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Summary of Significant Accounting Policies
 12 Months Ended
Dec. 31, 2018
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies
Summary of Significant Accounting Policies
a.    Principles of Consolidation

The accompanying financial statements reflect our financial position, results of operations, comprehensive income (loss), equity and cash flows on a consolidated basis. All intercompany transactions and account balances have been eliminated.
b.    Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires us to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities at the date of the financial statements and for the period then ended. On an ongoing basis, we evaluate the estimates used. We base our estimates on historical experience, actuarial estimates, current conditions and various other assumptions that we believe to be reasonable under the circumstances. These estimates form the basis for making judgments about the carrying values of assets and liabilities and are not readily apparent from other sources. Actual results may differ from these estimates.
c.    Cash, Cash Equivalents and Restricted Cash

Cash and cash equivalents include cash on hand and cash invested in highly liquid short-term securities, which have remaining maturities at the date of purchase of less than 90 days. Cash and cash equivalents are carried at cost, which approximates fair value.

At December 31, 2017 and 2018, we had approximately $22,167 and $15,141, respectively, of restricted cash held by certain financial institutions related to bank guarantees.
d.    Foreign Currency

Local currencies are the functional currencies for our operations outside the United States, with the exception of certain foreign holding companies, whose functional currency is the United States dollar. In those instances where the local currency is the functional currency, assets and liabilities are translated at period-end exchange rates, and revenues and expenses are translated at average exchange rates for the applicable period. Resulting translation adjustments are reflected in the accumulated other comprehensive, net component of Iron Mountain Incorporated Stockholders' Equity. See Note 2.u.
e.    Derivative Instruments and Hedging Activities

Every derivative instrument is required to be recorded in the balance sheet as either an asset or a liability measured at its fair value. Periodically, we acquire derivative instruments that are intended to hedge either cash flows or values that are subject to foreign exchange or other market price risk and not for trading purposes. We have formally documented our hedging relationships, including identification of the hedging instruments and the hedged items, as well as our risk management objectives and strategies for undertaking each hedge transaction. Given the recurring nature of our revenues and the long-term nature of our asset base, we have the ability and the preference to use long-term, fixed interest rate debt to finance our business, thereby preserving our long-term returns on invested capital. We target approximately 75% of our debt portfolio to be fixed with respect to interest rates. Occasionally, we may use interest rate swaps as a tool to maintain our targeted level of fixed rate debt. In addition, we may use borrowings in foreign currencies, either obtained in the United States or by our foreign subsidiaries, to hedge foreign currency risk associated with our international investments. Sometimes we enter into currency swaps to temporarily hedge an overseas investment, such as a major acquisition, while we arrange permanent financing or to hedge our exposure due to foreign currency exchange movements related to our intercompany accounts with and between our foreign subsidiaries. As of December 31, 2017 and 2018, none of our derivative instruments contained credit-risk related contingent features. See Note 3.
f.    Property, Plant and Equipment

Property, plant and equipment are stated at cost and depreciated using the straight-line method with the following useful lives (in years):
 
Range
Buildings and building improvements
5 to 40
Leasehold improvements
5 to 10 or life of the lease (whichever is shorter)
Racking
1 to 20 or life of the lease (whichever is shorter)
Warehouse equipment/vehicles
1 to 10
Furniture and fixtures
1 to 10
Computer hardware and software
2 to 5

Property, plant and equipment (including capital leases in the respective category), at cost, consist of the following:
 
December 31,
 
2017
 
2018
Land
$
314,897

 
$
400,980

Buildings and building improvements
2,039,902

 
2,991,307

Leasehold improvements
592,700

 
770,666

Racking
1,996,594

 
2,001,831

Warehouse equipment/vehicles
467,345

 
481,515

Furniture and fixtures
55,245

 
56,207

Computer hardware and software
627,571

 
680,283

Construction in progress
156,846

 
218,160

 
$
6,251,100

 
$
7,600,949



Minor maintenance costs are expensed as incurred. Major improvements which extend the life, increase the capacity or improve the safety or the efficiency of property owned are capitalized. Major improvements to leased buildings are capitalized as leasehold improvements and depreciated.

We capitalize interest expense during the active construction period of major capital projects. Capitalized interest is added to the cost of the underlying assets and is amortized over the useful lives of the assets. During the year ended December 31, 2018, we capitalized interest of $3,732. The amount of capitalized interest during the years ended December 31, 2016 and 2017 was insignificant.

We develop various software applications for internal use. Computer software costs associated with internal use software are expensed as incurred until certain capitalization criteria are met. Payroll and related costs for employees directly associated with, and devoting time to, the development of internal use computer software projects (to the extent time is spent directly on the project) are capitalized. During the years ended December 31, 2016, 2017 and 2018, we capitalized $16,438, $25,166 and $29,407 of costs, respectively, associated with the development of internal use computer software projects. Capitalization begins when the design stage of the application has been completed and it is probable that the project will be completed and used to perform the function intended. Capitalization ends when the asset is ready for its intended use. Depreciation begins when the software is placed in service. Computer software costs that are capitalized are periodically evaluated for impairment.

We did not record any material write-offs of deferred software costs during the years ended December 31, 2016, 2017 and 2018.

Entities are required to record the fair value of a liability for an asset retirement obligation in the period in which it is incurred. Asset retirement obligations represent the costs to replace or remove tangible long-lived assets required by law, regulatory rule or contractual agreement. When the liability is initially recorded, the entity capitalizes the cost by increasing the carrying amount of the related long-lived asset, which is then depreciated over the useful life of the related asset. The liability is increased over time through accretion expense (included in depreciation expense) such that the liability will equate to the future cost to retire the long-lived asset at the expected retirement date. Upon settlement of the liability, an entity either settles the obligation for its recorded amount or realizes a gain or loss upon settlement. Our asset retirement obligations are primarily the result of requirements under our facility lease agreements which generally have "return to original condition" clauses which would require us to remove or restore items such as shred pits, vaults, demising walls and office build-outs, among others. The significant assumptions used in estimating our aggregate asset retirement obligation are the timing of removals, the probability of a requirement to perform, estimated cost and associated expected inflation rates that are consistent with historical rates and credit-adjusted risk-free rates that approximate our incremental borrowing rate. Our asset retirement obligations at December 31, 2017 and 2018 were $27,757 and $28,256, respectively.
g.    Long-Lived Assets

We review long-lived assets, including all finite-lived intangible assets, for impairment whenever events or changes in circumstances indicate the carrying amount of such assets may not be recoverable. Recoverability of these assets is determined by comparing the sum of the forecasted undiscounted net cash flows of the operation to which the assets relate to their carrying amount. The operations are generally distinguished by the business segment and geographic region in which they operate. If it is determined that we are unable to recover the carrying amount of the assets, the long-lived assets are written down, on a pro rata basis, to fair value. Fair value is determined based on discounted cash flows or appraised values, depending upon the nature of the assets. Long-lived assets, including finite-lived intangible assets, are amortized over their useful lives. Annually, or more frequently if events or circumstances warrant, we assess whether a change in the lives over which long-lived assets, including finite-lived intangible assets, are amortized is necessary.

Consolidated loss (gain) on disposal/write-down of property, plant and equipment (excluding real estate), net was (i) $1,412 for the year ended December 31, 2016 and consisted primarily of losses associated with the write-off of certain software assets associated with our North American Records and Information Management Business segment; (ii) $799 for the year ended December 31, 2017 and consisted primarily of losses associated with the write-off of certain property in our Other International Business segment, partially offset by gains on the retirement of leased vehicles accounted for as capital lease assets primarily associated with our North American Records and Information Management Business segment; and (iii) $(9,818) for the year ended December 31, 2018 and consisted primarily of gains associated with the involuntary conversion of assets included in a facility that we own in Argentina which was partially destroyed in a fire in 2014, for which we received insurance proceeds in excess of the carrying amount of such assets during the fourth quarter of 2018. See Note 10.e.

Gain on sale of real estate for the year ended December 31, 2016 was $2,180, net of tax of $130, and consisted primarily of the sale of land and buildings in the United States and Canada. Gain on sale of real estate for the year ended December 31, 2017 was $1,565 and consisted primarily of the sale of land and building in the United States for net proceeds of approximately $12,700. Gain on sale of real estate for the year ended December 31, 2018 was $55,328, net of tax of $8,476, and consisted primarily of the sale of land and buildings in the United Kingdom.
h.    Goodwill and Other Indefinite-Lived Intangible Assets

Goodwill and intangible assets with indefinite lives are not amortized but are reviewed annually for impairment or more frequently if impairment indicators arise. Other than goodwill, we currently have no intangible assets that have indefinite lives and which are not amortized.

