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Summary of Significant Accounting Policies (Policies) | 6 Months Ended
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Jun. 30, 2022
Summary of Significant Accounting Policies |
Basis of Accounting and Principles of Consolidation | Basis of Accounting and Principles of Consolidation The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for audited financial statements. The unaudited Condensed Consolidated Financial Statements reflect all adjustments (consisting only of normal recurring adjustments) which are, in the opinion of management, necessary for a fair presentation of the results for the interim period presented. Operating results for the three and six months ended June 30, 2022 may not be indicative of the results that may be expected for the year ending December 31, 2022. Amounts as of December 31, 2021 included in the Condensed Consolidated Financial Statements have been derived from the audited Consolidated Financial Statements as of that date. The unaudited Condensed Consolidated Financial Statements, included herein, should be read in conjunction with the audited Consolidated Financial Statements and notes thereto, as well as Management’s Discussion and Analysis of Financial Condition and Results of Operations, in the Company’s Form 10-K for the year ended December 31, 2021. The unaudited Condensed Consolidated Financial Statements include the accounts of the Company, the Operating Partnership and its wholly owned subsidiaries. The Company, as the sole general partner, held 99.6% and 99.5% of the Operating Partnership’s common equity as of June 30, 2022 and December 31, 2021, as well as 100% of the Series A preferred equity interest. All material intercompany accounts and transactions have been eliminated, including the Company’s Series A preferred equity interest in the Operating Partnership. At June 30, 2022 and December 31, 2021, the non-controlling interest in the Operating Partnership consisted of a 0.4% and 0.5% ownership interest in the Operating Partnership held by the Company’s founder and chairman. The Operating Partnership Common Units may, under certain circumstances, be exchanged for shares of common stock. The Company as sole general partner of the Operating Partnership has the option to settle exchanged Operating Partnership Common Units held by others for cash based on the current trading price of its shares. Assuming the exchange of all non-controlling Operating Partnership Common Units, there would have been 80,190,362 shares of common stock outstanding at June 30, 2022.
Significant Risks and Uncertainties | Significant Risks and Uncertainties One of the most significant risks and uncertainties continues to be the potential adverse effect of the ongoing pandemic of the novel coronavirus, or COVID-19, and its variants. The outbreak of COVID-19 has significantly, adversely impacted economic activity and has contributed to significant volatility and negative pressure in financial markets. Although the duration and severity of this pandemic are still uncertain, there is reason to believe that the success of vaccination efforts and therapeutics in the U.S. will have a positive impact on businesses, as federal, state and local restrictions are lifted. However, the virus’s variants, its surges and resurgences in the population, and challenges related to vaccine immunization are still having a very fluid and continuously evolving impact on businesses and consumers. The COVID-19 pandemic could still have material and adverse effects on our financial condition, results of operations and cash flows in the near term due to, but not limited to, the following:
| ● | reduced economic activity severely impacting our tenants’ businesses, financial condition and liquidity and may cause tenants to be unable to fully meet their obligations to us. Certain tenants have sought to modify such obligations and may seek additional relief and additional tenants may seek modifications of such obligations, resulting in increases in uncollectible receivables and reductions in rental income;
| ● | the negative financial impact of the pandemic which could impact our future compliance with financial covenants of our credit facility and other debt agreements; and
| ● | weaker economic conditions which could cause us to recognize impairment in value of our tangible or intangible assets.
During the quarter ended June 30, 2022, the Company collected substantially all rent payments originally contracted for in the period. However, the extent to which the COVID-19 pandemic impacts our operations and those of our tenants will still depend on future developments which are uncertain, including the scope, severity and remaining duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and containment measures, among others. The Company continues to closely monitor the impact of the COVID-19 pandemic on all aspects of its business and geographies. However, as a result of the many uncertainties surrounding the COVID-19 pandemic, we are not able to fully predict the impact that it ultimately will have on our financial condition, results of operations and cash flows.
Real Estate Investments | Real Estate Investments The Company records the acquisition of real estate at cost, including acquisition and closing costs. For properties developed by the Company, all direct and indirect costs related to planning, development and construction, including interest, real estate taxes and other miscellaneous costs incurred during the construction period, are capitalized for financial reporting purposes and recorded as property under development until construction has been completed.
