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Significant Accounting Policies (Policies)
9 Months Ended
Sep. 30, 2019
Accounting Policies [Abstract]  
Accounting Pronouncements Recently Adopted

Accounting Pronouncements Recently Adopted

 

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2016-02 – Leases (Topic 842).  This ASU requires lessees to recognize right-of-use assets and lease liabilities on the balance sheet. This ASU was effective for us as of January 1, 2019.  This ASU required a modified retrospective transition method that could either be applied at the earliest comparative period in the financial statements or the period of adoption.  We elected to use the period of adoption (January 1, 2019) transition method and therefore did not recast prior periods.  This ASU allowed for certain practical expedients to make the adoption of the ASU less burdensome.  We elected the practical expedients upon transition which permitted us to not reassess lease identification, classification, and initial direct costs under the new standard for leases that commenced prior to the effective date.  We also elected not to recognize a right-of-use asset nor a lease liability for leases with an initial term of twelve months or less.  Finally, we elected not to separate non-lease components from the leased components in the valuation of our right-of-use asset and lease liability for all asset classes.

On January 1, 2019, we recognized a right-of-use asset of $274.7 million in other assets and lease liabilities of $62.2 million and $221.2 million in other current liabilities and other long-term liabilities, respectively.  No cumulative adjustment to retained earnings was required upon adoption.  We do not have any significant finance leases.  See Note 7 for additional information.

There are no other recently issued accounting pronouncements that we have not yet adopted that are expected to have a material effect on our financial position, results of operations or cash flows.

Leases

 

We own most of our manufacturing facilities, but lease various office space, vehicles and other less significant assets throughout the world.  Our contracts contain a lease if they convey a right to control the use of an identified asset, either explicitly or implicitly, in exchange for consideration.  Our lease contracts are a necessary part of our business, but we do not believe they are significant to our overall operations.  We do not have any significant finance leases.  Additionally, we do not have significant leases: where we are considered a lessor; where we sublease our assets; with an initial term of twelve months or less; with related parties; with residual value guarantees; that impose restrictions or covenants on us; or that have not yet commenced, but create significant rights and obligations against us.

 

  Our real estate leases generally have terms of between 5 to 10 years and contain lease extension options that can vary from month-to-month extensions to up to 5 year extensions.  We include extension options in our lease term if we are reasonably certain to exercise that option.  In determining whether an extension is reasonably certain, we consider the uniqueness of the property for our needs, the availability of similar properties, whether the extension period payments remain the same or may change due to market rates or fixed price increases in the contract, and other economic factors.  Our vehicle leases generally have terms of between 3 to 5 years and contain lease extension options on a month-to-month basis. Our vehicle leases are generally not reasonably certain to be extended.

 

Under GAAP, we are required to discount our lease liabilities to present value using the rate implicit in the lease, or our incremental borrowing rate for a similar term as the lease term if the implicit rate is not readily available.  We generally do not have adequate information to know the implicit rate in a lease and therefore use our incremental borrowing rate.  Under GAAP, the incremental borrowing rate must be on a collateralized basis, but our debt arrangements are unsecured.  We have determined our incremental borrowing rate by using our credit rating to estimate our unsecured borrowing rate and applying reasonable assumptions to reduce the unsecured rate for a risk adjustment effect from collateral.