23.

Impact of recently issued accounting standards

Recently adopted accounting guidance

Revenue from contracts with customers

Beginning in

May 2014,

the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)

No.

2014

09,

Revenue from Contracts with Customers

, as well as several related ASUs (collectively, the “Revenue Guidance”). The Revenue Guidance clarifies the principles for recognizing revenue and develops a common revenue standard for GAAP and International Financial Reporting Standards. The Revenue Guidance, codified as Accounting Standards Codification Topic

No.

606

(“ASC

606”

) has been adopted retrospectively effective

January 1, 2018

and accordingly, comparative information has been restated. The primary changes are described below.

(a) Accounting for lease brokerage revenues

Under previous GAAP, lease brokerage revenues were deferred until the related contingency (e.g. tenant occupancy) was resolved. Under ASC

606,

in certain cases revenue is recognized earlier since the Company’s performance obligation will typically be satisfied upon lease execution.

(b) Accounting for reimbursable expenses related to the Company’s property management activities

Under previous GAAP, reimbursable expenses contemplated both performance and payment risk when evaluating whether a principal or agent relationship existed between the Company and its customers. Under ASC

606,

principal versus agent indicators were revised with a focus on control over the services provided by

third

-party service providers. As a result, the revenues related to the Company’s property management activities for the year ended

December 31, 2017

increased by

$146,269

and the related cost of revenues increased by

$146,269

with

net impact on earnings.

The Company has revised the presentation of certain amounts in the balance sheet to reflect the adoption of ASC

606,

with increases to contract balances and decreases to unbilled revenues and unearned revenues associated with the change in lease brokerage revenue recognition.

Adoption of the standard using the full retrospective method resulted in a restatement of certain previously reported results. These include the recognition of additional revenue and an increase in income tax expense, along with increasing contract balances and accrued expenses. The Company’s previously reported results for the year ended

December 31, 2017

were impacted as follows:

(in thousands of US dollars, except per share amounts)
	Year ended December 31, 2017
	As previously reported		Lease brokerage revenue adjustment			Principal versus agent adjustment		Restated
Statement of earnings

Revenues	$	2,275,362	$	13,569		$	146,269	$	2,435,200
Cost of revenues		1,427,281		12,315			146,269		1,585,865
Selling, general and administrative expenses		613,335		705			-		614,040
Income tax		63,300		(1,393	)		-		61,907
Non-controlling interest share of earnings		20,236		83			-		20,319
Non-controlling interest redemption increment		22,583		(190	)		-		22,393
Net earnings attributable to Company		49,313		2,049			-		51,362
Diluted net earnings per common share		1.25		0.05			-		1.31

(in thousands of US dollars)	As at December 31, 2017
	As previously reported			Lease brokerage revenue adjustment			Principal versus agent adjustment		Restated
Balance sheet

Accounts receivable, net of allowance	$	383,385		$	(843	)	$	-	$	382,542
Contract assets, current		-			104,737			-		104,737
Unbilled revenues		41,370			(41,370	)		-		-
Contract assets, non-current		-			7,104			-		7,104
Deferred income tax asset, net		52,394			(3,993	)		-		48,401
Accounts payable and accrued expenses		252,904			(25,817	)		-		227,087
Accrued compensation		365,709			53,926			-		419,635
Contract liabilities		-			35,423			-		35,423
Unearned revenues		11,919			(11,919	)		-		-
Deferred income tax liability, net		18,579			465			-		19,044
Deficit		(128,411	)		12,922			-		(115,489	)
Accumulated other comprehensive loss		(43,354	)		197			-		(43,157	)
Non-controlling interests		4,019			438			-		4,457

Recently issued accounting guidance,

not

yet adopted

The FASB has issued

two

ASUs related to leases. In

February 2016,

the FASB issued ASU

No.

