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Basis of Financial Reporting | 9 Months Ended
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Sep. 30, 2019
Organization, Consolidation and Presentation of Financial Statements [Abstract] |
Basis of Financial Reporting | Basis of Financial Reporting The accompanying unaudited consolidated financial statements of Nelnet, Inc. and subsidiaries (the “Company”) as of September 30, 2019 and for the three and nine months ended September 30, 2019 and 2018 have been prepared on the same basis as the audited consolidated financial statements for the year ended December 31, 2018 and, in the opinion of the Company’s management, the unaudited consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of results of operations for the interim periods presented. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Operating results for the three and nine months ended September 30, 2019 are not necessarily indicative of the results for the year ending December 31, 2019. The unaudited consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 (the "2018 Annual Report"). Accounting Standard Adopted in 2019 In the first quarter of 2019, the Company adopted the following new accounting standard: Leases In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Codification Topic 842, Leases ("ASC Topic 842"). The standard requires the identification of arrangements that should be accounted for as leases by lessees and the disclosure of key information about leasing arrangements. The standard establishes a right-of-use ("ROU") model that requires a lessee to recognize a ROU asset and lease liability for all leases with a term longer than twelve months and classify the lease as operating or financing, with the income statement reflecting lease expense for operating leases and amortization/interest expense for financing leases. The Company adopted the standard effective January 1, 2019, using the effective date as its date of initial application. Consequently, financial information is not updated and the disclosures required under the new standard are not provided for dates and periods before January 1, 2019. The Company elected to utilize the ‘package of practical expedients’, which permitted it to not reassess under the new standard its prior conclusions about lease identification, lease classification, and initial direct costs. The most significant impact of the standard relates to (1) the recognition of new ROU assets and lease liabilities on the Company's balance sheet; (2) the deconsolidation of assets and liabilities for certain sale-leaseback transactions arising from build-to-suit lease arrangements for which construction was completed and the Company is leasing the constructed assets that did not qualify for sale accounting prior to the adoption of the new standard; and (3) significant new disclosures about the Company’s leasing activities. The build-to-suit lease arrangements have been reassessed as operating leases as of the effective date under ASC Topic 842. Adoption of the new standard resulted in recognizing lease liabilities of $33.7 million based on the present value of the remaining minimum rental payments. In addition, the Company recognized ROU assets of $32.8 million, which corresponds to the lease liabilities reduced by deferred rent expense as of the effective date. The Company also deconsolidated total assets of $43.8 million and total liabilities of $34.8 million for entities that had been consolidated due to sale-leaseback transactions that failed to qualify for recognition as sales under the prior guidance. Deconsolidation of these entities reduced noncontrolling interests by $6.1 million. The cumulative effect of the changes made to the Company's consolidated balance sheet as of January 1, 2019 for the adoption of the new lease standard was as follows:
| Balances at December 31, 2018 |  | Adjustments from adoption of new lease standard |  | Balances at January 1, 2019 |
Assets |  |  |  |  |  |
Cash and cash equivalents | $ | 121,347 |  |  | (646) |  |  | 120,701 |  |
Investments and notes receivable | 249,370 |  |  | (23,134) |  |  | 226,236 |  |
Accounts receivable | 59,531 |  |  | (89) |  |  | 59,442 |  |
Property and equipment, net | 344,784 |  |  | (16,974) |  |  | 327,810 |  |
Other assets | 45,533 |  |  | 32,804 |  |  | 78,337 |  |
Liabilities |  |  |  |  |  |
Bonds and notes payable | 22,218,740 |  |  | (33,182) |  |  | 22,185,558 |  |
Other liabilities | 256,092 |  |  | 31,220 |  |  | 287,312 |  |
Equity |  |  |  |  |  |
Noncontrolling interests | 10,315 |  |  | (6,077) |  |  | 4,238 |  |
At the inception of an arrangement, the Company determines if the arrangement is, or contains, a lease and records the lease in the consolidated financial statements upon lease commencement, which is the date when the underlying asset is made available by the lessor. The Company primarily leases dark fiber to support its telecommunications operations and office and data center space. Leases with an initial term of 12 months or less are not recorded on the balance sheet. The lease expense for these leases is recognized on a straight-line basis over the lease term. All other lease assets and lease liabilities are recognized based on the present value of lease payments over the lease term at the commencement date. When the discount rate implicit in the lease cannot be readily determined, the Company uses its incremental borrowing rate. The Company has elected to utilize the practical expedient to account for lease and non-lease components together as a single, combined lease component for its office and data center space. In addition, the Company has identified itself as the lessor in its Communications operating segment for services provided to customers that include customer-premise equipment. The Company has also elected to utilize the practical expedient to account for those services and associated leases as a single, combined component. The non-lease services are 'predominant' in those contracts. Therefore, the combined component is considered a single performance obligation under ASC Topic 606, Revenue from Contracts with Customers. Most leases include one or more options to renew, with renewal terms that can be extended. The exercise of lease renewal options for the majority of leases is at the Company's discretion. Renewal options that the Company is reasonably certain to exercise are included in the lease term. Certain leases include escalating rental payments or rental payments adjusted periodically for inflation. None of the lease agreements include any residual value guarantees, a transfer of title, or a purchase option that is reasonably certain to be exercised. The following table provides supplemental balance sheet information related to leases:
| As of
| September 30, 2019
Operating lease ROU assets, which is included in "other assets" on the consolidated balance sheet | $ | 34,264 |
Operating lease liabilities, which is included in "other liabilities" on the consolidated balance sheet | $ | 35,237 |
The following table provides components of lease expense:
| Three months ended September 30, 2019 |  | Nine months ended September 30, 2019
Rental expense, which is included in "other expenses" on the consolidated statements of income (a) | $ | 2,776 |  |  | 8,276 |
Rental expense, which is included in "cost to provide communications services" on the consolidated statements of income (a) | 428 |  |  | 1,138 |
Total operating rental expense | $ | 3,204 |  |  | 9,414 |
(a) Includes short-term and variable lease costs, which are immaterial. The following table provides supplemental cash flow information related to leases:
| Nine months ended September 30, 2019
Cash paid for amounts included in the measurement of lease liabilities: |
Operating cash outflows related to operating leases | $ | 7,307 |
Supplemental noncash activity: |
Operating ROU assets obtained in exchange for lease obligations, excluding impact of adoption | $ | 7,972 |
Weighted average remaining lease term and discount rate are shown below:
| As of
| September 30, 2019
Weighted average remaining lease term (years) | 7.2
Weighted average discount rate | 3.95 | %
Maturity of lease liabilities are shown below:
2019 (October 1 - December 31) | $ | 2,638 |
2020 | 9,916 |
2021 | 6,803 |
2022 | 4,652 |
2023 | 3,640 |
2024 and thereafter | 12,996 |
Total lease payments | 40,645 |
Imputed interest | (5,408) |
Total | $ | 35,237 |
The Company adopted the new lease standard using the effective date as its date of initial application as noted above, and as required, the following disclosure is provided for periods prior to adoption. Future minimum lease payments as of December 31, 2018 are shown below:
2019 | $ | 9,181 |
2020 | 8,261 |
2021 | 5,776 |
2022 | 3,745 |
2023 | 2,904 |
2024 and thereafter | 5,479 |
Total minimum lease payments | $ | 35,346 |

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- Definition The entire disclosure for the basis of accounting, or basis of presentation, used to prepare the financial statements (for example, US Generally Accepted Accounting Principles, Other Comprehensive Basis of Accounting, IFRS). + 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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