Summary of Significant Accounting Policies (Policies)

6 Months Ended

Dec. 31, 2019

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

A full listing of our significant accounting policies is described in Note 4 “Summary of Significant Accounting Policies” of our Annual Report on Form 10-K for the fiscal year ended June 30, 2019 (“2019 Form 10-K”). We have prepared the accompanying unaudited consolidated financial statements in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial statements and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (which are normal and recurring in nature) considered necessary for a fair presentation have been included. These consolidated financial statements and accompanying notes should be read in conjunction with our annual consolidated financial statements and the notes thereto included in our 2019 Form 10-K.

We use the same accounting policies in preparing quarterly and annual financial statements. Unless otherwise noted, amounts presented within the Notes to Consolidated Financial Statements refer to our continuing operations.

Due to the seasonal nature of our business, quarterly revenue, expenses, earnings, and cash flows are not necessarily indicative of the results that may be achieved for the full fiscal year.

Certain prior period amounts have been reclassified for consistency with the current period presentation.

Recent Accounting Standards

Recent Accounting Standards

Recently adopted accounting standards

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02: “Leases (Topic 842).” This guidance was issued to increase transparency and comparability among organizations by recognizing right-of-use assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The amendments are effective for financial statements issued for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. We adopted this guidance, along with the related clarifications and improvements, effective July 1, 2019 using the modified retrospective approach without adjusting prior

comparative periods. The adoption of this standard significantly impacts our Consolidated Balance Sheets, but did not impact our Consolidated Statements of Income. We elected the practical expedients package which allows us to forego reassessing (i) whether any expired or existing contracts are or contain leases; (ii) the lease classification for any expired or expiring leases; and (iii) initial direct costs for any existing leases. We did not elect the hindsight practical expedient, which permits the use of hindsight when determining the lease term and impairment of operating lease assets. See Note 11 “Leases” for the disclosures related to this new accounting standard.

The impact on the Consolidated Balance Sheet upon adoption of Accounting Standards Codification (“ASC”) 842 is as follows (in thousands, except par value):

	June 30,		Adjustments due to		July 1,
	2019		adoption of ASC 842		2019
Assets:
Current assets:
Cash and cash equivalents	$	299,445	$	—	$	299,445
Investments in marketable securities		8,680		—		8,680
Restricted cash		1,022		—		1,022
Accounts receivable, net		157,829		—		157,829
Prepaid expenses and other current assets		37,724		(3,483)		34,241
Total current assets		504,700		(3,483)		501,217
Noncurrent assets:
Property and equipment, net		364,683		—		364,683
Operating lease assets		—		282,978		282,978
Deferred income taxes		18,314		—		18,314
Intangible assets, net		418,097		—		418,097
Goodwill		874,451		—		874,451
Other assets, net		62,451		—		62,451
Total noncurrent assets		1,737,996		282,978		2,020,974
Total assets	$	2,242,696	$	279,495	$	2,522,191
Liabilities and shareholders' equity:
Current liabilities:
Accounts payable	$	57,627	$	—	$	57,627
Accrued salaries, wages, and benefits		64,492		—		64,492
Accrued liabilities		86,722		(16,946)		69,776
Deferred revenue		99,790		—		99,790
Current operating lease liabilities		—		66,707		66,707
Current portion of long-term debt		3,000		—		3,000
Total current liabilities		311,631		49,761		361,392
Noncurrent liabilities:
Long-term debt		398,094		—		398,094
Long-term operating lease liabilities		—		269,387		269,387
Deferred income taxes		29,426		—		29,426
Other liabilities		102,472		(39,653)		62,819
Total noncurrent liabilities		529,992		229,734		759,726
Total liabilities		841,623		279,495		1,121,118
Redeemable noncontrolling interest		9,543		—		9,543
Shareholders' equity:
Common stock, $0.01 par value		801		—		801
Additional paid-in capital		486,061		—		486,061
Retained earnings		2,012,902		—		2,012,902
Accumulated other comprehensive loss		(137,290)		—		(137,290)
Treasury stock, at cost		(970,944)		—		(970,944)
Total shareholders' equity		1,391,530		—		1,391,530
Total liabilities and shareholders' equity	$	2,242,696	$	279,495	$	2,522,191

Upon the adoption of ASC 842, the following balances were removed from the Consolidated Balance Sheet as of July 1, 2019: (i) $3.5 million of prepaid rent balances within prepaid expenses and other current assets; (ii) $6.8 million of current deferred rent liability balances within accrued liabilities; (iii) $10.1 million of current restructure liability balances within accrued liabilities; (iv) $24.8 million of noncurrent deferred rent liability balances within other liabilities; and (v) $14.9 million of noncurrent restructure liability balances within other liabilities.

Recently issued accounting standards not yet adopted

In June 2016, FASB issued ASU No. 2016-13: “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” This guidance was issued to provide financial statement users with more decision-useful information about the expected losses on financial instruments by replacing the incurred loss impairment

methodology with a methodology that reflects expected credit losses by requiring a broader range of reasonable and supportable information to inform credit loss estimates. The amendments are effective for financial statements issued for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Management is evaluating the impact the guidance will have on Adtalem’s Consolidated Financial Statements.

Reclassifications

Reclassifications

Beginning in the first quarter of fiscal year 2020, Adtalem Brazil operations were classified as discontinued operations. See Note 4 “Discontinued Operations and Assets Held for Sale” for additional information. Prior period amounts have been revised to conform to the current classification. Certain expenses in prior periods previously allocated to Adtalem Brazil within our former Business and Law segment have been reclassified to the Home Office and Other segment based on discontinued operation reporting guidance regarding allocation of corporate overhead. For fiscal year 2020, home office costs to support the remaining businesses are being allocated to the Medical and Healthcare and Financial Services segments. See Note 20 “Segment Information” for additional information.