Assets Held for Sale | Assets Held for Sale ​ Assets are classified as real estate held for sale based on specific criteria as outlined in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 360, Property, Plant & Equipment. Properties classified as real estate held for sale are recorded at the lower of their carrying value or their fair value, less anticipated selling costs. Any properties classified as held for sale are not depreciated. Assets are generally classified as real estate held for sale once management has actively engaged in marketing the asset and has received a firm purchase commitment that is expected to close within one year.
Acquisitions of Real Estate | Acquisitions of Real Estate The acquisition of property for investment purposes is typically accounted for as an asset acquisition. The Company allocates the purchase price to land, buildings and identified intangible assets and liabilities, based in each case on their relative estimated fair values and without giving rise to goodwill. Intangible assets and liabilities represent the value of in-place leases and above- or below-market leases. In making estimates of fair values, the Company may use various sources, including data provided by independent third parties, as well as information obtained by the Company as a result of its due diligence, including expected future cash flows of the property and various characteristics of the markets where the property is located. In allocating the fair value of the identified tangible and intangible assets and liabilities of an acquired property, land is valued based upon comparable market data or independent appraisals. Buildings are valued on an as-if vacant basis based on a cost approach utilizing estimates of cost and the economic age of the building or an income approach utilizing various market data. In-place lease intangibles are valued based on the Company’s estimates of costs related to tenant acquisition and the carrying costs that would be incurred during the time it would take to locate a tenant if the property were vacant, considering current market conditions and costs to execute similar leases at the time of the acquisition. Above- and below-market lease intangibles are recorded based on the present value of the difference between the contractual amounts to be paid pursuant to the leases at the time of acquisition and the Company’s estimate of current market lease rates for the property. In the case of sale-leaseback transactions, it is typically assumed that the lease is not in-place prior to the close of the transaction.
Depreciation and Amortization | Depreciation and Amortization Land, buildings and improvements are recorded and stated at cost. The Company’s properties are depreciated using the straight-line method over the estimated remaining useful life of the assets, which are generally 40 years for buildings and 10 to 20 years for improvements. Properties classified as held for sale and properties under development or redevelopment are not depreciated. Major replacements and betterments, which improve or extend the life of the asset, are capitalized and depreciated over their estimated useful lives. In-place lease intangible assets and the capitalized above- and below-market lease intangibles are amortized over the non-cancelable term of the lease unless the Company believes it is reasonably certain that the tenant will renew the lease for an option term, in which case the Company amortizes the value attributable to the renewal over the renewal period. In-place lease intangible assets are amortized to amortization expense and above- and below-market lease intangibles are amortized as a net adjustment to rental income. In the event of early lease termination, the remaining net book value of any above- or below-market lease intangible is recognized as an adjustment to rental income. The following schedule summarizes the Company’s amortization of lease intangibles for the three and six months ended June 30, 2022 and 2021 (presented in thousands): ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three Months Ended | ​ | Six Months Ended | ​
​ |  | June 30, 2022 |  | June 30, 2021 |  | June 30, 2022 |  | June 30, 2021 | ​
Lease intangibles (in-place) | ​ | $ | 10,407 | ​ | $ | 6,768 | ​ | $ | 19,203 | ​ | $ | 12,683 | ​
Lease intangibles (above-market) | ​ |  | 9,846 | ​ |  | 6,843 | ​ |  | 19,483 | ​ |  | 13,244 | ​
Lease intangibles (below-market) | ​ |  | (1,535) | ​ |  | (1,584) | ​ |  | (2,994) | ​ |  | (3,229) | ​
Total | ​ | $ | 18,718 | ​ | $ | 12,027 | ​ | $ | 35,692 | ​ | $ | 22,698 | ​
​ The following schedule represents estimated future amortization of lease intangibles as of June 30, 2022 (presented in thousands): ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | 2022 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Year Ending December 31, |  | (remaining) | ​ |  | 2023 |  | 2024 |  | 2025 |  | 2026 |  | Thereafter |  | Total
Lease intangibles (in-place) | ​ | $ | 22,324 | ​ |  | $ | 42,613 |  | $ | 39,950 |  | $ | 37,562 |  | $ | 34,871 | ​ | $ | 169,852 |  | $ | 347,172
Lease intangibles (above-market) | ​ |  | 19,901 | ​ |  |  | 37,609 |  |  | 33,557 |  |  | 31,223 |  |  | 29,524 | ​ |  | 240,333 |  |  | 392,147
Lease intangibles (below-market) | ​ |  | (3,228) | ​ | ​ |  | (5,839) | ​ |  | (5,168) | ​ |  | (4,732) | ​ |  | (4,353) | ​ |  | (13,024) | ​ |  | (36,344)
Total | ​ | $ | 38,997 | ​ |  | $ | 74,383 |  | $ | 68,339 |  | $ | 64,053 |  | $ | 60,042 | ​ | $ | 397,161 |  | $ | 702,975
Impairments | Impairments The Company reviews real estate investments and related lease intangibles for possible impairment when certain events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable through operations plus estimated disposition proceeds. Events or changes in circumstances that may occur include, but are not limited to, significant changes in real estate market conditions, estimated residual values and an expectation to sell assets before the end of the previously estimated life. Impairments are measured to the extent the current book value exceeds the estimated fair value of the asset less disposition costs for any assets classified as held for sale. The valuation of impaired assets is determined using valuation techniques including discounted cash flow analysis, analysis of recent comparable sales transactions and purchase offers received from third parties, which are Level 3 inputs. The Company may consider a single valuation technique or multiple valuation techniques, as appropriate, when estimating the fair value of its real estate. Estimating future cash flows is highly subjective and estimates can differ materially from actual results.