We have selected October 1 as our annual goodwill impairment review date. We have performed our annual goodwill impairment review as of October 1, 2016, 2017 and 2018. We concluded that as of October 1, 2016 and October 1, 2018, goodwill was not impaired. As of October 1, 2017, we determined that the fair value of the Consumer Storage reporting unit was less than its carrying value and, therefore, we recorded a $3,011 impairment charge on the goodwill associated with this reporting unit during the fourth quarter of 2017, which represents a full write-off of all goodwill associated with this reporting unit. We concluded that the goodwill associated with each of our other reporting units was not impaired as of October 1, 2017.

The following is a discussion regarding (i) the reporting units at which level we tested goodwill for impairment as of October 1, 2017, (ii) our reporting units as of December 31, 2017 (including the amount of goodwill associated with each reporting unit), (iii) changes to the composition of our reporting units between December 31, 2017 and October 1, 2018, (iv) the reporting units at which level we tested goodwill for impairment as of October 1, 2018, and (v) our reporting units as of December 31, 2018 (including the amount of goodwill associated with each reporting unit). When changes occur in the composition of one or more reporting units, the goodwill is reassigned to the reporting units affected based upon their relative fair values.
Goodwill Impairment Analysis - 2017

a. Reporting Units as of October 1, 2017

Our reporting units at which level we performed our goodwill impairment analysis as of October 1, 2017 were as follows: (1) North American Records and Information Management; (2) North American Data Management; (3) Global Data Center (which had no goodwill at October 1, 2017); (4) Consumer Storage; (5) Fine Arts; (6) Western Europe; (7) Northern/Eastern Europe and Middle East, Africa and India ("NEE and MEAI"); (8) Latin America; (9) Australia and New Zealand; and (10) Asia.

b. Changes to Composition of Reporting Units between October 1, 2017 and December 31, 2017

During the fourth quarter of 2017, as a result of changes in the management of our entertainment storage and related services businesses, we reassessed the composition of our reportable operating segments (see Note 9 for a description of our reportable operating segments) as well as our reporting units. As a result of this reassessment, we determined that our entertainment storage and related services businesses in the United States and Canada, which were previously included within our North American Data Management reporting unit, were being managed in conjunction with our entertainment storage and services businesses in China - Hong Kong S.A.R., France, the Netherlands and the United Kingdom (the majority of which were acquired in the third quarter of 2017 as part of the Bonded Transaction (as defined and more fully disclosed in Note 6)). This newly formed reporting unit is referred to as the Entertainment Services reporting unit. We have reassigned the related goodwill associated to the reporting units impacted by this change on a relative fair value basis.
Goodwill by Reporting Unit as of December 31, 2017

The carrying value of goodwill, net for each of our reporting units described above as of December 31, 2017 is as follows:
 
Carrying Value
as of
December 31, 2017
North American Records and Information Management(1)
$
2,269,446

North American Data Management(2)
497,851

Consumer Storage(3)
—

Fine Arts(3)
25,298

Entertainment Services(3)
34,750

Western Europe(4)
396,489

NEE and MEAI(5)
188,265

Latin America(5)
155,115

Australia and New Zealand(5)
316,883

Asia(5)
186,170

Global Data Center(6)
—

Total
$
4,070,267

_______________________________________________________________________________
(1) This reporting unit is included in the North American Records and Information Management Business segment.
(2) This reporting unit is included in the North American Data Management Business segment.
(3) This reporting unit is included in the Corporate and Other Business segment.
(4) This reporting unit is included in the Western European Business segment.
(5) This reporting unit is included in the Other International Business segment.
(6) This reporting unit is included in the Global Data Center Business segment.
Goodwill Impairment Analysis - 2018

a. Changes to Composition of Reporting Units between December 31, 2017 and October 1, 2018

During the second quarter of 2018, as a result of changes in the management of our businesses included in our Other International Business segment, we reassessed the composition of our reporting units. As a result of this reassessment, we determined that our business in South Africa, which was previously included within our NEE and MEAI reporting unit, was now being managed in conjunction with our businesses included in our Australia and New Zealand reporting unit. This newly formed reporting unit, which consists of our businesses in Australia, New Zealand and South Africa is referred to as the Australia, New Zealand and South Africa reporting unit, or the ANZ SA reporting unit. Our former NEE and MEAI reporting unit, which no longer includes our business in South Africa, is referred to as the Northern/Eastern Europe and Middle East and India reporting unit, or the NEE and MEI reporting unit.

b. Reporting Units as of October 1, 2018

As a result of the changes described above, our reporting units at which level we performed our goodwill impairment analysis as of October 1, 2018 were as follows: (1) North American Records and Information Management; (2) North American Data Management; (3) Global Data Center; (4) Consumer Storage; (5) Fine Arts; (6) Entertainment Services; (7) Western Europe; (8) NEE and MEI; (9) Latin America; (10) ANZ SA; and (11) Asia. We concluded that the goodwill associated with each of our reporting units was not impaired as of such date.

c. Changes to Composition of Reporting Units between October 1, 2018 and December 31, 2018

During the fourth quarter of 2018, as a result of changes in the management of our Information Governance and Digital Solutions business in Sweden, we reassessed the composition of our reporting units as well as our reportable operating segments (see Note 9 for a description of our reportable operating segments). As part of this reassessment, we determined that our Information Governance and Digital Solutions business in Sweden (which was previously managed along with our other businesses within the Western Europe reporting unit) is now being managed in conjunction with our businesses included in our NEE and MEI reporting unit, which already included the remainder of our business in Sweden. We concluded that the goodwill associated with our Western Europe and NEE and MEI reporting units was not impaired following this change in reporting units. See Note 9 for disclosure regarding the impact of this change in management of our business in Sweden on our reportable operating segments.
Goodwill by Reporting Unit as of December 31, 2018

The carrying value of goodwill, net for each of our reporting units described above as of December 31, 2018 is as follows:
 
Carrying Value
as of
December 31, 2018
North American Records and Information Management(1)
$
2,251,795

North American Data Management(2)
493,491

Consumer Storage(3)
—

Fine Arts(3)
35,526

Entertainment Services(3)
34,233

Western Europe(4)
381,806

NEE and MEI(5)
169,780

Latin America(5)
136,099

ANZ SA(5)
300,204

Asia(5)
212,140

Global Data Center(6)
425,956

Total
$
4,441,030

_______________________________________________________________________________
(1) This reporting unit is included in the North American Records and Information Management Business segment.
(2) This reporting unit is included in the North American Data Management Business segment.
(3) This reporting unit is included in the Corporate and Other Business segment.
(4) This reporting unit is included in the Western European Business segment.
(5) This reporting unit is included in the Other International Business segment.
(6) This reporting unit is included in the Global Data Center Business segment.
Reporting unit valuations have generally been determined using a combined approach based on the present value of future cash flows and market multiples. The income approach incorporates many assumptions including future growth rates and operating margins, discount rate factors, expected capital expenditures and income tax cash flows. Changes in economic and operating conditions impacting these assumptions could result in goodwill impairments in future periods. In conjunction with our annual goodwill impairment reviews, we reconcile the sum of the valuations of all of our reporting units to our market capitalization as of such dates.

The changes in the carrying value of goodwill attributable to each reportable operating segment for the years ended December 31, 2017 and 2018 is as follows:
 
North American
Records and
Information
Management
Business
 
North American
Data Management
Business
 
Western European Business
 
Other International Business
 
Global Data Center Business
 
Corporate and Other Business
 
Total
Consolidated
Goodwill balance, net of accumulated amortization, as of December 31, 2016
$
2,280,911

 
$
493,966

 
$
349,421

 
$
743,077

 
$
—

 
$
37,646

 
$
3,905,021

Deductible goodwill acquired during the year
894

 
—

 
—

 
9,274

 
—

 
717

 
10,885

Non-deductible goodwill acquired during the year
—

 
—

 
—

 
24,970

 
—

 
24,533

 
49,503

Goodwill impairment
—

 
—

 
—

 
—

 
—

 
(3,011
)
 
(3,011
)
Goodwill allocated to Russia and Ukraine Divestment (see Note 13)
—

 
—

 
—

 
(3,515
)
 
—

 
—

 
(3,515
)
Fair value and other adjustments(1)
(25,195
)
 
208

 
10,536

 
21,079

 
—

 
—

 
6,628

Currency effects
12,836

 
3,677

 
36,532

 
51,548

 
—

 
163

 
104,756

Goodwill balance, net of accumulated amortization, as of December 31, 2017
2,269,446

