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Significant Accounting Policies | 9 Months Ended
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Sep. 30, 2019
Accounting Policies [Abstract] |
Significant Accounting Policies | Significant Accounting Policies The Variable Interest Entity (VIE) Arrangements Laureate consolidates in its financial statements certain internationally based educational organizations that do not have shares or other equity ownership interests. Although these educational organizations may be considered not-for-profit entities in their home countries and they are operated in compliance with their respective not-for-profit legal regimes, we believe they do not meet the definition of a not-for-profit entity under GAAP, and therefore we treat them as ‘‘for-profit’’ entities for accounting purposes. These entities generally cannot declare dividends or distribute their net assets to the entities that control them. Under ASC 810-10, ‘‘Consolidation,’’ we have determined that these institutions are VIEs and that Laureate is the primary beneficiary of these VIEs because we have, as further described herein: (1) the power to direct the activities of the VIEs that most significantly affect their educational and economic performance and (2) the right to receive economic benefits from contractual and other arrangements with the VIEs that could potentially be significant to the VIEs. We account for the acquisition of the right to control a VIE in accordance with ASC 805, ‘‘Business Combinations.’’ The VIEs in Brazil and Mexico comprise several not-for-profit foundations that have insignificant revenues and operating expenses. Selected Consolidated Statements of Operations information for VIEs that are included in continuing operations was as follows, net of the charges related to the above-described contractual arrangements:
| For the three months ended September 30, |  | For the nine months ended September 30,
| 2019 |  | 2018 |  | 2019 |  | 2018
Selected Statements of Operations information: |  |  |  |  |  |  |
Revenues, by segment: |  |  |  |  |  |  |
Brazil | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Mexico | — |  |  | 4 |  |  | — |  |  | 89 |
Andean | 120,746 |  |  | 119,884 |  |  | 325,668 |  |  | 325,423 |
Revenues | 120,746 |  |  | 119,888 |  |  | 325,668 |  |  | 325,512 |
Depreciation and amortization | 6,521 |  |  | 6,163 |  |  | 19,507 |  |  | 19,398 |
Operating income (loss), by segment: |  |  |  |  |  |  |
Brazil | 81 |  |  | (16 | ) |  | 46 |  |  | (56 | )
Mexico | (96 | ) |  | (121 | ) |  | (292 | ) |  | (349 | )
Andean | 23,576 |  |  | 12,954 |  |  | 40,875 |  |  | 7,714 |
Operating income | 23,561 |  |  | 12,817 |  |  | 40,629 |  |  | 7,309 |
Net income | 25,510 |  |  | 18,812 |  |  | 43,094 |  |  | 22,860 |
Net income attributable to Laureate Education, Inc. | 25,510 |  |  | 18,812 |  |  | 43,094 |  |  | 22,860 |
The following table reconciles the Net income attributable to Laureate Education, Inc. as presented in the table above, to the amounts in our Consolidated Statements of Operations:
| For the three months ended September 30, |  | For the nine months ended September 30,
| 2019 |  | 2018 |  | 2019 |  | 2018
Net income (loss) attributable to Laureate Education, Inc.: |  |  |  |  |  |  |
Variable interest entities | $ | 25,510 |  |  | $ | 18,812 |  |  | $ | 43,094 |  |  | $ | 22,860 |
Other operations | 33,432 |  |  | 21,564 |  |  | 687,966 |  |  | 241,920 |
Corporate and eliminations | (154,168 | ) |  | (135,165 | ) |  | 146,549 |  |  | 33,719 |
Net (loss) income attributable to Laureate Education, Inc. | $ | (95,226 | ) |  | $ | (94,789 | ) |  | $ | 877,609 |  |  | $ | 298,499 |
The following table presents selected assets and liabilities of the consolidated VIEs. Except for Goodwill, the assets in the table below include the assets that can be used only to settle the obligations for the VIEs. The liabilities in the table are liabilities for which the creditors of the VIEs do not have recourse to the general credit of Laureate. Selected Consolidated Balance Sheet amounts for these VIEs were as follows:
| September 30, 2019 |  | December 31, 2018
| VIE |  | Consolidated |  | VIE |  | Consolidated
Balance Sheets data: |  |  |  |  |  |  |
Cash and cash equivalents | $ | 163,413 |  |  | $ | 323,930 |  |  | $ | 158,387 |  |  | $ | 387,780 |
Current assets held for sale | 17,586 |  |  | 131,606 |  |  | 183,880 |  |  | 337,686 |
Other current assets | 233,477 |  |  | 668,663 |  |  | 141,346 |  |  | 491,667 |
Total current assets | 414,476 |  |  | 1,124,199 |  |  | 483,613 |  |  | 1,217,133 |
Goodwill | 162,833 |  |  | 1,677,392 |  |  | 168,473 |  |  | 1,707,089 |