Cash and Cash Equivalents and Cash Held in Escrows | Cash and Cash Equivalents and Cash Held in Escrows The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Cash and cash equivalents consist of deposit and checking accounts. Cash held in escrows primarily relates to proposed like-kind exchange transactions pursued under Section 1031 of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”) and funds restricted through a mortgage agreement. The account balances periodically exceed the Federal Deposit Insurance Corporation (“FDIC”) insurance coverage, and as a result, there is a concentration of credit risk related to amounts on deposit in excess of FDIC insurance coverage. The Company had $25.5 million and $44.0 million in cash and cash equivalents and cash held in escrow as of June 30, 2022 and December 31, 2021, respectively, in excess of the FDIC insured limit. Per the requirements of Accounting Standards Update (“ASU”) 2016-18 (Topic 230, Statement of Cash Flows) the following table provides a reconciliation of cash and cash equivalents and cash held in escrow, both as reported within the Condensed Consolidated Balance Sheets, to the total of the cash and cash equivalents and cash held in escrow as reported within the Condensed Consolidated Statements of Cash Flows (presented in thousands): ​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | June 30, 2022 |  | December 31, 2021
Cash and cash equivalents | ​ | $ | 26,267 | ​ | $ | 43,252
Cash held in escrow | ​ |  | 840 | ​ |  | 1,998
Total of cash and cash equivalents and cash held in escrow | ​ | $ | 27,107 | ​ | $ | 45,250
​ | ​ | ​ | ​ | ​ | ​ | ​
Revenue Recognition and Accounts Receivable | Revenue Recognition and Accounts Receivable The Company leases real estate to its tenants under long-term net leases which are accounted for as operating leases. Under this method, leases that have fixed and determinable rent increases are recognized on a straight-line basis over the lease term. Rental increases based upon changes in the consumer price indexes, or other variable factors, are recognized only after changes in such factors have occurred and are then applied according to the lease agreements. Certain leases also provide for additional rent based on tenants’ sales volumes. These rents are recognized when determinable after the tenant exceeds a sales breakpoint. Recognizing rent escalations on a straight-line method results in rental revenue in the early years of a lease being higher than actual cash received, creating a straight-line rent receivable asset which is included in the Accounts Receivable - Tenants line item in the Condensed Consolidated Balance Sheets. The balance of straight-line rent receivables at June 30, 2022 and December 31, 2021 was $47.1 million and $40.9 million, respectively. To the extent any of the tenants under these leases become unable to pay their contractual cash rents, the Company may be required to write down the straight-line rent receivable from those tenants, which would reduce rental income. The Company reviews the collectability of charges under its tenant operating leases on a regular basis, taking into consideration changes in factors such as the tenant’s payment history, the financial condition of the tenant, business conditions in the industry in which the tenant operates and economic conditions in the area where the property is located. The Company’s assessment has specifically included the impact of the COVID-19 pandemic and general economic conditions, which represents a material risk to collectability (see Significant Risks and Uncertainties above). In the event that collectability with respect to any tenant changes, the Company recognizes an adjustment to rental revenue. The Company’s review of collectability of charges under its operating leases also includes any accrued rental revenue related to the straight-line method of reporting rental revenue. As of June 30, 2022, the Company has three tenants where collection is no longer considered probable. For these tenants, the Company is recording rental income on a cash basis and has written off any outstanding receivables, including straight-line rent receivables. Adjustments to rental revenue related to potentially uncollectible charges under these tenant leases had an immaterial impact to Rental Income and Net Income for the three and six months ended June 30, 2022. In addition to the tenant-specific collectability assessment performed, the Company also recognizes a general allowance, as a reduction to rental revenue, for its operating lease receivables which are not expected to be fully collectible based on the potential for settlement of arrears. As of June 30, 2022 and December 31, 2021, this allowance was $0.8 million. The Company’s leases provide for reimbursement from tenants