XML 23 R11.htm IDEA: XBRL DOCUMENT v3.22.0.1
New Accounting Standards
 12 Months Ended
Dec. 31, 2021
Accounting Changes and Error Corrections [Abstract]  
New Accounting Standards New Accounting Standards
Recently Adopted Accounting Standards
In November 2020, the U.S. Securities and Exchange Commission issued Release No. 33-10890, “Management’s Discussion and Analysis, Selected Financial Data, and Supplementary Financial Information” to modernize, simplify and enhance certain financial disclosure requirements in Regulation S-K. Among other changes, the amendments enhance and clarify the disclosure requirements for liquidity and capital resources, eliminate the requirement to present five years of Selected Financial Data, replace the requirement to present two years of tabular selected quarterly financial data with a principles-based requirement to disclose when there are material retrospective changes and eliminate the tabular disclosure of contractual obligations. The company applied the amendments under the Release to this Annual Report on Form 10-K for the year ended December 31, 2021, as it is required for fiscal years ending on or after August 9, 2021.
Accounting Standards Not Yet Adopted
In August 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2020-06 ("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, which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. The ASU also removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception and simplifies the diluted earnings per share calculation in certain events. The amendments in this ASU are effective for annual and interim periods beginning after December 15, 2021. We will have adopted ASU 2020-06 effective January 1, 2022, using a modified retrospective method. As permitted by the guidance, prior comparative periods will not be adjusted under this method, and a cumulative-effect adjustment of approximately $22.1 million will be recorded to the opening balance of retained earnings at the date of adoption.
Pursuant to ASU 2020-06, we are no longer permitted to separately account for the liability and equity components of convertible debt instruments (such as the 2023 Convertible Notes). As such, for future periods, the entire carrying amount of the 2023 Convertible Notes will be recognized as a liability on our consolidated balance sheet. The Company estimates that adoption of this standard will result in a net increase to “Long-term debt, net” of approximately $16.4 million on the adoption date. In addition, the adoption of the standard will result in the derecognition of the embedded conversion option, net of tax effects of approximately $34.1 million which is included in “Additional paid-in capital,” as well as the derecognition of the related deferred tax liabilities of approximately $4.3 million on the Consolidated Balance Sheet.
The net effect of the adoption of ASU 2020-06 for future periods is a reduction of non-cash interest expense, or an increase to net income, as there is no longer a discount from the separation of the conversion feature within equity. The discount from recognition of issuance costs will be amortized over the effective life of the 2023 Convertible Notes using the effective interest method.
ASU 2020-06 also no longer allows the use of the treasury stock method for convertible instruments for purposes of calculating diluted earnings per share and instead requires application of the if-converted method. Under that method, diluted earnings per share will generally be calculated assuming that all of the convertible debt instruments were converted solely into shares of common stock at the beginning of the reporting period unless the result would be anti-dilutive. Effective January 1, 2022, pursuant to the First Supplemental Indenture, the principal amount of the 2023 Convertible Notes being converted is required to be paid in cash and only the premium due upon conversion, if any, is permitted to be settled in shares, cash or a combination of shares and cash. Consequently, the if-converted method will produce a similar result as the treasury stock method, which was used prior to the adoption of ASU 2020-06 for the 2023 Convertible Notes. We do not currently expect that the adoption of ASU 2020-06 will have a material impact on the Consolidated Statement of Cash Flows.