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RECENT ACCOUNTING PRONOUNCEMENTS | 3 Months Ended
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Mar. 31, 2019
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. Derivatives and Hedging In August 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2017-12, Derivatives and Hedging (Topic 815), which simplifies and clarifies the accounting and disclosure for hedging activities by more closely aligning the results of cash flow and fair value hedge accounting with the risk management activities of an entity. The amendments in this update are effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2018, with early adoption permitted. We adopted this standard during the first quarter of 2018 and it did not impact our consolidated financial position, results of operations or cash flows. Leases In February 2016, the FASB issued 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. Topic 842 impacts the accounting for both lessors and lessees. We have adopted the standard effective January 1, 2019, using the modified retrospective transition method and initial application date of January 1, 2017. For all our facilities and equipment that we lease, we have elected the practical expedient to combine lease and non-lease components. For our existing operating and finance leases that commenced before the date of initial application, we have made an accounting policy election, as lessee, to use the incremental borrowing rate for our leases considering the remaining lease term and remaining minimum rental payments. After lease commencement of our operating leases as lessee, unless the ROU assets are impaired, we have made an accounting policy election to subsequently measure operating lease ROU assets by amortizing the ROU assets calculated as the difference between the straight line cost for the period (including amortization of initial direct costs) and the periodic accretion of the lease liability using the effective interest method. In calculating the change in ROU assets from a lease modification that decreases our rights as lessee to use one or more underlying assets, we have made an accounting policy election of remeasuring the ROU asset based on how much of the original right of use remains after modification. 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 primarily impacts our ChoiceLease product line, which includes a vehicle lease as well as maintenance and other services. The standard requires lessees to classify leases as either finance or operating leases. This classification determines whether the related expense is 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). We recorded a ROU asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. We have elected the practical expedient in Topic 842 to not apply these recognition requirements to leases with a term of 12 months or less with the exception of our real estate leases. Instead we recognize the lease payments in profit or loss on a straight-line basis over the lease term and variable lease payments in the period in which the obligation for those payments is incurred. Adoption of the new lease standard impacted our previously reported Consolidated Condensed Statements of Earnings and Comprehensive Income results as follows (in millions, except per share amounts):
| Three months ended March 31, 2018
| As Previously |  | Lessor |  | Lessee and Other |  |
| Reported |  | Adjustments (1) |  | Adjustments (1) |  | As Revised
Lease & related maintenance and rental revenues | $ | 824.3 |  |  | 0.5 |  |  | 0.3 |  |  | 825.0 |
Total revenues | 1,903.5 |  |  | 0.5 |  |  | 0.3 |  |  | 1,904.2 |
Cost of lease & related maintenance and rental | 619.2 |  |  | (3.6 | ) |  | — |  |  | 615.6 |
Cost of services (2) | 787.2 |  |  | — |  |  | 1.5 |  |  | 788.8 |
Other operating expenses | 33.5 |  |  | — |  |  | (0.5 | ) |  | 33.0 |
Selling, general and administrative expenses (2) | 208.6 |  |  | (0.4 | ) |  | (0.4 | ) |  | 207.8 |
Interest expense | 37.8 |  |  | — |  |  | 0.4 |  |  | 38.2 |
Restructuring and other items, net (2) | 16.0 |  |  | — |  |  | (0.9 | ) |  | 15.1 |
Earnings from continuing operations before income taxes | 48.1 |  |  | 4.5 |  |  | 0.1 |  |  | 52.7 |
Provision for income taxes | 14.2 |  |  | 1.2 |  |  | — |  |  | 15.4 |
Earnings from continuing operations | 33.9 |  |  | 3.3 |  |  | 0.1 |  |  | 37.3 |
Net earnings | 33.5 |  |  | 3.3 |  |  | 0.1 |  |  | 36.9 |
Comprehensive income | 51.0 |  |  | 3.4 |  |  | — |  |  | 54.3 |
Earnings per common share - Basic |  |  |  |  |  |  |
Continuing operations | $ | 0.65 |  |  | 0.06 |  |  | — |  |  | 0.71 |
Net earnings | $ | 0.64 |  |  | 0.06 |  |  | — |  |  | 0.70 |
Earnings per common share - Diluted |  |  |  |  |  |  |
Continuing operations | $ | 0.64 |  |  | 0.06 |  |  | — |  |  | 0.70 |
Net earnings | $ | 0.63 |  |  | 0.06 |  |  | — |  |  | 0.70 |
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(1) | Amounts include the correction of a prior period error. The primary components of the error correction are a reduction of "Lease & related maintenance and rental revenues" of approximately $4.7 million and an offsetting reduction in depreciation expense (included in "Cost of lease & related maintenance and rental") of approximately $4.7 million. We determined certain lessor arrangements of revenue earning equipment historically accounted for as operating leases should have been accounted for as direct financing leases. Additionally, we evaluated our leases for classification and determined that certain lessee arrangements, primarily real estate leases, historically accounted for as operating leases should have been accounted for as capital leases. We concluded these errors were not material to any of our previously issued consolidated financial statements.