for common area maintenance, insurance, real estate taxes and other operating expenses. A portion of the Company’s operating cost reimbursement revenue is estimated each period and is recognized as rental revenue in the period the recoverable costs are incurred and accrued, and the related revenue is earned. The balance of unbilled operating cost reimbursement receivable at June 30, 2022 and December 31, 2021 was $9.7 million and $9.1 million, respectively. The Company has adopted the practical expedient in FASB ASC Topic 842, Leases (“ASC 842”) that allows lessors to combine non-lease components with the lease components when the timing and patterns of transfer for the lease and non-lease components are the same and the lease is classified as an operating lease. As a result, all rentals and reimbursements pursuant to tenant leases are reflected as one line, “Rental Income,” in the Condensed Consolidated Statement of Operations and Comprehensive Income.
Earnings per Share | Earnings per Share Earnings per share of common stock has been computed pursuant to the guidance in the FASB ASC Topic 260, Earnings Per Share. The guidance requires the classification of the Company’s unvested restricted stock, which contain rights to receive non-forfeitable dividends, as participating securities requiring the two-class method of computing net income per share of common stock. In accordance with the two-class method, earnings per share has been computed by dividing the net income less net income attributable to unvested restricted shares by the weighted average number of shares of common stock outstanding less unvested restricted shares. Diluted earnings per share is computed by dividing net income by the weighted average shares of common stock and potentially dilutive securities in accordance with the treasury stock method. The following is a reconciliation of the numerator and denominator used in the computation of basic and diluted net earnings per share of common stock for each of the periods presented (presented in thousands, except for share data): ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three Months Ended | ​ | Six Months Ended | ​
​ |  | June 30, 2022 |  | June 30, 2021 |  | June 30, 2022 |  | June 30, 2021 | ​
Net income attributable to Agree Realty Corporation | ​ | $ | 35,973 | ​ | $ | 22,347 | ​ | $ | 72,086 | ​ | $ | 52,459 | ​
Less: Series A preferred stock dividends | ​ | ​ | (1,859) | ​ | ​ | — | ​ | ​ | (3,718) | ​ | ​ | — | ​
Net income attributable to common stockholders | ​ | ​ | 34,114 | ​ | ​ | 22,347 | ​ | ​ | 68,368 | ​ | ​ | 52,459 | ​
Less: Income attributable to unvested restricted shares | ​ | ​ | (103) | ​ | ​ | (71) | ​ | ​ | (207) | ​ | ​ | (175) | ​
Net income used in basic and diluted earnings per share | ​ | $ | 34,011 | ​ | $ | 22,276 | ​ | $ | 68,161 | ​ | $ | 52,284 | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Weighted average number of common shares outstanding | ​ |  | 75,277,924 |  | ​ | 65,055,820 |  | ​ | 73,385,101 | ​ |  | 64,057,906 | ​
Less: Unvested restricted stock | ​ |  | (240,004) |  | ​ | (219,836) |  | ​ | (240,004) | ​ |  | (219,836) | ​
Weighted average number of common shares outstanding used in basic earnings per share | ​ |  | 75,037,920 |  | ​ | 64,835,984 |  | ​ | 73,145,097 | ​ |  | 63,838,070 | ​
​ | ​ | ​ | ​ |  | ​ | ​ |  | ​ | ​ | ​ |  | ​ | ​
Weighted average number of common shares outstanding used in basic earnings per share | ​ |  | 75,037,920 |  | ​ | 64,835,984 |  | ​ | 73,145,097 | ​ |  | 63,838,070 | ​
Effect of dilutive securities: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Share-based compensation | ​ |  | 92,177 |  | ​ | 98,202 |  | ​ | 85,345 | ​ |  | 91,413 | ​
2020 ATM Forward Equity Offerings | ​ | ​ | — | ​ | ​ | 217,943 | ​ | ​ | — | ​ | ​ | 133,476 | ​
2021 ATM Forward Equity Offerings | ​ | ​ | 40,752 | ​ | ​ | 33,475 | ​ | ​ | 20,867 | ​ | ​ | 16,738 | ​
December 2021 Forward Offering | ​ | ​ | 311,848 | ​ | ​ | — | ​ | ​ | 179,925 | ​ | ​ | — | ​
May 2022 Forward Offering | ​ | ​ | 87,392 | ​ | ​ | — | ​ | ​ | 43,696 | ​ | ​ | — | ​
Weighted average number of common shares outstanding used in diluted earnings per share | ​ |  | 75,570,089 |  | ​ | 65,185,604 |  | ​ | 73,474,930 | ​ |  | 64,079,697 | ​
