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New Accounting Standards and Reclassifications
 12 Months Ended
Dec. 31, 2020
New Accounting Standards and Reclassifications  
New Accounting Standards and Reclassifications

2.    New Accounting Standards and Reclassifications

Adoption of New Accounting Standards

Leases — In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02 associated with lease accounting. There were further amendments, including practical expedients, with the issuance of ASU 2018-01 in January 2018, ASU 2018-11 in July 2018 and ASU 2018-20 in December 2018. On January 1, 2019, we adopted this ASU using the optional transition method which allows entities to continue to apply historical accounting guidance in the comparative periods presented in the year of adoption. Accordingly, our financial statements for the reported periods after January 1, 2019 are presented under this amended guidance, while prior period amounts are not adjusted and continue to be reported in accordance with historical accounting guidance.

We elected to apply the following package of practical expedients on a consistent basis permitting entities not to reassess: (i) whether any expired or existing contracts are or contain a lease; (ii) lease classification for any expired or existing leases and (iii) whether initial direct costs for any expired or existing leases qualify for capitalization under the amended guidance. In addition, we applied (i) the practical expedient for land easements, which allows the Company to not apply the lease standard to certain existing land easements at transition and (ii) the practical expedient to include both the lease and non-lease components as a single component and account for it as a lease. See Note 8 for additional information.

Financial Instruments-Credit Losses — In June 2016, the FASB issued ASU 2016-13 associated with the measurement of credit losses on financial instruments. On January 1, 2020, we adopted this ASU using the modified retrospective transition method. The amended guidance replaced the previous incurred loss impairment methodology of recognizing credit losses when a loss is probable, with a methodology that reflects expected credit losses and requires

consideration of a broader range of reasonable and supportable information to assess credit loss estimates. This expected loss model generally results in earlier recognition of an allowance for losses. We recognized a net $2 million after tax decrease to retained earnings as of January 1, 2020 for the cumulative impact of adopting the amended guidance. See Note 3 for additional information and disclosures related to this amended guidance.

Implementation Costs Incurred in a Cloud Computing Arrangement — In August 2018, the FASB issued ASU 2018-15 associated with a customer’s accounting for implementation costs incurred in a cloud computing arrangement that is a service contract. The amendments align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. Costs for implementation activities in the application development stage are capitalized as prepayments depending on the nature of the costs, while costs incurred during the preliminary project and post-implementation stages are expensed as the activities are performed. The Company adopted this amended guidance on January 1, 2020 prospectively, and it did not have a material impact on our consolidated financial statements.

Guarantor Financial Information — In March 2020, the Securities and Exchange Commission (“SEC”) adopted final rules that simplify the disclosure requirements related to certain registered securities under SEC Regulation S-X, Rules 3-10 and 3-16, permitting registrants to provide certain alternative financial disclosures and non-financial disclosures in lieu of separate consolidating financial statements for subsidiary issuers and guarantors of registered debt securities (which we previously included within the notes to our financial statements included in our Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q) if certain conditions are met. The disclosure requirements, as amended, are now located in newly-created Rules 13-01 and 13-02 of Regulation S-X and are generally effective for filings on or after January 4, 2021, with early adoption permitted. We early adopted the new disclosure requirements effective as of April 1, 2020 and are providing the summarized financial information and related disclosures in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“Item 7”) in this Form 10-K.

Amendments to and Modernization of Regulation S-K — In August and November 2020, the SEC adopted final amendments to Regulation S-K intended to (i) modernize the disclosure requirements related to the description of business, legal proceedings and risk factors (Items 101, 103 and 105) and (ii) simplify and enhance certain financial disclosure requirements (Items 301, 302(a) and 303). Among other things, the amendments: (i) require registrants to include a description of human capital resources to the extent such disclosures would be material to an understanding of the registrant’s business (Item 101); (ii) increase the threshold for disclosure of governmental environmental proceedings from those reasonably likely to result in penalties in excess of $100,000 to $300,000 (Item 103); (iii) refine the risk factors disclosure to require disclosure of material risks and require that such risk factors be organized using sub-headings (Item 105); (iv) allow registrants to omit the table of selected quarterly financial data currently provided for each quarter of the two most recent fiscal years (Item 302(a)); (v) eliminates the table of selected financial data for each of its last five years required within annual reports (Item 301) and (vi) eliminate the requirement to present a contractual obligations table within Item 7 and instead describe known contractual and other obligations within liquidity and capital resources of Item 7 (Item 303).

We adopted the amended disclosure requirements for Item 101, Item 103 and Item 105 effective as of December 31, 2020, and the changes are reflected within Item 1, Business and Item 1A. Risk Factors. The amended guidance for Item 301, Item 302(a) and Item 303 is required for all registrants beginning with their first fiscal year ending on or after August 9, 2021. Registrants who have not currently filed their annual reports may early adopt the entire amended rule or Item 301 and Item 302(a) effective on February 10, 2021. We have elected to early adopt the amendments to Item 301 and Item 302(a). We are assessing the remaining provisions of this amended guidance and evaluating the impact on our consolidated financial statements.

Reclassifications

When necessary, reclassifications have been made to our prior period financial information to conform to the current year presentation and are not material to our consolidated financial statements.