Note 12 - Right of Use Assets

9 Months Ended

Sep. 30, 2019

Notes to Financial Statements

Lessee, Operating Leases [Text Block]

12.

Right of Use assets:

On

January 1, 2019,

the Company adopted ASC Topic

842

using the modified retrospective transition method. Topic

842

requires the recognition of lease assets and liabilities for operating leases, in addition to the finance lease assets and liabilities previously recorded on our condensed consolidated balance sheets. Beginning on

January 1, 2019,

our condensed consolidated financial statements are presented in accordance with the revised policies, while prior period amounts are

not

adjusted and continue to be reported in accordance with our historical policies. The modified retrospective transition method required the cumulative effect, if any, of initially applying the guidance to be recognized as an adjustment to our accumulated deficit as of our adoption date. As a result of adopting Topic

842,

we recognized additional lease assets and liabilities of

$5,834

as of

January 1, 2019,

in relation to the brand licenses we currently hold.  There is

no

discount rate implicit in the license agreement so the Company estimated a

12%

the discount rate for the incremental borrowing rate for the licenses as of the adoption date,

January 1, 2019.

Effective

April 1, 2019,

we recognized lease assets and liabilities of

$125,474,

in relation to the Vancouver office. We estimated a discount rate of

4.12%.

There was

no

cumulative effect adjustment to our accumulated deficit as a result of initially applying the guidance.

We elected the package of practical expedients permitted under the transition guidance within Topic

842,

which allowed us to carry forward prior conclusions about lease identification, classification and initial direct costs for leases entered into prior to adoption of Topic

842.

Additionally, we elected to

not

separate lease and non-lease components for all of our leases. For leases with a term of

12

months or less, our current offices, we elected the short-term lease exemption, which allowed us to

not

recognize right-of-use assets or lease liabilities for qualifying leases existing at transition and new leases we

may

enter into in the future.

Our operating leases primarily consist of license agreements for the use of certain brands. These arrangements typically do

not

transfer ownership of the underlying asset as we do

not

assume, nor do we intend to assume, the risks and rewards of ownership.