 
497,851

 
396,489

 
846,433

 
—

 
60,048

 
4,070,267

Deductible goodwill acquired during the year
—

 
—

 
—

 
3,251

 
—

 
6,644

 
9,895

Non-deductible goodwill acquired during the year
—

 
—

 
5,231

 
28,999

 
429,853

 
3,620

 
467,703

Goodwill allocated to IMFS Divestment (see Note 13)
(1,202
)
 
—

 
—

 
—

 
—

 
—

 
(1,202
)
Fair value and other adjustments(2)
(423
)
 
—

 
—

 
4,283

 
—

 
609

 
4,469

Currency effects
(16,026
)
 
(4,360
)
 
(19,914
)
 
(64,743
)
 
(3,897
)
 
(1,162
)
 
(110,102
)
Goodwill balance, net of accumulated amortization, as of December 31, 2018
$
2,251,795

 
$
493,491

 
$
381,806

 
$
818,223

 
$
425,956

 
$
69,759

 
$
4,441,030

Accumulated Goodwill Impairment Balance as of December 31, 2017
$
85,909

 
$
—

 
$
46,500

 
$
—

 
$
—

 
$
3,011

 
$
135,420

Accumulated Goodwill Impairment Balance as of December 31, 2018
$
85,909

 
$
—

 
$
46,500

 
$
—

 
$
—

 
$
3,011

 
$
135,420

___________________________________________________________________
(1)
Total fair value and other adjustments primarily include net adjustments of $6,628 primarily related to property, plant and equipment, and customer relationship intangible assets.
(2)
Total fair value and other adjustments primarily include net adjustments of $(2,717) primarily related to property, plant and equipment, customer relationship intangible assets and deferred income taxes and other liabilities and $7,186 of cash paid related to certain acquisitions completed in 2017.
i.    Finite-lived Intangible Assets and Liabilities

i. Customer Relationship Intangible Assets

Customer relationship intangible assets, which are acquired through either business combinations or acquisitions of customer relationships, are amortized over periods ranging from ten to 30 years (weighted average of 18 years at December 31, 2018) and are included in depreciation and amortization in the accompanying Consolidated Statements of Operations. The value of customer relationship intangible assets is calculated based upon estimates of their fair value.

ii. Customer Inducements

Prior to the adoption of ASU 2014-09, free intake costs to transport boxes to one of our facilities, which include labor and transportation costs ("Free Move Costs"), were capitalized and amortized over periods ranging from ten to 30 years. The amortization of Free Move Costs is included in depreciation and amortization in the accompanying Consolidated Statements of Operations for the years ended December 31, 2016 and 2017. Subsequent to the adoption of ASU 2014-09, Free Move Costs are considered a Contract Fulfillment Cost (as defined in Note 2.l.) and, therefore, are now deferred and amortized and included in amortization expense over three years, consistent with the transfer of the performance obligation to the customer to which the asset relates. See Note 2.l. for information regarding the accounting for Free Move Costs, which are now a component of Intake Costs (as defined in Note 2.l.), following the adoption of ASU 2014-09.

Payments that are made to a customer's current records management vendor in order to terminate the customer's existing contract with that vendor, or direct payments to a customer ("Permanent Withdrawal Fees"), are amortized over periods ranging from five to 15 years (weighted average of seven years as of December 31, 2018) and are included in storage and service revenue in the accompanying Consolidated Statements of Operations. Our accounting for Permanent Withdrawal Fees did not change as a result of the adoption of ASU 2014-09.

Free Move Costs (prior to the adoption of ASU 2014-09) and Permanent Withdrawal Fees are collectively referred to as "Customer Inducements". If the customer terminates its relationship with us, the unamortized carrying value of the Customer Inducement intangible asset is charged to expense or revenue. However, in the event of such termination, we generally collect, and record as income, permanent removal fees that generally equal or exceed the amount of the unamortized Customer Inducement intangible asset.

iii. Data Center Intangible Assets and Liabilities

Finite-lived intangible assets associated with our data center business consist of the following:

Data Center In-Place Lease Intangible Assets and Data Center Tenant Relationship Intangible Assets

Data Center In-Place Lease Intangible Assets (“Data Center In-Place Leases”) and Data Center Tenant Relationship Intangible Assets (“Data Center Tenant Relationships") are acquired through either business combinations or asset acquisitions in our data center business. These intangible assets reflect the value associated with acquiring a data center operation with active tenants as of the date of acquisition. The value of Data Center In-Place Leases is determined based upon an estimate of the economic costs (such as lost revenues, tenant improvement costs, commissions, legal expenses and other costs to acquire new data center leases) avoided by acquiring a data center operation with active tenants that would have otherwise been incurred if the data center operation was purchased vacant. Data Center In-Place Leases are amortized over the weighted average remaining term of the acquired data center leases (weighted average of six years as of December 31, 2018) and are included in depreciation and amortization in the accompanying Consolidated Statements of Operations. The value of Data Center Tenant Relationships is determined based upon an estimate of the economic costs avoided upon lease renewal of the acquired tenants, based upon expectations of lease renewal. Data Center Tenant Relationships are amortized over the weighted average remaining anticipated life of the relationship with the acquired tenant (weighted average of nine years as of December 31, 2018) and are included in depreciation and amortization in the accompanying Consolidated Statements of Operations. Data Center In-Place Leases and Data Center Tenant Relationships are included in Customer relationships, customer inducements and data center lease-based intangibles in the accompanying Consolidated Balance Sheets.

Data Center Above-Market and Below-Market In-Place Lease Intangible Assets

Data Center Above-Market In-Place Lease Intangible Assets (“Data Center Above-Market Leases”) and Data Center Below-Market In-Place Lease Intangible Assets (“Data Center Below-Market Leases”) are acquired through either business combinations or asset acquisitions in our data center business. We record Data Center Above-Market Leases and Data Center Below-Market Leases at the net present value of the difference between (i) the contractual amounts to be paid pursuant to each in-place lease and (ii) management’s estimate of the fair market lease rates for each corresponding in-place lease. Data Center Above-Market Leases (weighted average of four years as of December 31, 2018) and Data Center Below-Market Leases (weighted average of nine years as of December 31, 2018) are amortized over the remaining non-cancellable term of the acquired in-place lease to storage revenue in the accompanying Consolidated Statements of Operations. Data Center Above-Market Leases are included in Customer relationships, customer inducements and data center lease-based intangibles in the accompanying Consolidated Balance Sheets. Data Center Below-Market Leases are included in Other long-term liabilities in the accompanying Consolidated Balance Sheets.
The gross carrying amount and accumulated amortization of our finite-lived intangible assets as of December 31, 2017 and 2018, respectively, are as follows:
 
December 31, 2017
 
December 31, 2018
 
Gross Carrying
Amount
 
Accumulated
Amortization
 
Net Carrying
Amount
 
Gross Carrying
Amount
 
Accumulated
Amortization
 
Net Carrying
Amount
Assets:
 
 
 
 
 
 
 
 
 
 
 
Customer relationship intangible assets
$
1,704,105

 
$
(395,278
)
 
$
1,308,827

 
$
1,718,919

 
$
(455,705
)
 
$
1,263,214

Customer inducements(1)
140,030

 
(66,981
)
 
73,049

 
56,478

 
(34,181
)
 
22,297

Data center lease-based intangible assets(2)
19,314

 
(643
)
 
18,671

 
271,818

 
(50,807
)
 
221,011

Third-party commissions asset(3)
—

 
—

 
—

 
30,071

 
(1,089
)
 
28,982

 
$
1,863,449

 
$
(462,902
)
 
$
1,400,547

 
$
2,077,286

 
$
(541,782
)
 
$
1,535,504

Liabilities:
 
 
 
 
 
 
 
 
 
 
 
Data center below-market leases
$
—

 
$
—

 
$
—

 
$
12,318

 
$
(1,642
)
 
$
10,676

_______________________________________________________________________________

(1)
The gross carrying amount, accumulated amortization and net carrying amount of customer inducements as of December 31, 2017 includes Free Move Costs, which were capitalized as Customer Inducements prior to the adoption of ASU 2014-09. Subsequent to the adoption of ASU 2014-09, Free Move Costs are considered Contract Fulfillment Costs and Customer Inducements consist exclusively of Permanent Withdrawal Fees. Contract Fulfillment Costs are included in Other, a component of Other assets, net, in the accompanying Consolidated Balance Sheet as of December 31, 2018. See Note 2.l. for information regarding Contract Fulfillment Costs included in our Consolidated Balance Sheet as of December 31, 2018.
(2)
Includes Data Center In-Place Leases, Data Center Tenant Relationships and Data Center Above-Market Leases.
(3)
Third-party commissions asset is included in Other, a component of Other assets, net in the accompanying Consolidated Balance Sheet as of December 31, 2018. See Note 6 for additional information on the third-party commissions asset.