​ For the three months ended June 30, 2022, four shares of common stock related to at-the-market (“ATM”) forward equity offerings and 483 shares of restricted common stock (“restricted shares”) granted in 2020 and 2021 were anti-dilutive and were not included in the computation of diluted earnings per share. ​ For the six months ended June 30, 2022, 38,316 shares of common stock related to ATM forward equity offerings and 1,305 shares of restricted shares granted in 2020 and 2021were anti-dilutive and were not included in the computation of diluted earnings per share. ​ For the three months ended June 30, 2021, 1,440 shares of restricted common stock granted in 2020 were anti-dilutive and were not included in the computation of diluted earnings per share. There were no anti-dilutive shares of common stock related to the 2020 ATM forward equity offerings and the 2021 ATM forward equity offerings for the three months ended June 30, 2021. ​ For the six months ended June 30, 2021, 2,743 shares of restricted common stock granted in 2020 were anti-dilutive and were not included in the computation of diluted earnings per share. There were no anti-dilutive shares of common stock related to the 2020 ATM forward equity offerings and the 2021 ATM forward equity offerings for the six months ended June 30, 2021.
Forward Equity Sales | Forward Equity Sales The Company occasionally sells shares of common stock through forward sale agreements to enable the Company to set the price of such shares upon pricing the offering (subject to certain adjustments) while delaying the issuance of such shares and the receipt of the net proceeds by the Company. To account for the forward sale agreements, the Company considers the accounting guidance governing financial instruments and derivatives. To date, the Company has concluded that its forward sale agreements are not liabilities as they do not embody obligations to repurchase its shares nor do they embody obligations to issue a variable number of shares for which the monetary value are predominantly fixed, varying with something other than the fair value of the shares, or varying inversely in relation to its shares. The Company then evaluates whether the agreements meet the derivatives and hedging guidance scope exception to be accounted for as equity instruments. The Company has concluded that the agreements are classifiable as equity contracts based on the following assessments: (i) none of the agreements’ exercise contingencies are based on observable markets or indices besides those related to the market for the Company’s own stock price and operations; and (ii) none of the settlement provisions precluded the agreements from being indexed to its own stock. The Company also considers the potential dilution resulting from the forward sale agreements on the earnings per share calculations. The Company uses the treasury stock method to determine the dilution resulting from the forward sale agreements during the period of time prior to settlement.
Equity Offering Costs | Equity Offering Costs Underwriting commissions and offering costs of equity offerings have been reflected as a reduction of additional paid-in-capital in our Condensed Consolidated Balance Sheets.
Income Taxes | Income Taxes The Company has made an election to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code and related regulations. The Company generally will not be subject to federal income taxes on amounts distributed to stockholders, providing it distributes 100% of its REIT taxable income and meets certain other requirements for qualifying as a REIT. For the periods covered in the Condensed Consolidated Financial Statements, the Company believes it has qualified as a REIT. Accordingly, no provision has been made for federal income taxes. Notwithstanding its qualification for taxation as a REIT, the Company is subject to certain state taxes on its income and real estate. Earnings and profits that determine the taxability of distributions to stockholders differ from net income reported for financial reporting purposes due to differences in the estimated useful lives and methods used to compute depreciation and the carrying value (basis) of the investments in properties for tax purposes, among other things. The Company and its taxable REIT subsidiaries (“TRS”) have made a timely TRS election pursuant to the provisions of the REIT Modernization Act. A TRS is able to engage in activities resulting in income that previously would have been disqualified from being eligible REIT income under the federal income tax regulations. As a result, certain activities of the Company which occur within its TRS entities are subject to federal and state income taxes. All provisions for federal income taxes in the accompanying Condensed Consolidated Financial Statements are attributable to the Company’s TRS. The Company regularly analyzes its various federal and state filing positions and only recognizes the income tax effect in its financial statements when certain criteria regarding uncertain income tax positions have been met. The Company believes that its income tax positions would more likely than not be sustained upon examination by all relevant taxing authorities. Therefore, no provisions for uncertain income tax positions have been recorded in the Condensed Consolidated Financial Statements.
