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ACCOUNTING CHANGES OR RECENT ACCOUNTING PRONOUNCEMENTS | 6 Months Ended
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Jan. 03, 2020
Accounting Changes and Error Corrections [Abstract] |
ACCOUNTING CHANGES OR RECENT ACCOUNTING PRONOUNCEMENTS | NOTE 2: ACCOUNTING CHANGES OR RECENT ACCOUNTING PRONOUNCEMENTS Adoption of New Accounting Standards Leases Effective June 29, 2019, we adopted Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842), as amended (“ASC 842”) using the optional transition method. We initially applied ASC 842 for leases existing as of June 29, 2019 and recognized $270 million of right-of-use (“ROU”) assets and $289 million of lease liabilities in our Consolidated Balance Sheet. See Note 5: Business Combination in these Notes for ROU assets and lease liabilities assumed as part of the L3Harris Merger. In accordance with ASC 842, we recognized ROU assets and lease liabilities in our balance sheet for operating and finance leases under which we are the lessee, except for equipment leases and, as permitted by a practical expedient under ASC 842, leases with a term of 12 months or less. Equipment leases were not material at January 3, 2020 and June 29, 2019. We also elected the package of practical expedients permitted under ASC 842 and did not reassess lease classification for existing or expired leases, whether expired or existing contracts contain a lease under the new definition of a lease or whether previously capitalized initial direct costs would qualify for capitalization under ASC 842. Operating lease assets are classified as operating ROU assets, operating lease liabilities for obligations due within 12 months are classified as other accrued items and operating lease liabilities for obligations due longer than 12 months are classified as other long-term liabilities. Finance lease assets are classified as property, plant and equipment. Finance lease liabilities are classified as other accrued items or other long-term debt, net depending on when the obligation is due. ROU assets and lease liabilities are recognized based on the present value of future lease payments. Lease payments primarily include base rent. We have some lease payments that are based on an index and changes to the index are treated as variable lease payments and recognized in the period in which the obligation for those payments is incurred. Our lease payments also include non-lease components such as real estate taxes and common-area maintenance costs. We elected the practical expedient to account for lease and non-lease components as a single component. In certain of our leases, the non-lease components are variable and are therefore excluded from lease payments to determine the ROU asset. The present value of future lease payments is determined using our incremental borrowing rate at lease commencement over the expected lease term. We use our incremental borrowing rate because our leases do not provide an implicit lease rate. The expected lease term represents the number of years we expect to lease the property, including options to extend or terminate the lease when it is reasonably certain that we will exercise the option. Operating lease expense is recognized as an operating cost on a straight-line basis over the expected lease term in our Consolidated Statement of Income. For finance leases, the ROU asset is amortized on a straight-line basis over the lease term, and interest on the lease liability is recognized in interest expense. The amortization of ROU assets for our finance leases and interest expense were not material for the two quarters ended January 3, 2020. We are a lessor for certain arrangements for flight simulators. These leases meet the criteria for operating lease classification. Lease income associated with these leases was not material for the two quarters ended January 3, 2020. The adoption of ASC 842 did not have a material effect on our results of operations or cash flows. Derivatives and Hedging Effective June 29, 2019, we adopted ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. The amendments in this update are intended to better align companies’ risk management activities and financial reporting for hedging relationships through changes to both the designation and measurement guidance for qualifying hedge relationships and the presentation of hedge results. The amendments in this update require companies to present the earnings effect of the hedging instrument in the same income statement line in which the earnings effect of the hedged item is reported. Prior to the adoption of this update, GAAP provided hedge accounting for only the portion of the hedge deemed to be highly effective and required companies to separately reflect the amount by which the hedging instrument did not offset the hedged item, which is referred to as the ineffective amount. The amendments in this update include, among other items, removal of the requirement that companies separately measure and recognize in earnings the ineffective amount for highly effective hedges. Adoption of this standard did not have a material effect on our financial condition, results of operations or cash flows.

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- Definition The entire disclosure of changes in accounting principles, including adoption of new accounting pronouncements, that describes the new methods, amount and effects on financial statement line items. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 250 -URI http://asc.fasb.org/topic&trid=2122394 + Details
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