Other finite-lived intangible assets, including trade names, noncompetition agreements and trademarks, are capitalized and amortized over a weighted average of four years as of December 31, 2018, and are included in depreciation and amortization in the accompanying Consolidated Statements of Operations.
 
December 31, 2017
 
December 31, 2018
 
Gross Carrying
Amount
 
Accumulated
Amortization
 
Net Carrying
Amount
 
Gross Carrying
Amount
 
Accumulated
Amortization
 
Net Carrying
Amount
Other finite-lived intangible assets (included in other assets, net)
$
20,929

 
$
(10,728
)
 
$
10,201

 
$
20,310

 
$
(14,798
)
 
$
5,512







Amortization expense associated with finite-lived intangible assets, revenue reduction associated with the amortization of Permanent Withdrawal Fees and net revenue reduction associated with the amortization of Data Center Above-Market Leases and Data Center Below-Market Leases for the years ended December 31, 2016, 2017 and 2018 are as follows:
 
 
Year Ended December 31,
 
 
2016
 
2017
 
2018
Amortization expense included in depreciation and amortization associated with:
 
 

 
 

 
 

Customer relationship and customer inducement intangible assets
 
$
84,349

 
$
109,563

 
$
113,782

Data center in-place leases and tenant relationships
 
—

 
—

 
43,061

Other finite-lived intangible assets
 
2,451

 
6,530

 
4,624

Third-party commissions asset
 
—

 
—

 
1,089

Revenue reduction associated with amortization of:
 
 

 
 

 
 

Permanent withdrawal fees
 
$
12,217

 
$
11,253

 
$
11,408

Data center above-market leases and data center below-market leases
 
—

 
—

 
4,873



Estimated amortization expense for existing finite-lived intangible assets (excluding deferred financing costs, as disclosed in Note 2.j. and Contract Fulfillment Costs, as defined and disclosed in Note 2.l.) is as follows:
 
Estimated Amortization
 
Included in Depreciation
and Amortization
 
Revenue Reduction Associated with the Amortization of Permanent Withdrawal Fees
 
Revenue Reduction (Increase) Associated with Amortization of Data Center
 Above-market leases and Below-market leases
2019
$
160,048

 
$
7,386

 
$
4,332

2020
155,324

 
5,705

 
1,260

2021
151,546

 
3,792

 
676

2022
121,459

 
1,667

 
157

2023
118,586

 
1,192

 
(523
)
Thereafter
800,248

 
1,387

 
(3,902
)
j.    Deferred Financing Costs

Deferred financing costs are amortized over the life of the related debt. If debt is retired early, the related unamortized deferred financing costs are written-off in the period the debt is retired to other expense (income), net. As of December 31, 2017 and 2018, the gross carrying amount of deferred financing costs was $113,678 and $128,469, respectively, and accumulated amortization of those costs was $27,438 and $41,862, respectively. Unamortized deferred financing costs are included as a component of Long-term debt in our Consolidated Balance Sheets.

Estimated amortization expense for deferred financing costs, which are amortized as a component of interest expense, is as follows:
 
Estimated Amortization of
Deferred Financing Costs
2019
$
15,544

2020
15,396

2021
14,272

2022
13,227

2023
10,108

Thereafter
18,060

k.    Prepaid Expenses and Accrued Expenses

There are no prepaid expenses with items greater than 5% of total current assets as of December 31, 2017 and 2018.

Accrued expenses, with items greater than 5% of total current liabilities are shown separately, and consist of the following:
 
December 31,
 
2017
 
2018
Interest
$
71,176

 
$
83,854

Payroll and vacation
67,379

 
65,846

Incentive compensation
72,006

 
75,256

Sales tax and VAT payable
63,725

 
96,564

Dividend
172,102

 
181,986

Other
206,758

 
249,178

Accrued expenses
$
653,146

 
$
752,684

l.    Revenues

Our revenues consist of storage rental revenues as well as service revenues and are reflected net of sales and value added taxes. Storage rental revenues, which are considered a key driver of financial performance for the storage and information management services industry, consist primarily of recurring periodic rental charges related to the storage of materials or data (generally on a per unit basis) that are typically retained by customers for many years, technology escrow services that protect and manage source code, data backup and storage on our proprietary cloud and revenues associated with our data center operations. Service revenues include charges for related service activities, the most significant of which include: (1) the handling of records, including the addition of new records, temporary removal of records from storage, refiling of removed records and courier operations, consisting primarily of the pickup and delivery of records upon customer request; (2) destruction services, consisting primarily of secure shredding of sensitive documents and the related sale of recycled paper, the price of which can fluctuate from period to period, and customer termination and permanent removal fees; (3) other services, including the scanning, imaging and document conversion services of active and inactive records and project revenues; (4) consulting services; and (5) cloud-related data protection, preservation, restoration and recovery.

In May 2014, the Financial Accounting Standards Board ("FASB") issued ASU 2014-09. ASU 2014-09 provides guidance for management to reassess revenue recognition as it relates to: (1) transfer of control, (2) variable consideration, (3) allocation of transaction price based on relative standalone selling price, (4) licenses, (5) time value of money, and (6) contract costs. We adopted ASU 2014-09 as of January 1, 2018 using the modified retrospective method for all of our customer contracts, whereby the cumulative effect of applying ASU 2014-09 is recognized at the date of initial application. At January 1, 2018, we recognized the cumulative effect of initially applying ASU 2014-09 as an adjustment to the opening balance of (distributions in excess of earnings) earnings in excess of distributions, resulting in a decrease of $30,233 to stockholders' equity. The reduction of (distribution in excess of earnings) earnings in excess of distributions represents the net effect of (i) the write-off of Free Move Costs, net (which were capitalized and amortized prior to the adoption of ASU 2014-09) based upon the net book value of the Free Move Costs as of December 31, 2017, (ii) the recognition of certain Contract Fulfillment Costs, specifically Intake Costs (each as defined below) and commission assets, (iii) the recognition of deferred revenue associated with Intake Costs billed to our customers, and (iv) the deferred income tax impact of the aforementioned items. As we adopted ASU 2014-09 on a modified retrospective basis, the comparative Consolidated Balance Sheet as of December 31, 2017 and the comparative Consolidated Statements of Operations, Consolidated Statements of Comprehensive Income (Loss), Consolidated Statements of Equity and the Consolidated Statements of Cash Flows for the years ended December 31, 2016 and 2017 have not been restated to reflect the adoption of ASU 2014-09 and reflect our revenue policies in place at that time.

Storage rental and service revenues are recognized in the month the respective storage rental or service is provided, and customers are generally billed on a monthly basis on contractually agreed-upon terms. Amounts related to future storage rental or prepaid service contracts for customers where storage rental fees or services are billed in advance are accounted for as deferred revenue and recognized ratably over the period the applicable storage rental or service is provided or performed. Revenues from the sales of products, which are included as a component of service revenues, are recognized when products are shipped and title has passed to the customer. Revenues from the sales of products, which represented less than 2% of consolidated revenue for the year ended December 31, 2018, have historically not been significant. The performance obligation is a series of distinct services (as determined for purposes of ASU 2014-09, a “series”) that have the same pattern of transfer to the customer that is satisfied over time. For those contracts that qualify as a series, we have a right to consideration from the customer in an amount that corresponds directly with the value of the underlying performance obligation transferred to the customer to date. This concept is known as "right to invoice" and we are applying the "right to invoice" practical expedient to all revenues, with the exception of storage revenues in our data center business.

For all of our businesses, with the exception of the storage component of our data center business, each purchasing decision is fully in the control of the customer and, therefore, consideration beyond the current reporting period is variable and allocated to the specific period, which is consistent with the practical expedient described above. Our data center business features storage rental provided to the customer at contractually specified rates over a fixed contractual period.

The costs associated with the initial movement of customer records into physical storage and certain commissions are considered costs to obtain or fulfill customer contracts (“Contract Fulfillment Costs”). The following describes each of these Contract Fulfillment Costs recognized under ASU 2014-09:

Intake Costs (and associated deferred revenue)

Prior to the adoption of ASU 2014-09, intake costs incurred but not charged to a customer to transport records to our facilities (or Free Move Costs, as described in Note 2.i.), which include labor and transportation costs, were capitalized and amortized as a component of depreciation and amortization in our Consolidated Statements of Operations. The initial movement of customer records into physical storage must take place prior to initiation of the storage of records and is not considered a separate performance obligation and, therefore, the costs of the initial intake of customer records into physical storage (“Intake Costs”) represent a contract fulfillment cost for the storage of records as the earnings process does not commence until a customer’s records or other assets are in our possession. Accordingly, upon the adoption of ASU 2014-09, all Intake Costs, regardless of whether or not the services associated with such initial moves are billed to the customer or are provided to the customer at no charge, will be deferred and amortized as a component of depreciation and amortization in our Consolidated Statements of Operations over three years, consistent with the transfer of the performance obligation to the customer to which the asset relates. Similarly, in instances where such Intake Costs are billed to the customer, the associated revenue will be deferred and recognized over the same three-year period.