Tradenames | 63,731 |  |  | 1,116,189 |  |  | 66,929 |  |  | 1,126,244 |
Other intangible assets, net | — |  |  | 1,697 |  |  | — |  |  | 25,429 |
Operating lease right-of-use assets, net | 69,934 |  |  | 871,746 |  |  | — |  |  | — |
Long-term assets held for sale | 69,603 |  |  | 448,573 |  |  | 165,087 |  |  | 1,035,197 |
Other long-term assets | 272,957 |  |  | 1,584,917 |  |  | 312,711 |  |  | 1,658,544 |
Total assets | 1,053,534 |  |  | 6,824,713 |  |  | 1,196,813 |  |  | 6,769,636 |
Current liabilities held for sale | 12,337 |  |  | 136,634 |  |  | 101,320 |  |  | 321,520 |
Other current liabilities | 209,573 |  |  | 1,239,574 |  |  | 106,657 |  |  | 868,567 |
Long-term operating leases, less current portion | 59,948 |  |  | 800,828 |  |  | — |  |  | — |
Long-term liabilities held for sale | 30,833 |  |  | 158,501 |  |  | 42,265 |  |  | 358,863 |
Long-term debt and other long-term liabilities | 31,610 |  |  | 1,646,352 |  |  | 24,502 |  |  | 3,155,344 |
Total liabilities | 344,301 |  |  | 3,981,889 |  |  | 274,744 |  |  | 4,704,294 |
Total stockholders' equity | 709,233 |  |  | 2,830,880 |  |  | 922,069 |  |  | 2,050,946 |
Total stockholders' equity attributable to Laureate Education, Inc. | 709,233 |  |  | 2,843,440 |  |  | 921,747 |  |  | 2,061,079 |
On January 24, 2018, a new Higher Education Law (the New Law) was passed by the Chilean Congress. Among other things, the New Law prohibits conflicts of interests and related party transactions involving universities and their controlling parties, with certain exceptions. These exceptions include the provision of services that are educational in nature or essential for the university’s purposes. The New Law established a Superintendency of Higher Education, with authority to regulate institutions of higher education and promulgate regulations and procedures implementing the New Law. As of May 29, 2019, the New Law’s provisions regarding related party transactions came into force; however, the Superintendent has not issued any further interpretive guidance or regulations. Immediately prior to these provisions coming into force, each of the Chilean non-profit universities and the relevant Laureate services provider reached an agreement to terminate the prior network services agreement in favor of an open bidding process, wherein unrelated third parties and Laureate-related providers were invited to compete in the provision of the range of services that are essential to the fulfillment of each of their academic missions. The Chilean non-profit universities have completed substantially all of the bidding and contractual processes subsequent to the May 2019 contract terminations. The Company participated in these open bid processes, conducted by a third party, and was judged to have submitted the superior bid in many of them. Awarded contracts that do not need any approval by the Superintendent should enter into force during the fourth quarter, and contracts that need approval of the Superintendent may also enter into force during the fourth quarter. Within the ordinary regulatory course of supervision, the Company and the Chilean non-profit universities will continue to interact with the Superintendent to maintain compliance with the New Law. We do not believe that the New Law will change our relationship with our two tech/voc institutions in Chile that are for-profit entities. Additionally, we will continue to evaluate our accounting treatment of the Chilean non-profit universities to determine whether we can continue to consolidate them. Our continuing evaluation of the impact of the New Law may result in changes to our expectations due to changes in our interpretations of the law, assumptions used, and additional guidance that may be issued. Recently Issued Accounting Standards Not Yet Adopted Accounting Standards Update (ASU) No. 2016-13 (ASU 2016-13), Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments In June 2016, the Financial Accounting Standards Board (FASB) issued ASU 2016-13, which sets forth a “current expected credit loss” (CECL) model and requires companies to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions, and reasonable supportable forecasts. ASU 2016-13 applies to financial instruments that are not measured at fair value, including receivables that result from revenue transactions. This ASU is effective for Laureate beginning on January 1, 2020. While we are currently evaluating the effect that ASU 2016-13 will have on our Consolidated Financial Statements, we do not expect this guidance to have a material impact. Recently Adopted Accounting Standards ASU No. 2016-02 (ASU 2016-02), Leases (Topic 842) On February 25, 2016, the FASB issued ASU 2016-02, which requires lessees to