Management's Responsibility to Evaluate Our Ability to Continue as a Going Concern | Management’s Responsibility to Evaluate Our Ability to Continue as a Going Concern When preparing financial statements for each annual and interim reporting period, management has the responsibility to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued. In making its evaluation, the Company considers, among other things, any risks and/or uncertainties to its results of operations, contractual obligations in the form of near-term debt maturities, dividend requirements, or other factors impacting the Company’s liquidity and capital resources. No conditions or events that raised substantial doubt about the ability to continue as a going concern within one year were identified as of the issuance date of the Condensed Consolidated Financial Statements contained in this Quarterly Report on Form 10-Q.
Reclassifications | Reclassifications Certain reclassifications of prior period amounts have been made in the consolidated financial statements and footnotes in order to conform to the current presentation.
Segment Reporting | Segment Reporting The Company is primarily in the business of acquiring, developing and managing retail real estate which is considered to be one reportable segment. The Company has no other reportable segments.
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of (1) assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements, and (2) revenues and expenses during the reporting period. Actual results could differ from those estimates.
Fair Values of Financial Instruments | Fair Values of Financial Instruments The Company’s estimates of fair value of financial and non-financial assets and liabilities are based on the framework established in the fair value accounting guidance, ASC Topic 820 Fair Value Measurement (“ASC 820”). The framework specifies a hierarchy of valuation inputs which was established to increase consistency, clarity and comparability in fair value measurements and related disclosures. The guidance describes a fair value hierarchy based on three levels of inputs that may be used to measure fair value, two of which are considered observable and one that is considered unobservable. The following describes the three levels: Level 1 – Valuation is based on quoted prices in active markets for identical assets or liabilities. ​ Level 2 – Valuation is based on inputs other than Level 1 inputs that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. ​ Level 3 – Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include option pricing models, discounted cash flow models and similar techniques.
Recent Accounting Pronouncements | Recent Accounting Pronouncements In August 2020, the FASB issued ASU 2020-06, “Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” (“ASU 2020-06”). The guidance in ASU 2020-06 simplifies the accounting for convertible debt and convertible preferred stock by removing the requirements to separately present certain conversion features in equity. In addition, the amendments in ASU 2020-06 also simplify the guidance in ASC Subtopic 815-40, Derivatives and Hedging: Contracts in Entity’s Own Equity, by removing certain criteria that must be satisfied in order to classify a contract as equity, which is expected to decrease the number of freestanding instruments and embedded derivatives accounted for as assets or liabilities. Finally, the amendments revise the guidance on calculating earnings per share, requiring use of the if-converted method for all convertible instruments and rescinding an entity’s ability to rebut the presumption of share settlement for instruments that may be settled in cash or other assets. The amendments in ASU 2020-06 are effective for the Company for fiscal years beginning after December 15, 2021. The adoption of this guidance on January 1, 2022 did not have a material impact the Company’s financial statements. In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848)” (“ASU 2020-04”). ASU 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. The Company has elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. The Company continues to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur.

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- Definition Disclosure of accounting policy regarding (1) the principles it follows in consolidating or combining the separate financial statements, including the principles followed in determining the inclusion or exclusion of subsidiaries or other entities in the consolidated or combined financial statements and (2) its treatment of interests (for example, common stock, a partnership interest or other means of exerting influence) in other entities, for example consolidation or use of the equity or cost methods of accounting. The accounting policy may also address the accounting treatment for intercompany accounts and transactions, noncontrolling interest, and the income statement treatment in consolidation for issuances of stock by a subsidiary. + References Reference 1: http://www.xbrl.org/2003/role/exampleRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section 50 -Paragraph 4 -Subparagraph (a) -URI https://asc.fasb.org/extlink&oid=126899994&loc=d3e18823-107790 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 810 -SubTopic 10 -Section 50 -Paragraph 1 -URI https://asc.fasb.org/extlink&oid=109239629&loc=d3e5614-111684 + Details
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