Commissions

Prior to the adoption of ASU 2014-09, commissions we paid related to our long-term storage contracts were expensed as incurred. Upon the adoption of ASU 2014-09, certain commission payments that are directly associated with the fulfillment of long-term storage contracts are capitalized and amortized as a component of depreciation and amortization in our Consolidated Statements of Operations over three years, consistent with the transfer of the performance obligation to the customer to which the asset relates. Certain direct commission payments associated with contracts with a duration of one year or less are expensed as incurred under the practical expedient which allows an entity to expense as incurred an incremental cost of obtaining a contract if the amortization period of the asset that the entity otherwise would have recognized is one year or less.

The Contract Fulfillment Costs recorded as a result of the adoption of ASU 2014-09 as of January 1, 2018 and December 31, 2018 are as follows:
 
 
 
 
January 1, 2018 (Date of Adoption of
ASU 2014-09)
 
 
December 31, 2018
Description
 
Location in Balance Sheet
 
Gross Carrying Amount
 
Accumulated Amortization
 
Net Carrying Amount
 
 
Gross Carrying Amount
 
Accumulated Amortization
 
Net Carrying Amount
Intake Costs asset
 
Other (within Other Assets, Net)
 
$
31,604

 
$
(14,954
)
 
$
16,650

 
 
$
39,748

 
$
(24,504
)
 
15,244

Commissions asset
 
Other (within Other Assets, Net)
 
42,072

 
(21,173
)
 
20,899

 
 
58,424

 
(34,637
)
 
23,787


Amortization expense associated with Contract Fulfillment Costs for the year ended December 31, 2018 is $10,380 and $13,838, respectively.

Estimated amortization expense for Contract Fulfillment Costs is as follows:
 
Estimated Amortization
2019
$
21,227

2020
12,526

2021
5,278



Deferred revenue liabilities are reflected as follows in our Consolidated Balance Sheets:
 
 
 
 
December 31,
Description
 
Balance Sheet Location
 
2017
 
2018
Deferred revenue - Current
 
Deferred revenue
 
$
241,590

 
$
264,823

Deferred revenue - Long-term
 
Other Long-term Liabilities
 
—

 
26,401


Of the total deferred revenue recorded on our Consolidated Balance Sheet as of December 31, 2018, we expect to recognize approximately 91% as revenue within the next 12 months.

The following table presents certain components of our Consolidated Statements of Operations for the year ended December 31, 2018 as reported and as if we had not adopted ASU 2014-09 on January 1, 2018:
 
Year Ended December 31, 2018
 
As Reported
 
If ASU 2014-09 was not adopted
Revenues
$
4,225,761

 
$
4,219,663

Operating Income
$
755,508

 
$
751,648

Income from Continuing Operations
$
376,976

 
$
373,113

 
 
 
 
Per Share Income from Continuing Operations - Basic
$
1.31

 
$
1.30

Per Share Income from Continuing Operations - Diluted
$
1.31

 
$
1.30



Data Center

Our data center business features storage rental provided to the customer at contractually specified rates over a fixed contractual period and are accounted for under Accounting Standards Codification ("ASC") 840, Leases, and therefore, the majority of our revenues from our data center business are recognized on a straight-line basis. Storage rental revenue associated with our data center business was $218,675 for the year ended December 31, 2018, which includes approximately $38,800 of revenue associated with power and connectivity. The revenue related to the service component of our data center business is recognized in the period the data center access or related services are provided.

The future minimum lease payments to be received under non-cancellable data center operating leases, for which we are the lessor, excluding month to month leases, for the next five years are as follows:
 
Future minimum lease payments
2019
$
178,196

2020
138,216

2021
92,724

2022
71,784

2023
57,882

m.    Rent Normalization

We have entered into various leases for buildings that expire over various terms. Certain leases have fixed escalation clauses (excluding those tied to the consumer price index or other inflation-based indices) or other features (including return to original condition, primarily in the United Kingdom) which require normalization of the rental expense over the life of the lease, resulting in deferred rent being reflected as a liability in the accompanying Consolidated Balance Sheets. In addition, we have assumed various above and below market leases in connection with certain of our acquisitions. The difference between the present value of these lease obligations and the market rate at the date of the acquisition was recorded as either a deferred rent liability (which is a component of Other long-term liabilities) or deferred rent asset (which is a component of Other within Other assets, net) in our Consolidated Balance Sheets and is being amortized to rent expense.
n.    Stock-Based Compensation

We record stock-based compensation expense, utilizing the straight-line method, for the cost of stock options, restricted stock units ("RSUs"), performance units ("PUs") and shares of stock issued under our employee stock purchase plan ("ESPP") (together, "Employee Stock-Based Awards").

Stock-based compensation expense for Employee Stock-Based Awards included in the accompanying Consolidated Statements of Operations for the years ended December 31, 2016, 2017 and 2018 was $28,976 ($22,364 after tax or $0.09 per basic and diluted share), $30,019 ($26,512 after tax or $0.10 per basic and diluted share) and $31,167 ($28,998 after tax or $0.10 per basic and diluted share), respectively.

Stock-based compensation expense for Employee Stock-Based Awards included in the accompanying Consolidated Statements of Operations is as follows:
 
Year Ended December 31,
 
2016
 
2017
 
2018
Cost of sales (excluding depreciation and amortization)
$
110

 
$
108

 
$
119

Selling, general and administrative expenses
28,866

 
29,911

 
31,048

Total stock-based compensation
$
28,976

 
$
30,019

 
$
31,167


Stock Options

Under our various stock option plans, options are generally granted with exercise prices equal to the market price of the stock on the date of grant; however, in certain instances, options are granted at prices greater than the market price of the stock on the date of grant. The options we issue become exercisable ratably over a period of either (i) three years from the date of grant and have a contractual life of ten years from the date of grant, unless the holder's employment is terminated sooner, or (ii) five years from the date of grant and have a contractual life of ten years from the date of grant, unless the holder's employment is terminated sooner. Our non-employee directors are considered employees for purposes of our stock option plans and stock option reporting.

A summary of our stock options outstanding as of December 31, 2018 by vesting terms is as follows:
 
December 31, 2018
 
Stock Options Outstanding
 
% of
Stock Options Outstanding
Three-year vesting period (10 year contractual life)
3,965,018

 
92.8
%
Five-year vesting period (10 year contractual life)
306,816

 
7.2
%
 
4,271,834

 
100.0
%

Our equity compensation plans generally provide that, upon a vesting change in control (as defined in each plan), any unvested options and other awards granted thereunder shall vest immediately if an employee is terminated as a result of the change in control or terminates their own employment for good reason (as defined in each plan). On January 20, 2015, our stockholders approved the adoption of the Iron Mountain Incorporated 2014 Stock and Cash Incentive Plan, as amended (the "2014 Plan"). Under the 2014 Plan, the total amount of shares of common stock reserved and available for issuance pursuant to awards granted under the 2014 Plan is 12,750,000. The 2014 Plan permits us to continue to grant awards through May 24, 2027.

A total of 48,253,839 shares of common stock have been reserved for grants of options and other rights under our various stock incentive plans, including the 2014 Plan. The number of shares available for grant under our various stock incentive plans, not including the ESPP, at December 31, 2018 was 6,053,429.

The weighted average fair value of stock options granted in 2016, 2017 and 2018 was $2.56, $4.28 and $3.50 per share, respectively. These values were estimated on the date of grant using the Black-Scholes option pricing model. The weighted average assumptions used for grants in the year ended December 31:
Weighted Average Assumptions
 
2016
 
2017
 
2018
Expected volatility
 
27.2
%
 
25.7
%
 
25.4
%
Risk-free interest rate
 
1.32
%
 
1.96
%
 
2.65
%
Expected dividend yield
 
7
%
 
6
%
 
7
%
Expected life
 
5.6 years

 
5.0 years

 
5.0 years



Expected volatility is calculated utilizing daily historical volatility over a period that equates to the expected life of the option. The risk-free interest rate was based on the United States Treasury interest rates whose term is consistent with the expected life (estimated period of time outstanding) of the stock options. Expected dividend yield is considered in the option pricing model and represents our current annualized expected per share dividends over the current trade price of our common stock. The expected life of the stock options granted is estimated using the historical exercise behavior of employees.

