Leases

3 Months Ended

Mar. 31, 2019

Notes to Financial Statements

Leases

8. Leases

The company determines whether an arrangement is, or contains, a lease at inception. Prior to 2019, the company generally accounted for operating lease payments by charging them to expense as incurred. Beginning in 2019, operating leases that have commenced are included in other assets, other accrued expenses and other long-term liabilities in the consolidated balance sheet. Classification of operating lease liabilities as either current or noncurrent is based on the expected timing of payments due under the company’s obligations.

Because most of the company’s leases do not provide an implicit rate, the company estimates incremental borrowing rates based on the information available at the commencement date in determining the present value of lease payments. The company uses the implicit rate when readily determinable. Lease terms may include the effect of options to extend or terminate the lease when it is reasonably certain that the company will exercise that option.

We lease office space related primarily to the administrative activities and at March 31, 2019, the remaining term of these leases are less than 12 months. See Note 3.

Leases with lease terms of twelve-months or less are expensed on a straight-line basis over the lease term and are not recorded in the Condensed Consolidated Balance Sheet.

In addition, we elected the hindsight practical expedient to determine the lease term for existing leases. In our application of hindsight, we evaluated the Freiburg lease and determined the term would be less than 12 months.