be allocated between principal and interest expense using the effective interest method. The principal portion of the lease payment attributed to the New Building is reflected as a principal reduction of the financing obligation. In addition, the asset, which represents the total estimated cost of construction of the New Building at the end of the construction period, will be depreciated over the initial term of the New Lease to its expected residual value. At the conclusion of the New Lease, the Company will de-recognize both the net book value of the asset and the unamortized portion of the financing obligation. The amount of asset depreciation and financing obligation amortization is structured at the outset such that the remaining residual book value of the asset is always equal to or less than the remaining financing obligation at the end of the lease term. If the remaining financing obligation is greater than the residual book value of the asset at the end of the lease term, the Company will recognize a gain at the end of the lease term. The Company currently does not expect to recognize a gain at the conclusion of the New Lease.

At December 31, 2014, the Company had recognized $13.1 million in estimated project costs associated with the construction of the New Building as part of construction-in-progress and a financing obligation in the amount of $10.4 million, net of a $2.7 million deposit paid directly to the landlord, as part of Other liabilities in its consolidated balance sheets. The Company expects to recognize an additional $8.6 million in project costs associated with the construction of the New Building and an additional financing obligation of $1.3 million, net of $7.3 million in deposits to be paid directly to the landlord.

The Company had also recognized a $6.4 million tenant incentive asset and deferred tenant incentive liability associated with the Existing Building at December 31, 2014.

In addition to the lease arrangements described above, the Company leases office space and computer hardware under noncancelable long-term operating leases. Most leases include renewal options of at least three years.

Minimum future operating leases and financing obligations at December 31, 2014 are as follows (U.S. dollars in thousands):

Year Ending December 31,	Operating Leases		Financing Obligations

2015	$	29,382	$	386
2016		24,980		673
2017		21,396		693
2018		18,285		714
2019		12,183		735
Thereafter		678		4,382
Total minimum lease payments	$	106,904	$	7,583

Rent expense for operating leases totaled $27.7 million, $34.6 million and $52.3 million for the years ended December 31, 2012, 2013 and 2014, respectively. Interest expense associated with the financing obligations was nil for the years ended December 31, 2012, 2013 and 2014.