A summary of stock option activity for the year ended December 31, 2018 is as follows:
 
Options
 
Weighted
Average
Exercise
Price
 
Weighted
Average
Remaining
Contractual
Term (Years)
 
Aggregate
Intrinsic
Value
Outstanding at December 31, 2017
3,671,740

 
$
34.41

 
 
 
 

Granted
846,517

 
33.71

 
 
 
 

Exercised
(182,607
)
 
22.36

 
 
 
 

Forfeited
(47,754
)
 
34.69

 
 
 
 

Expired
(16,062
)
 
34.69

 
 
 
 

Outstanding at December 31, 2018
4,271,834

 
$
34.78

 
7.03
 
$
6,066

Options exercisable at December 31, 2018
2,393,010

 
$
34.51

 
5.97
 
$
5,785

Options expected to vest
1,808,321

 
$
35.10

 
8.36
 
$
279


The aggregate intrinsic value of stock options exercised for the years ended December 31, 2016, 2017 and 2018 is as follows:
 
Year Ended December 31,
 
2016
 
2017
 
2018
Aggregate intrinsic value of stock options exercised
$
18,298

 
$
8,485

 
$
2,181



Restricted Stock Units

Under our various equity compensation plans, we may also grant RSUs. Our RSUs generally have a vesting period of three years from the date of grant. However, RSUs granted to our non-employee directors vest immediately upon grant.

All RSUs accrue dividend equivalents associated with the underlying stock as we declare dividends. Dividends will generally be paid to holders of RSUs in cash upon the vesting date of the associated RSU and will be forfeited if the RSU does not vest. The fair value of RSUs is the excess of the market price of our common stock at the date of grant over the purchase price (which is typically zero).

Cash dividends accrued and paid on RSUs for the years ended December 31, 2016, 2017 and 2018, are as follows:
 
Year Ended December 31,
 
2016
 
2017
 
2018
Cash dividends accrued on RSUs
$
2,525

 
$
2,590

 
$
2,899

Cash dividends paid on RSUs
2,363

 
2,370

 
2,477



The fair value of RSUs vested during the years ended December 31, 2016, 2017 and 2018, are as follows:
 
Year Ended December 31,
 
2016
 
2017
 
2018
Fair value of RSUs vested
$
22,236

 
$
19,825

 
$
20,454



A summary of RSU activity for the year ended December 31, 2018 is as follows:
 
RSUs
 
Weighted-
Average
Grant-Date
Fair Value
Non-vested at December 31, 2017
1,071,469

 
$
35.38

Granted
814,659

 
33.59

Vested
(582,687
)
 
35.10

Forfeited
(106,875
)
 
34.92

Non-vested at December 31, 2018
1,196,566

 
$
34.33


Performance Units

Under our various equity compensation plans, we may also make awards of PUs. For the majority of outstanding PUs, the number of PUs earned is determined based on our performance against predefined targets of revenue and return on invested capital ("ROIC") and, beginning with PUs granted in 2018, Adjusted EBITDA (as defined in Note 9). The number of PUs earned may range from 0% to 200% of the initial award. The number of PUs earned is determined based on our actual performance as compared to the targets at the end of a three-year performance period. Certain PUs that we grant will be earned based on a market condition associated with the total return on our common stock in relation to either (i) a subset of the Standard & Poor's 500 Index (for certain PUs granted prior to 2017), or (ii) the MSCI United States REIT Index (for certain PUs granted in 2017 and thereafter), rather than the revenue, ROIC and Adjusted EBITDA targets noted above. The number of PUs earned based on this market condition may range from 0% to 200% of the initial award.

All of our PUs will be settled in shares of our common stock and are subject to cliff vesting three years from the date of the original PU grant. PUs awarded to employees who terminate their employment during the three-year performance period and on or after attaining age 55 and completing 10 years of qualifying service are eligible for pro-rated vesting, subject to the actual achievement against the predefined targets or a market condition as discussed above, based on the number of full years of service completed following the grant date (but delivery of the shares remains deferred). As a result, PUs are generally expensed over the three-year performance period.

All PUs accrue dividend equivalents associated with the underlying stock as we declare dividends. Dividends will generally be paid to holders of PUs in cash upon the settlement date of the associated PU and will be forfeited if the PU does not vest.

Cash dividends accrued and paid on PUs for the years ended December 31, 2016, 2017 and 2018, are as follows:
 
Year Ended December 31,
 
2016
 
2017
 
2018
Cash dividends accrued on PUs
$
1,078

 
$
1,290

 
$
1,804

Cash dividends paid on PUs
645

 
205

 
644



During the years ended December 31, 2016, 2017 and 2018, we issued 231,672, 229,692 and 353,507 PUs, respectively. We forecast the likelihood of achieving the predefined revenue, ROIC and Adjusted EBITDA targets for our PUs in order to calculate the expected PUs to be earned. We record a compensation charge based on either the forecasted PUs to be earned (during the performance period) or the actual PUs earned (at the three-year anniversary of the grant date) over the vesting period for each of the awards. The fair value of PUs based on our performance against revenue, ROIC and Adjusted EBITDA targets is the excess of the market price of our common stock at the date of grant over the purchase price (which is typically zero). For PUs earned based on a market condition, we utilize a Monte Carlo simulation to fair value these awards at the date of grant, and such fair value is expensed over the three-year performance period. As of December 31, 2018, we expected 65%, 100% and 100% achievement of the predefined revenue, ROIC and Adjusted EBITDA targets associated with the awards of PUs made in 2016, 2017 and 2018, respectively.
The fair value of earned PUs that vested during the years ended December 31, 2016, 2017 and 2018, is as follows:
 
Year Ended December 31,
 
2016
 
2017
 
2018
Fair value of earned PUs that vested
$
5,748

 
$
1,242

 
$
3,117



A summary of PU activity for the year ended December 31, 2018 is as follows:
 
Original
PU Awards
 
PU Adjustment(1)
 
Total
PU Awards
 
Weighted-
Average
Grant-Date
Fair Value
Non-vested at December 31, 2017
717,878

 
(250,067
)
 
467,811

 
$
39.28

Granted
353,507

 
—

 
353,507

 
33.64

Vested
(81,305
)
 
—

 
(81,305
)
 
38.34

Forfeited/Performance or Market Conditions Not Achieved
(23,031
)
 
(49,881
)
 
(72,912
)
 
38.01

Non-vested at December 31, 2018
967,049

 
(299,948
)
 
667,101

 
$
36.54

_______________________________________________________________________________

(1)
Represents an increase or decrease in the number of original PUs awarded based on either the final performance criteria or market condition achievement at the end of the performance period of such PUs or a change in estimated awards based on the forecasted performance against the predefined targets.

Employee Stock Purchase Plan

We offer an ESPP in which participation is available to substantially all United States and Canadian employees who meet certain service eligibility requirements. The ESPP provides a way for our eligible employees to become stockholders on favorable terms. The ESPP provides for the purchase of our common stock by eligible employees through successive offering periods. We have historically had two six-month offering periods per year, the first of which generally runs from June 1 through November 30 and the second of which generally runs from December 1 through May 31. During each offering period, participating employees accumulate after-tax payroll contributions, up to a maximum of 15% of their compensation, to pay the purchase price at the end of the offering. Participating employees may withdraw from an offering before the purchase date and obtain a refund of the amounts withheld as payroll deductions. At the end of the offering period, outstanding options under the ESPP are exercised, and each employee's accumulated contributions are used to purchase our common stock. The price for shares purchased under the ESPP is 95% of the fair market price at the end of the offering period, without a look-back feature. As a result, we do not recognize compensation expense for the ESPP shares purchased. For the years ended December 31, 2016, 2017 and 2018, there were 110,835, 102,826 and 119,123 shares, respectively, purchased under the ESPP. As of December 31, 2018, we have 505,645 shares available under the ESPP.
_______________________________________________________________________________

As of December 31, 2018, unrecognized compensation cost related to the unvested portion of our Employee Stock-Based Awards was $43,248 and is expected to be recognized over a weighted-average period of 1.9 years.

