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RECENT ACCOUNTING PRONOUNCEMENTS | 6 Months Ended
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Jun. 30, 2018
New Accounting Pronouncements and Changes in Accounting Principles [Abstract] |
RECENT ACCOUNTING PRONOUNCEMENTS | RECENT ACCOUNTING PRONOUNCEMENTS Income Taxes In February 2018, the FASB issued ASU No. 2018-02, Income Statement-Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which permits - but does not require - companies to reclassify stranded tax effects caused by 2017 tax reform from accumulated other comprehensive income to retained earnings. Additionally, the ASU requires new disclosures by all companies, whether they opt to do the reclassification or not. The standard is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years, with early adoption permitted. We adopted this standard using the aggregate portfolio approach and elected to reclassify $101 million of tax benefits resulting from the federal income tax rate change, net of associated state tax effect, from accumulated other comprehensive loss to retained earnings as of the beginning of 2018. This standard did not impact our results of operations or cash flows. Share-Based Compensation In May 2017, the FASB issued ASU No. 2017-09, Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting, which clarifies when changes to the terms or conditions of a share-based payment award must be accounted for as modifications. The amendments in this update are effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2017, with early adoption permitted. We adopted the standard during the first quarter of 2018 and it did not have an impact on our consolidated financial position, results of operations, or cash flows. Business Combinations In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. The objective of the update is to add guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The definition of a business affects many areas of accounting, including acquisitions, disposals, goodwill, and consolidation. Companies must use a prospective approach to adopt ASU 2017-01, which was effective for annual and interim periods beginning after December 15, 2017, with early adoption permitted. We prospectively adopted this standard in the first quarter of 2018. The new standard did not have a material impact to the Company's consolidated condensed financial statements during the first or second quarter of 2018. Statement of Cash Flows In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows, which clarifies how companies present and classify certain cash receipts and cash payments in the statement of cash flows. In November 2016, the FASB issued additional guidance related to the statement of cash flows, which requires companies to explain the change during the period in the total of cash, cash equivalents, and restricted cash or restricted cash equivalents. The standard was effective January 1, 2018, with early adoption permitted. We adopted the standard during the first quarter of 2018. As a result of this update, restricted cash is included within cash and cash equivalents on our statements of consolidated cash flows. As of June 30, 2018 and December 31, 2017, we had $3 million and $5 million respectively, in prepaid expenses and other current assets associated with our like-kind exchange program for certain of our U.S. based revenue earning equipment. Leases In July 2018, the FASB issued ASU No. 2018-10, Codification Improvements to Topic 842, Leases. The objective of this update is to increase stakeholder's awareness of the amendments and to expedite the improvements related to ASU No. 2016-02, Leases (Topic 842). The amendments to this update affect narrow aspects of the guidance issued in ASU No. 2016-02, which are not yet effective. We will adopt the standard effective January 1, 2019, using the modified retrospective transition method. We are currently evaluating the impact of the adoption of this update on our consolidated financial position, results of operations, and cash flows. In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which sets out the principles for the recognition, measurement, presentation and disclosure of leases. The standard requires lessees to classify leases as either finance or operating leases. This classification will determine whether the related expense will be recognized based on asset amortization and interest on the obligation or on a straight-line basis over the term of the lease. A lessee is also required to record a right-of- use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases. We do not expect the lessee requirements to have a material impact on our consolidated financial position, results of operations or cash flows. The new standard continues to require lessors to separate the lease component from the non-lease component; however, it provides clarification on the scope of non-lease components (e.g., maintenance services). The new standard also provides more guidance on how to identify and separate the components. The lease component will be accounted for using an approach that is substantially equivalent to existing guidance for sales-type leases, direct financing leases and operating leases. The non-lease component will be accounted for in accordance with the revenue recognition guidance, see below section "Revenue Recognition." The adoption of the new lease standard will primarily impact our ChoiceLease product line, which includes a vehicle lease as well as maintenance and other services related to the vehicle. We will generally continue to recognize revenue for the lease portion of the product line on a straight-line basis. Revenue