2016

02,

Leases

. This ASU affects all aspects of lease accounting and has a significant impact to lessees as it requires the recognition of a right-of use asset and a lease liability for virtually all leases including operating leases. In addition to balance sheet recognition, additional quantitative and qualitative disclosures will be required. The Company has catalogued and abstracted key terms of its leases and is using a software solution to assist with the additional accounting and disclosures required. The Company’s assets and liabilities will be materially impacted by the recognition of a right-of-use asset and lease liability. Related balance sheet ratios will also be impacted; however, covenant ratio calculations under the Company’s Revolving Credit Facility will

not

be impacted, as they will continue to be based on the accounting standards in place as of

December 31, 2017.

July 2018,

the FASB issued ASU

No.

2018

11,

Codification Improvements to Topic

842,

Leases

. This ASU affects narrow aspects of the guidance issued in ASU

2016

providing an additional (and optional) alternative transition method to adopt the new leases standard. Under this transition method, an entity initially applies the new leases standard at the adoption date and recognizes a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. While the Company is continuing to evaluate the full magnitude of the ASU adoptions on its consolidated financial statements for existing lease contracts, it has elected certain practical expedients allowed by the ASU, including the expedient to forego separating lease and non-lease components in lessee contracts, which will increase the magnitude of the asset and liability to be reported. The Company will adopt this ASU effective

January 1, 2019,

with the expectation of electing the new optional transition method offered under ASU

2018

11.

June 2016,

the FASB issued ASU

No.

2016

13,

Financial Instruments – Credit Losses

. This ASU creates a new framework to evaluate financial instruments, such as trade receivables, for expected credit losses. This new framework replaces the existing incurred loss approach and is expected to result in more timely recognition of credit losses. The standard is effective for annual and interim periods beginning after

December 15, 2019

and early adoption is

not

permitted until years beginning after

December 15, 2018.

The Company is currently assessing the impact of this ASU on its financial statements.

January 2017,

the FASB issued ASU

No.

2017

04,

Intangibles – Goodwill and Other: Simplifying the Accounting for Goodwill Impairment

to remove Step

of the goodwill impairment test, which requires a hypothetical purchase price allocation. Under this guidance, a goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value,

not

to exceed the carrying amount of goodwill. The standard is effective for annual and interim periods beginning after

December 15, 2019,

with early adoption permitted. The Company is currently assessing the impact of this ASU on its financial statements.

August 2017,

the FASB issued ASU

No.

2017

12,

Derivatives and Hedging (Topic

815

): Targeted Improvements to Accounting for Hedging Activities,

which increases the scope of hedge accounting for both financial and nonfinancial strategies. The standard is effective for annual and interim periods beginning after

December 15, 2018,

with early adoption permitted. The Company is currently assessing the impact of this ASU on its financial statements and does

not

anticipate a material impact as the Company’s interest rate swaps are currently accounted for as cash flow hedges, are deemed to be effective as hedges and are already reported in other comprehensive income.

February 2018,

the FASB issued ASU

2018

02,

Income Statement – Reporting Comprehensive Income (Topic

220

): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income

. This ASU provides an option to reclassify stranded tax effects within accumulated other comprehensive income to retained earnings in each period in which the effect of the change in the U.S. federal corporate income tax rate in (or portion thereof) is recorded. The standard is effective for annual and interim periods beginning after

December 15, 2019,

with early adoption permitted. The Company is currently assessing the impact of this ASU on its financial statements.

August

2018,

the FASB issued ASU

2018

15,

Intangibles – Goodwill and Other – Internal-Use software (Subtopic

350

This ASU aligns the capitalizing of implementation costs incurred in relation to a hosting arrangement with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. It also requires that these capitalized costs are to be expensed over the term of the hosting arrangement and to the same line as the hosting arrangement. The standard is effective for annual and interim periods beginning after

December 15, 2019,

with early adoption permitted and should be applied either retrospectively or prospectively after the date of adoption. The Company is currently assessing the impact of this ASU on its financial statements.