We issue shares of our common stock for the exercises of stock options, and the vesting of RSUs, PUs and shares of our common stock under our ESPP from unissued reserved shares.
o.    Income Taxes

Accounting for income taxes requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the tax and financial reporting bases of assets and liabilities and for loss and credit carryforwards. Valuation allowances are provided when recovery of deferred tax assets does not meet the more likely than not standard as defined in GAAP. We have elected to recognize interest and penalties associated with uncertain tax positions as a component of the (benefit) provision for income taxes in the accompanying Consolidated Statements of Operations.
p.    Income (Loss) Per Share—Basic and Diluted

Basic income (loss) per common share is calculated by dividing income (loss) by the weighted average number of common shares outstanding. The calculation of diluted income (loss) per share is consistent with that of basic income (loss) per share but gives effect to all potential common shares (that is, securities such as stock options, RSUs, PUs, warrants or convertible securities) that were outstanding during the period, unless the effect is antidilutive. The calculation of basic and diluted income (loss) per share for the years ended December 31, 2016, 2017 and 2018 is as follows:
 
Year Ended December 31,
 
2016
 
2017
 
2018
Income (loss) from continuing operations
$
103,880

 
$
191,723

 
$
376,976

Less: Net income (loss) attributable to noncontrolling interests
2,409

 
1,611

 
1,198

Income (loss) from continuing operations (utilized in numerator of Earnings Per Share calculation)
$
101,471

 
$
190,112

 
$
375,778

Income (loss) from discontinued operations, net of tax
3,353

 
(6,291
)
 
(12,427
)
Net income (loss) attributable to Iron Mountain Incorporated
$
104,824

 
$
183,821

 
$
363,351

 
 
 
 
 
 
Weighted-average shares—basic
246,178,000

 
265,898,000

 
285,913,000

Effect of dilutive potential stock options
574,954

 
431,071

 
234,558

Effect of dilutive potential RSUs and PUs
514,044

 
509,235

 
505,030

Effect of Over-Allotment Option(1)
—

 
6,278

 
—

Weighted-average shares—diluted
247,266,998

 
266,844,584

 
286,652,588

 
 
 
 
 
 
Earnings (losses) per share—basic:
 

 
 

 
 

Income (loss) from continuing operations
$
0.41

 
$
0.71

 
$
1.31

Income (loss) from discontinued operations, net of tax
0.01

 
(0.02
)
 
(0.04
)
Net income (loss) attributable to Iron Mountain Incorporated(2)
$
0.43

 
$
0.69

 
$
1.27

 
 
 
 
 
 
Earnings (losses) per share—diluted:
 

 
 

 
 

Income (loss) from continuing operations
$
0.41

 
$
0.71

 
$
1.31

Income (loss) from discontinued operations, net of tax
0.01

 
(0.02
)
 
(0.04
)
Net income (loss) attributable to Iron Mountain Incorporated(2)
$
0.42

 
$
0.69

 
$
1.27

 
 
 
 
 
 
Antidilutive stock options, RSUs and PUs, excluded from the calculation
1,790,362

 
2,326,344

 
3,258,078

___________________________________________________________________

(1)
See Note 12.
(2)
Columns may not foot due to rounding.
q.    Allowance for Doubtful Accounts and Credit Memo Reserves

We maintain an allowance for doubtful accounts and credit memos for estimated losses resulting from the potential inability of our customers to make required payments and potential disputes regarding billing and service issues. When calculating the allowance, we consider our past loss experience, current and prior trends in our aged receivables and credit memo activity, current economic conditions and specific circumstances of individual receivable balances. If the financial condition of our customers were to significantly change, resulting in a significant improvement or impairment of their ability to make payments, an adjustment of the allowance may be required. We write-off uncollectible balances as circumstances warrant, generally, no later than one year past due.

Rollforward of allowance for doubtful accounts and credit memo reserves is as follows:
Year Ended December 31,
 
Balance at
Beginning of
the Year
 
Credit Memos
Charged to
Revenue
 
Allowance for
Bad Debts
Charged to
Expense
 
Other(1)
 
Deductions(2)
 
Balance at
End of
the Year
2016
 
$
31,447

 
$
37,616

 
$
8,705

 
$
16,528

 
$
(50,006
)
 
$
44,290

2017
 
44,290

 
38,966

 
14,826

 
1,905

 
(53,339
)
 
46,648

2018
 
46,648

 
36,329

 
18,625

 
(1,568
)
 
(56,450
)
 
43,584

_______________________________________________________________________________
(1)
Primarily consists of recoveries of previously written-off accounts receivable, allowances of businesses acquired (primarily Recall in 2016) and the impact associated with currency translation adjustments.
(2)
Primarily consists of the issuance of credit memos and the write-off of accounts receivable.
r.    Concentrations of Credit Risk

Financial instruments that potentially subject us to credit risk consist principally of cash and cash equivalents (including money market funds and time deposits) and accounts receivable. The only significant concentrations of liquid investments as of December 31, 2017 and 2018, respectively, related to cash and cash equivalents. At December 31, 2017, we had money market funds with 12 "Triple A" rated money market funds and time deposits with seven global banks. At December 31, 2018, we had no money market funds and time deposits with seven global banks. As per our risk management investment policy, we limit exposure to concentration of credit risk by limiting the amount invested in any one mutual fund to a maximum of 1% of the fund total assets or in any one financial institution to a maximum of $50,000. As of December 31, 2017 and 2018, our cash and cash equivalents balance was $925,699 and $165,485, respectively. At December 31, 2017, our cash and cash equivalents included money market funds of $585,000 and time deposits of $24,482.
s.    Fair Value Measurements

Entities are permitted under GAAP to elect to measure certain financial instruments and certain other items at either fair value or cost. We have elected the cost measurement option.

Our financial assets or liabilities that are carried at fair value are required to be measured using inputs from the three levels of the fair value hierarchy. A financial asset or liability's classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.

The three levels of the fair value hierarchy are as follows:

Level 1—Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that we have the ability to access at the measurement date.

Level 2—Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (i.e., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).

Level 3—Unobservable inputs that reflect our assumptions about the assumptions that market participants would use in pricing the asset or liability.

The assets and liabilities carried at fair value and measured on a recurring basis as of December 31, 2017 and 2018, respectively, are as follows:
 
 
 
Fair Value Measurements at
December 31, 2017 Using
Description
Total Carrying
Value at
December 31,
2017
 
Quoted prices
in active
markets
(Level 1)
 
Significant other
observable
inputs
(Level 2)
 
Significant
unobservable
inputs
(Level 3)
Money Market Funds(1)
$
585,000

 
$
—

 
$
585,000

 
$
—

Time Deposits(1)
24,482

 
—

 
24,482

 
—

Trading Securities
11,784

 
11,279

(2)
505

(3)
—

Derivative Assets(4)
1,579

 
—

 
1,579

 
—

Derivative Liabilities(4)
2,329

 
—

 
2,329

 
—

 
 
 
Fair Value Measurements at
December 31, 2018 Using
Description
Total Carrying
Value at
December 31,
2018
 
Quoted prices
in active
markets
(Level 1)
 
Significant other
observable
inputs
(Level 2)
 
Significant
unobservable
inputs
(Level 3)
Time Deposits(1)
$
956

 
$
—

 
$
956

 
$
—

Trading Securities
10,753

 
10,248

(2)
505

(3)
—

Derivative Assets(4)
93

 
—

 
93

 
—

Interest Rate Swap Agreements Liabilities(5)
973

 
—

 
973

 
—

_____________________________________________________________
(1)
Money market funds and time deposits are measured based on quoted prices for similar assets and/or subsequent transactions.
(2)
Certain trading securities are measured at fair value using quoted market prices.
(3)
Certain trading securities are measured based on inputs other than quoted market prices that are observable.
(4)
Derivative assets and liabilities relate to short-term (six months or less) foreign currency contracts that we have entered into to hedge certain of our foreign exchange intercompany exposures, as more fully disclosed at Note 3. We calculate the value of such forward contracts by adjusting the spot rate utilized at the balance sheet date for translation purposes by an estimate of the forward points observed in active markets.
(5)
We have entered into interest rate swap agreements to hedge certain of our interest rate exposures, as more fully disclosed in Note 3. The interest rate swap agreements are designated as cash flow hedges and are measured based on inputs other than quoted market prices that are observable.

Disclosures are required in the financial statements for items measured at fair value on a non-recurring basis. We did not have any material items that are measured at fair value on a non-recurring basis for the years ended December 31, 2016, 2017 and 2018, with the exception of: (i) the reporting units as presented in our goodwill impairment analysis (as disclosed in Note 2.h.); (ii) the assets and liabilities acquired through acquisitions (as disclosed in Note 6); (iii) the Access Contingent Consideration (as defined and disclosed in Note 6); (iv) the redemption value of certain redeemable noncontrolling interests (as disclosed in Note 2.v.); and (v) our investment in OSG (as defined and disclosed in Note 13), all of which are based on Level 3 inputs.

