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Recent Accounting Pronouncements | 12 Months Ended
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Dec. 31, 2018
New Accounting Pronouncements and Changes in Accounting Principles [Abstract] |
RECENT ACCOUNTING PRONOUNCEMENTS | RECENT ACCOUNTING PRONOUNCEMENTS Cloud Computing Arrangements In August 2018, the FASB issued ASU No. 2018-15, Intangibles - Goodwill and Other - Internal Use Software (Topic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, which amends ASC 350-40 to address a customer’s accounting for implementation costs incurred in a cloud computing arrangement (CCA) that is a service contract. ASU 2018-15 aligns the accounting for costs incurred to implement a CCA that is a service arrangement with the guidance on capitalizing costs associated with developing or obtaining internal-use software. The standard is effective for fiscal years beginning after December 15, 2019, with early adoption permitted. Entities are permitted to apply either a retrospective or prospective approach to adopt the guidance. We are currently evaluating the impact of the adoption of this update on our consolidated financial position, results of operations, and cash flows. 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 the 2017 Tax Cuts and Jobs Act from accumulated other comprehensive income to retained earnings. Additionally, the ASU requires new disclosures by all companies, whether they elected to make 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 an impact to the Company's consolidated financial statements during 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. We did not have restricted cash as of December 31, 2018. As of December 31, 2017, we had restricted cash of $5 million 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 February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which sets out the principles for the identification, measurement, recognition, presentation and disclosure of leases. The FASB issued a number of subsequent updates to the standard. The standard impacts the accounting for both lessors and lessees. We will adopt the standard effective January 1, 2019, using the modified retrospective transition method and initial application date of January 1, 2017. We do not intend to elect the allowable transition practical expedients package and are therefore required to reassess as of January 1, 2017, and throughout 2017 and 2018, 1) whether contracts contain leases, 2) lease classification, and 3) initial direct costs. For our facility and equipment leases, we intend to elect the practical expedient for lessees, to combine lease and non-lease components. We do not intend to utilize the practical expedient that allows the use of hindsight by lessees and lessors in determining the lease term or in assessing impairment of right-of-use assets. The new standard requires lessors to identify and evaluate the lease and non-lease components in arrangements containing a lease, provides clarification on the scope of non-lease components and provides more guidance on how to identify and separate the components. From a lessor perspective, 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. 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. We will generally continue to recognize revenue for the lease component of the product line on a straight-line basis. The non-lease component will be accounted for in accordance with revenue guidance under Topic 606. Revenue from maintenance services will be recognized consistent with the estimated pattern of maintenance costs, which will generally result in the recognition of a contract liability for some portion of the customer's payments allocated to the service component of the arrangement. Maintenance services are typically not performed evenly over the life of a ChoiceLease contract. We are implementing a lessor revenue recognition system, which will both assist in separating the lease and non-lease components, primarily maintenance services, as well as account for the pattern of revenue recognition of the separate lease and non-lease components under our lessor arrangements. Upon the adoption of the lease standard, we expect to record a material cumulative-effect adjustment to retained earnings as of January 1, 2017, to recognize deferred revenue, net of the deferred tax impact, related to the maintenance services. We continue to evaluate the impact of adoption of the lessor requirements of this standard on our results of operations; however, such requirements may have a significant impact on our results of operations due to the change to the timing and pattern of recognition of income. The adoption of the lessor requirements will have no impact on our cash flows. 