recognize on their balance sheet a right-of-use (ROU) asset and a lease liability for virtually all of their leases (other than leases that meet the definition of a short-term lease). The liability is equal to the present value of the lease payments. The asset is based on the liability, subject to adjustment, such as for initial direct costs and uneven rent payments. For income statement purposes, the FASB retained a dual model, requiring leases to be classified as either operating or finance. Operating leases result in straight-line expense (similar to operating leases prior to adoption of ASU 2016-02) while finance leases will result in a front-loaded expense pattern (similar to capital leases prior to adoption of ASU 2016-02). Laureate adopted ASU 2016-02 as of January 1, 2019 under a modified retrospective method. The standard provided companies with an additional, optional transition method that allowed entities to prospectively apply the requirements by recognizing a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. We elected this optional transition method. In accordance with ASC Topic 842 we also elected the package of practical expedients, which permits us to not reassess (1) whether any expired or existing contracts are or contain leases, (2) the lease classification for any expired or existing leases, and (3) any initial direct costs for any existing leases as of the effective date. We did not elect the hindsight practical expedient, which permits entities to use hindsight in determining the lease term and assessing impairment. We elected the practical expedient to combine our lease and related nonlease components for our building leases. Adopting ASU 2016-02 had a material impact on our Consolidated Balance Sheet as we recorded significant asset and liability balances in connection with our leased properties. The most significant impacts to our Consolidated Financial Statements of adopting this standard are as follows:
• | The recognition of ROU assets and lease liabilities for operating leases, which totaled $871,746 and $892,747, respectively, as of September 30, 2019;
• | An increase in 2019 rent expense of approximately $13,000 for continuing operations primarily related to build-to-suit arrangements where Laureate was deemed to be the owner of the construction. Upon adoption of this standard, these arrangements were classified on the balance sheet as operating leases and the related ROU asset is being amortized to rent expense rather than depreciation expense; and
• | A cumulative-effect adjustment to retained earnings upon adoption of $28,944, which is primarily attributable to the reclassification into retained earnings of deferred gain liabilities related to sale-leaseback transactions that were classified as operating leases upon adoption.
ASU No. 2017-12 (ASU 2017-12), Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities On August 28, 2017, the FASB issued ASU 2017-12, which contains significant amendments to the hedge accounting model. The new guidance is intended to simplify the application of hedge accounting and should allow for more hedging strategies to qualify for hedge accounting. ASU 2017-12 also amends the presentation and disclosure requirements and changes how companies assess effectiveness. Public business entities like Laureate will have until the end of the first quarter in which a hedge is designated to perform an initial assessment of a hedge’s effectiveness. After initial qualification, the new guidance permits a qualitative effectiveness assessment for certain hedges instead of a quantitative test, such as a regression analysis, if the company can reasonably support an expectation of high effectiveness throughout the term of the hedge. An initial quantitative test to establish that the hedge relationship is highly effective is still required. We adopted this ASU on January 1, 2019 and the impact was not material. ASU No. 2018-15 (ASU 2018-15) Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40) In August 2018, the FASB issued ASU 2018-15, which addresses the accounting for implementation costs associated with a hosted service. The standard provides amendments to align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal use software license). Laureate elected to early adopt ASU 2018-15 on January 1, 2019, and the impact on our Consolidated Financial Statements was not material.

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- Definition The entire disclosure for all significant accounting policies of the reporting entity. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -URI http://asc.fasb.org/topic&trid=2122369 + Details
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