The fair value of our long-term debt, which was determined based on either Level 1 inputs or Level 3 inputs, is disclosed in Note 4. Long-term debt is measured at cost in our Consolidated Balance Sheets as of December 31, 2017 and 2018.
t.    Accumulated Other Comprehensive Items, Net

The changes in accumulated other comprehensive items, net for the years ended December 31, 2016, 2017 and 2018 are as follows:
 
Foreign Currency
Translation
Adjustments
 
Market Value
Adjustments
for Securities
 
Fair Value Adjustments for Interest Rate Swap Agreements
 
Total
Balance as of December 31, 2015
$
(175,651
)
 
$
734

 
$
—

 
$
(174,917
)
Other comprehensive (loss) income:
 
 
 
 
 
 
 
Foreign currency translation adjustment
(36,922
)
 
—

 
—

 
(36,922
)
Market value adjustments for securities
—

 
(734
)
 
—

 
(734
)
Total other comprehensive (loss) income
(36,922
)
 
(734
)
 
—

 
(37,656
)
Balance as of December 31, 2016
$
(212,573
)
 
$
—

 
—

 
$
(212,573
)
Other comprehensive (loss) income:
 

 
 

 
 
 
 

Foreign currency translation adjustment(1)
108,584

 
—

 
—

 
108,584

Total other comprehensive (loss) income
108,584

 
—

 
—

 
108,584

Balance as of December 31, 2017
$
(103,989
)
 
$
—

 
—

 
$
(103,989
)
Other comprehensive (loss) income:
 

 
 

 
 
 
 

Foreign currency translation adjustment
(160,702
)
 
—

 
—

 
(160,702
)
Fair value adjustments for interest rate swap agreements
—

 
—

 
(973
)
 
(973
)
Total other comprehensive (loss) income
(160,702
)
 
—

 
(973
)
 
(161,675
)
Balance as of December 31, 2018
$
(264,691
)
 
$
—

 
$
(973
)
 
$
(265,664
)
______________________________________________________________
(1)
During the year ended December 31, 2017, approximately $29,100 of cumulative translation adjustment associated with our businesses in Russia and Ukraine was reclassified from accumulated other comprehensive items, net and was included in the gain on sale associated with the Russia and Ukraine Divestment (see Note 13).
.    Other Expense (Income), Net (including Foreign Currency)

Other expense (income), net consists of the following:
 
Year Ended December 31,
 
2016
 
2017
 
2018
Foreign currency transaction losses (gains), net(1)
$
20,413

 
$
43,248

 
$
(15,567
)
Debt extinguishment expense, net
9,283

 
78,368

 
—

Other, net(2)
14,604

 
(42,187
)
 
3,875

 
$
44,300

 
$
79,429

 
$
(11,692
)

_______________________________________________________________________________
(1)
The gain or loss on foreign currency transactions, calculated as the difference between the historical exchange rate and the exchange rate at the applicable measurement date, includes gains or losses primarily related to (i) our Euro Notes (as defined in Note 4), (ii) borrowings in certain foreign currencies under our Revolving Credit Facility and our Former Revolving Credit Facility (each as defined in Note 4), (iii) certain foreign currency denominated intercompany obligations of our foreign subsidiaries to us and between our foreign subsidiaries, which are not considered permanently invested and (iv) amounts that are paid or received on the net settlement amount from forward contracts (as more fully discussed in Note 3).
(2)
Other, net for the year ended December 31, 2016 includes a charge of $15,417 associated with the loss on disposal of the Australia Divestment Business (as defined in Note 6) and a charge of $1,421 associated with the loss on disposal of the Iron Mountain Canadian Divestments (as defined in Note 6). Other, net for the year ended December 31, 2017 includes a gain of $38,869 associated with the Russia and Ukraine Divestment (as defined in Note 13).
v.    Redeemable Noncontrolling Interests

Certain unaffiliated third parties own noncontrolling interests in our consolidated subsidiaries in Chile, India and South Africa. The underlying agreements between us and our noncontrolling interest shareholders for these subsidiaries contain provisions under which the noncontrolling interest shareholders can require us to purchase their respective interests in such subsidiaries at certain times and at a purchase price as stipulated in the underlying agreements (generally at fair value). These put options make these noncontrolling interests redeemable and, therefore, these noncontrolling interests are classified as temporary equity outside of stockholders' equity. Redeemable noncontrolling interests are reported at the higher of their redemption value or the noncontrolling interest holders' proportionate share of the underlying subsidiaries net carrying value. Increases or decreases in the redemption value of the noncontrolling interest are offset against Additional Paid-in Capital.

In 2018, certain of our noncontrolling interest shareholders exercised their option to put their ownership interest back to us. Upon the exercise of the put option, this noncontrolling interest became mandatorily redeemable by us, and, therefore, is accounted for as a liability rather than a component of redeemable noncontrolling interests. We and these noncontrolling interest shareholders are currently in a dispute with respect to the fair value of the noncontrolling interest shares. We have recorded our estimate of the fair value of these noncontrolling interest shares as a component of Accrued expenses on our Consolidated Balance Sheet as of December 31, 2018. Subsequent to these noncontrolling interest shares becoming mandatorily redeemable, any increase or decrease in the fair value of such noncontrolling interest will be included as a component of Other expense (income), net on our Consolidated Statements of Operations in future periods.
w.    New Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In May 2014, the FASB issued ASU 2014-09. We adopted ASU 2014-09 on January 1, 2018 using the modified retrospective method. See Note 2.l. for information regarding the impact of the adoption of ASU 2014-09 on our consolidated financial statements.

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities ("ASU 2016-01"). ASU 2016-01 requires that most equity investments be measured at fair value, with subsequent changes in fair value recognized in net income, while eliminating the available-for-sale classification for equity securities with readily determinable fair values and the cost method for equity investments without readily determinable fair values. ASU 2016-01 also impacts financial liabilities under the fair value option and the presentation and disclosure requirements for financial instruments. We adopted ASU 2016-01 on January 1, 2018. ASU 2016-01 did not have an impact on our consolidated financial statements.

In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities ("ASU 2017-12"). ASU 2017-12 amends the hedge accounting recognition and presentation requirements as outlined in Accounting Standards Codification Topic 815 with the objective of improving the financial reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in its financial statements and enhance the transparency and understandability of hedge transactions. In addition, ASU 2017-12 simplifies the application of the hedge accounting guidance. We adopted ASU 2017-12 on January 1, 2018. ASU 2017-12 did not have a material impact on our consolidated financial statements.

Other As Yet Adopted Accounting Pronouncements

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) as amended ("ASU 2016-02"). ASU 2016-02 will require lessees to recognize assets and liabilities on the balance sheet for the rights and obligations created by all leases. ASU 2016-02 also will require certain qualitative and quantitative disclosures designed to give financial statement users information on the amount, timing, and uncertainty of cash flows arising from leases. ASU 2016-02 was effective for us on January 1, 2019.

ASU 2016-02 permits the use of a modified retrospective approach which requires an entity to recognize and measure leases existing at, or entered into after, either (1) the beginning of the earliest comparative period presented (“Option 1”) or (2) at the beginning of the period of adoption (“Option 2”). We will be electing Option 2, under which we will apply ASC 840, Leases (prior to the adoption of ASU 2016-02) to all comparative periods, including disclosures, and recognize the effects of applying ASU 2016-02 as a cumulative-effect adjustment to retained earnings as of January 1, 2019, the effective date of the standard. The transition guidance associated with ASU 2016-02 also permits certain practical expedients. We will elect the package of practical expedients permitted under the transition guidance which, among other things, allows us to carryforward the historical lease classification. We will also adopt an accounting policy election such that leases with an initial term of 12 months or less will not be included on our balance sheet. We will recognize those lease payments in the Consolidated Statements of Operations on a straight-line basis over the lease term.

We are finalizing certain aspects of adopting ASU 2016-02, including finalizing our discount rates. ASU 2016-02 will have a material impact on our Consolidated Balance Sheets, but will not have a material impact on our Consolidated Statements of Operations. The most significant impact of the adoption of ASU 2016-02 is the recognition of additional right-of-use assets and lease liabilities for operating leases. We currently estimate the lease liabilities to be between $1,750,000 and $1,950,000 at January 1, 2019, the date of initial application, and the right-of-use assets to be approximately $100,000 less than the lease liabilities. The accounting for our existing capital leases remains substantially unchanged by the provisions of ASU 2016-02. We also expect to record an immaterial adjustment to our opening retained earnings balance as a result of certain build-to-suit leases that were accounted for as capital leases under the old standard but will be accounted for as operating leases under ASU 2016-02.
In August 2018, the FASB issued ASU No. 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (a consensus of the FASB Emerging Issues Task Force) ("ASU 2018-15"). ASU 2018-15 aligns the accounting for costs incurred to implement a cloud computing arrangement that is a service arrangement with the guidance on capitalizing costs associated with developing or obtaining internal-use software. ASU 2018-15 is effective for us on January 1, 2020, with early adoption permitted. We do not expect ASU 2018-15 will have a material impact on our consolidated financial statements.