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 (finance leases) or on a straight-line basis over the term of the lease (operating 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 are implementing a lease management system to track and record the right-of-use asset and liability for all leases with a term of greater than 12 months. Upon the adoption of the lease standard, we will record right-of-use assets and lease liabilities as of January 1, 2017, and retrospectively adjust the results of operations and financial position throughout 2017 and 2018 for the effects of the new standard. The difference between the right-of-use assets and lease liabilities, net of the deferred tax impact, will be recorded as cumulative-effect adjustment to retained earnings. We do not expect the lessee requirements to have a material impact on our consolidated financial position, results of operations or cash flows. We are in the process of completing additional process changes and updating internal controls to ensure the new reporting and disclosure requirements are met upon adoption. 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 retrospectively adjust 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 Statements of Operations and Comprehensive Income results as follows (in millions, except per share amounts):
|  | Year ended December 31, 2017 |  | Year ended December 31, 2016
|  |  |  | New Revenue |  |  |  |  |  | New Revenue |  |
|  | As Previously |  | Standard |  |  |  | As Previously |  | Standard |  |
|  | Reported |  | Adjustments |  | As Revised |  | Reported |  | Adjustments |  | As Revised
Services revenue (1) |  | $ | 3,571.4 |  |  | (32.5 | ) |  | 3,538.9 |  |  | $ | 3,152.3 |  |  | (28.9 | ) |  | 3,123.4 |
Total revenues |  | 7,329.6 |  |  | (32.5 | ) |  | 7,297.1 |  |  | 6,787.0 |  |  | (28.9 | ) |  | 6,758.1 |
Cost of services (1) |  | 3,003.3 |  |  | (32.5 | ) |  | 2,970.8 |  |  | 2,603.0 |  |  | (28.9 | ) |  | 2,574.1 |
Selling, general and administrative expenses |  | 872.0 |  |  | (0.8 | ) |  | 871.2 |  |  | 805.1 |  |  | (0.9 | ) |  | 804.2 |
Earnings from continuing operations before income taxes |  | 313.8 |  |  | 0.8 |  |  | 314.5 |  |  | 406.4 |  |  | 0.9 |  |  | 407.3 |
Provision for income taxes |  | (477.2 | ) |  | (0.5 | ) |  | (477.7 | ) |  | 141.7 |  |  | 0.3 |  |  | 142.0 |
Earnings from continuing operations |  | 791.0 |  |  | 1.3 |  |  | 792.3 |  |  | 264.6 |  |  | 0.6 |  |  | 265.2 |
Net earnings |  | 790.6 |  |  | 1.3 |  |  | 791.8 |  |  | 262.5 |  |  | 0.6 |  |  | 263.1 |
Comprehensive income |  | 917.1 |  |  | 1.3 |  |  | 918.4 |  |  | 141.2 |  |  | 0.6 |  |  | 141.8 |
Earnings per common share - Basic |  |  |  |  |  |  |  |  |  |  |  |
Continuing operations |  | $ | 14.98 |  |  | 0.02 |  |  | 15.00 |  |  | $ | 4.98 |  |  | 0.01 |  |  | 4.99 |
Earnings per common share - Diluted |  |  |  |  |  |  |  |  |  |  |  |
Continuing operations |  | $ | 14.87 |  |  | 0.03 |  |  | 14.90 |  |  | $ | 4.94 |  |  | 0.01 |  |  | 4.95 |
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(1) | Amount includes $33 million and $29 million for the years ended December 31, 2017 and 2016, 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 Balance Sheet as follows (in millions):
|  |  |  |  | December 31, 2017
|  |  |  |  |  |  | New Revenue |  |
|  |  |  |  | As Previously |  | Standard |  |
|  |  |  |  | Reported |  | Adjustment |  | As Revised
Prepaid expenses and other current assets |  | $ | 159.5 |  |  | 0.6 |  |  | 160.1 |
Total current assets |  | 1,322.3 |  |  | 0.6 |  |  | 1,322.9 |
Direct financing leases and other assets |  | 559.5 |  |  | 11.2 |  |  | 570.7 |
Total assets |  | 11,452.2 |  |  | 11.8 |  |  | 11,464.0 |
Accrued expenses and other current liabilities |  | 587.4 |  |  | 2.2 |  |  | 589.6 |
Total current liabilities |  | 2,012.8 |  |  | 2.2 |  |  | 2,015.0 |
Other non-current liabilities |  | 812.1 |  |  | 0.5 |  |  | 812.6 |
Deferred income taxes |  | 1,208.8 |  |  | 2.3 |  |  | 1,211.1 |
Total liabilities |  | 8,617.2 |  |  | 5.1 |  |  | 8,622.3 |
Retained earnings |  | 2,465.0 |  |  | 6.7 |  |  | 2,471.7 |
Total shareholders' equity |  | 2,835.0 |  |  | 6.7 |  |  | 2,841.7 |
Total liabilities and shareholders' equity |  | 11,452.2 |  |  | 11.7 |  |  | 11,464.0 |

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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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