(2) | Adjustments primarily reflects the reclassification of our Singapore operations into "Restructuring and other items, net," that we will shut down during 2019.
Note: Amounts may not be additive due to rounding. Adoption of the new lease standard impacted our previously reported Consolidated Condensed Balance Sheet as follows (in millions):
|  |  |  | December 31, 2018
|  |  |  | As Previously |  | Lessor |  | Lessee |  |
|  |  |  | Reported |  | Adjustments (1) |  | Adjustments (1) |  | As Revised
Receivables, net | $ | 1,219.4 |  |  | 22.6 |  |  | — |  |  | 1,242.1 |
Prepaid expenses and other current assets | 201.6 |  |  | (23.3 | ) |  | — |  |  | 178.3 |
Total current assets | 1,568.4 |  |  | (0.7 | ) |  | — |  |  | 1,567.7 |
Revenue earning equipment, net | 9,498.0 |  |  | (84.2 | ) |  | 2.2 |  |  | 9,416.0 |
Operating property and equipment, net | 843.8 |  |  | — |  |  | 18.2 |  |  | 862.1 |
Sales-type leases and other assets | 606.6 |  |  | 156.8 |  |  | 204.3 |  |  | 967.8 |
Total assets | 13,051.1 |  |  | 72.0 |  |  | 224.7 |  |  | 13,347.8 |
Short-term debt and current portion of long term-debt | 930.0 |  |  | — |  |  | 7.2 |  |  | 937.1 |
Accrued expenses and other current liabilities | 630.5 |  |  | 145.1 |  |  | 72.2 |  |  | 847.7 |
Total current liabilities | 2,292.3 |  |  | 145.1 |  |  | 79.3 |  |  | 2,516.7 |
Long-term debt | 5,693.6 |  |  | — |  |  | 18.5 |  |  | 5,712.1 |
Other non-current liabilities | 849.9 |  |  | 421.2 |  |  | 131.5 |  |  | 1,402.6 |
Deferred income taxes | 1,304.8 |  |  | (124.6 | ) |  | (0.5 | ) |  | 1,179.7 |
Total liabilities | 10,140.8 |  |  | 441.7 |  |  | 228.8 |  |  | 10,811.2 |
Retained earnings | 2,710.7 |  |  | (369.6 | ) |  | (3.8 | ) |  | 2,337.3 |
Accumulated other comprehensive loss | (911.3 | ) |  | (0.1 | ) |  | (0.2 | ) |  | (911.6 | )
Total shareholders' equity | 2,910.3 |  |  | (369.7 | ) |  | (4.1 | ) |  | 2,536.6 |
Total liabilities and shareholders' equity | 13,051.1 |  |  | 72.0 |  |  | 224.7 |  |  | 13,347.8 |
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(1) | Amounts include the correction of a prior period error. The primary components of the error correction are an increase in "Receivables, net" of approximately $24 million, an increase in sales-type leases and other assets of approximately $65 million and a reduction in "Revenue earning equipment, net" of $83 million. We determined certain lessor arrangements of revenue earning equipment historically accounted for as operating leases should have been accounted for as direct financing leases. Additionally, we evaluated our leases for classification and determined that certain lessee arrangements, primarily real estate leases, historically accounted for as operating leases should have been accounted for as capital leases. We concluded these errors were not material to any of our previously issued consolidated financial statements.
Note: Amounts may not be additive due to rounding. Adoption of the new lease standard impacted our previously reported Consolidated Condensed Statements of Cash Flows as follows (in millions):
| Three months ended March 31, 2018
| As Previously Reported |  | New Lease Standard Adjustments |  | As Revised
Net earnings | 33.5 |  |  | 3.4 |  |  | 36.9 |
Earnings from continuing operations | 33.9 |  |  | 3.4 |  |  | 37.3 |
Depreciation expense | 336.7 |  |  | (3.9 | ) |  | 332.8 |
Amortization expense and other non-cash charges, net | 13.6 |  |  | 18.5 |  |  | 32.1 |
Deferred income tax expense | 31.9 |  |  | 1.2 |  |  | 33.1 |
Collections on sales-type leases and other items | — |  |  | 21.6 |  |  | 21.6 |
Changes in operating assets and liabilities: |  |  |  |  |  |
Prepaid expenses and other assets | (26.0 | ) |  | (20.1 | ) |  | (46.1 | )
Accrued expenses and other non-current liabilities | (95.9 | ) |  | 1.3 |  |  | (94.6 | )
Net cash provided by operating activities from continuing operations | 314.9 |  |  | 22.0 |  |  | 336.9 |
Debt repaid | (412.1 | ) |  | (2.2 | ) |  | (414.3 | )
Net cash provided by financing activities from continuing operations | 231.8 |  |  | (2.2 | ) |  | 229.6 |
Collections on direct finance leases and other items | 19.7 |  |  | (19.7 | ) |  | — |
Net cash used in investing activities from continuing operations | (553.0 | ) |  | (19.7 | ) |  | (572.8 | )
Note: Amounts may not be additive due to rounding.

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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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