from maintenance services will be recognized consistent with the timing pattern of maintenance costs, which will generally require the deferral of some portion of the customer's lease payments when received, as maintenance costs are typically not incurred evenly over the life of a ChoiceLease contract. We will adopt the standard effective January 1, 2019, using the modified retrospective transition method. Upon adoption, we will record a cumulative-effect adjustment to recognize deferred revenue related to the maintenance services on the opening balance sheet for 2017 and restate all prior periods presented (2017 and 2018). We expect the cumulative-effect adjustment will have a significant impact on our consolidated financial position. We continue to evaluate the impact of adoption of this standard on our results of operations. We do not expect the adoption of this standard to have an impact on our cash flows. Revenue Recognition In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which together with related, subsequently issued guidance, requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. In addition, Topic 606 requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. We adopted Topic 606 in the first quarter of 2018 using the full retrospective method, which required us to restate each prior reporting period presented. Upon adoption of Topic 606, we applied the standard’s practical expedient that permits the omission of disclosures of the prior period allocation of the transaction price to remaining performance obligations and an explanation of when the entity expects to recognize that amount as revenue. Adoption of the new revenue recognition standard impacted our previously reported Consolidated Condensed Statements of Operations and Comprehensive Income results as follows (in thousands, except per share amounts):
| Three months ended June 30, 2017 |  | Six months ended June 30, 2017
|  |  | New Revenue |  |  |  |  |  | New Revenue |  |
| As Previously |  | Standard |  |  |  | As Previously |  | Standard |  |
| Reported |  | Adjustments |  | As Revised |  | Reported |  | Adjustments |  | As Revised
Services revenue (1) | $ | 871,027 |  |  | (5,186 | ) |  | 865,841 |  |  | $ | 1,722,894 |  |  | (16,366 | ) |  | 1,706,528 |
Total revenues | 1,793,214 |  |  | (5,186 | ) |  | 1,788,028 |  |  | 3,541,377 |  |  | (16,366 | ) |  | 3,525,011 |
Cost of services (1) | 734,764 |  |  | (5,186 | ) |  | 729,578 |  |  | 1,448,844 |  |  | (16,366 | ) |  | 1,432,478 |
Selling, general and administrative expenses | 201,626 |  |  | (162 | ) |  | 201,464 |  |  | 403,387 |  |  | (828 | ) |  | 402,559 |
Earnings from continuing operations before income taxes | 80,692 |  |  | 162 |  |  | 80,854 |  |  | 140,648 |  |  | 828 |  |  | 141,476 |
Provision for income taxes | 29,349 |  |  | 110 |  |  | 29,459 |  |  | 51,026 |  |  | 519 |  |  | 51,545 |
Earnings from continuing operations | 51,343 |  |  | 52 |  |  | 51,395 |  |  | 89,622 |  |  | 309 |  |  | 89,931 |
Net earnings | 50,816 |  |  | 52 |  |  | 50,868 |  |  | 88,965 |  |  | 309 |  |  | 89,274 |
Comprehensive income | 83,822 |  |  | 52 |  |  | 83,874 |  |  | 142,777 |  |  | 309 |  |  | 143,086 |
Earnings per common share - Basic |  |  |  |  |  |  |  |  |  |  |
Continuing operations | $ | 0.97 |  |  | — |  |  | 0.97 |  |  | $ | 1.69 |  |  | 0.01 |  |  | 1.70 |
Earnings per common share - Diluted |  |  |  |  |  |  |  |  |  |  |
Continuing operations | $ | 0.97 |  |  | — |  |  | 0.97 |  |  | $ | 1.68 |  |  | 0.01 |  |  | 1.69 |
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(1) | Amount includes $5 million and $16 million for the three and six months ended June 30, 2017, respectively, related to correction of a prior period error. We historically accounted for certain freight brokerage agreements as a principal and presented revenue and costs related to subcontracted transportation on a gross basis in our financial statements. In adopting Topic 606, we reviewed and evaluated our existing revenue contracts and determined that certain of our freight brokerage agreements should have historically been presented on a net basis as an agent. We evaluated the materiality of this revision, quantitatively and qualitatively. We concluded it was not material to any of our previously issued consolidated financial statements and correction as an out of period adjustment in the current period was not material.
Adoption of the new revenue recognition standard impacted our previously reported Consolidated Condensed Balance Sheet as follows (in thousands)
|  |  |  |  | December 31, 2017
|  |  |  |  |  |  | New Revenue |  |
|  |  |  |  | As Previously |  | Standard |  |
|  |  |  |  | Reported |  | Adjustment |  | As Revised
Prepaid expenses and other current assets |  | $ | 159,483 |  |  | 611 |  |  | 160,094 |
Total current assets |  | 1,322,282 |  |  | 611 |  |  | 1,322,893 |
Direct financing leases and other assets |  | 559,549 |  |  | 11,157 |  |  | 570,706 |
Total assets |  | 11,452,231 |  |  | 11,768 |  |  | 11,463,999 |
Accrued expenses and other current liabilities |  | 587,406 |  |  | 2,197 |  |  | 589,603 |
Total current liabilities |  | 2,012,778 |  |  | 2,197 |  |  | 2,014,975 |
Other non-current liabilities |  | 812,089 |  |  | 553 |  |  | 812,642 |
Deferred income taxes |  | 1,208,766 |  |  | 2,363 |  |  | 1,211,129 |
Total liabilities |  | 8,617,215 |  |  | 5,113 |  |  | 8,622,328 |
Retained earnings |  | 2,465,022 |  |  | 6,655 |  |  | 2,471,677 |
Total shareholders' equity |  | 2,835,016 |  |  | 6,655 |  |  | 2,841,671 |
Total liabilities and shareholders' equity |  | 11,452,231 |  |  | 11,768 |  |  | 11,463,999 |

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