Accounting Policies

3 Months Ended

Mar. 31, 2021

Accounting Policies [Abstract]

Accounting Policies

Accounting Policies

Use of Estimates

The preparation of our condensed consolidated financial statements requires us to make estimates, judgments and assumptions that may affect the reported amounts of assets, liabilities, equity, revenues and expenses and related disclosure of contingent assets and liabilities. On an ongoing basis we evaluate our estimates, judgments and methodologies. We base our estimates on historical experience and on various other assumptions that we believe are reasonable, the results of which form the basis for making judgments about the carrying values of assets, liabilities and equity and the amount of revenues and expenses. Actual results may differ from those estimates.

Significant Accounting Policies

The significant accounting policies and estimates used in the preparation of the accompanying condensed consolidated financial statements are described in Note 2, Summary of Significant Accounting Policies to the consolidated financial statements in our 2020 Form 10-K. There have been no material changes in our significant accounting policies during the three months ended March 31, 2021.

Recently Issued Accounting Pronouncements Not Yet Adopted

Account Standard Update (ASU) 2020-06, Debt — Debt with Conversion and Other Options (subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (subtopic 815-40) (ASU 2020-06) simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible debt instruments with cash conversion features. Specifically, ASU 2020-06 removes the existing guidance that we currently follow for our convertible senior notes, which requires entities to account for cash conversion features in equity separately from the host contract. These amendments are expected to result in more freestanding financial instruments qualifying for equity classification and, as a result, not accounted for as derivatives, as well as fewer embedded features requiring separate accounting from the host contract. In addition, ASU 2020-06 eliminates the treasury stock method when calculating diluted earnings per share for convertible instruments that can be settled in whole or in part with equity and requires the use of the if-converted method. Early adoption is permitted, but no earlier than the fiscal year beginning after December 15, 2020. The standard can be applied using a full or modified retrospective approach.    

ASU 2020-06 will be effective for us as of January 1, 2022. When effective, we expect the accounting for our convertible senior notes as a single unit of account will: i) increase the carrying value of our convertible notes to be closer to its outstanding principal balance, ii) decrease our interest expense over the expected life of the financial instrument, and iii) result in the debt instrument’s effective interest rate to be closer to the stated coupon rate. In addition, the use of the more favorable treasury stock method, which allows an entity with a stated policy of settling convertible instruments with a combination of cash and shares to exclude shares issuable upon conversion that it expects to settle with cash when calculating diluted earnings per share, is no longer permitted. Even if we have the intent and ability to settle conversions by paying the conversion value in cash up to the principal amount being converted and any excess in shares, the adoption of ASU 2020-06 will require that we presume such instruments will be settled by issuance of shares (the “if-converted method”). As a result, our diluted earnings per share under ASU 2020-06 may be lower than if we were able to apply the treasury stock method when calculating the dilutive effect of our Notes in earnings per share.