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Description of Business and Significant Accounting Policies - (Notes) | 6 Months Ended
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Jun. 30, 2019
Organization, Consolidation and Presentation of Financial Statements [Abstract] |
DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES | DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES Description of Business TriNet Group, Inc. (TriNet, or the Company, we, our and us), a professional employer organization, provides comprehensive human resources solutions for small to midsize businesses under a co-employment model. These HR solutions include multi-state payroll processing and tax administration, employee benefits programs, including health insurance and retirement plans, workers' compensation insurance and claims management, employment and benefit law compliance, and other HR-related services. Through the co-employment relationship, we are the employer of record for certain employment-related administrative and regulatory purposes for the worksite employees, including:
• | compensation through wages and salaries,
• | employer payroll-related tax payments,
• | employee payroll-related tax withholdings and payments,
• | employee benefit programs, including health and life insurance, and others, and
• | workers' compensation coverage.
Our clients are responsible for the day-to-day job responsibilities of the WSEs. We operate in one reportable segment. All of our service revenues are generated from external clients. Less than 1% of our revenue is generated outside of the U.S. Basis of Presentation These unaudited condensed consolidated financial statements and accompanying notes have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial reporting and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X of the Rules and Regulations of the Securities and Exchange Commission. Certain information and note disclosures included in our annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, the condensed consolidated financial statements reflect all adjustments, that are normal and recurring in nature, necessary for fair financial statement presentation. The results of operations for the three and six months ended June 30, 2019 are not necessarily indicative of the operating results anticipated for the full year. These Financial Statements should be read in conjunction with the audited Consolidated Financial Statements included in Part II, Item 8 Financial Statements and Supplementary Data of our Annual Report on Form 10-K for the year ended December 31, 2018 (2018 Form 10-K). Reclassifications Certain prior year amounts have been reclassified to conform to current period presentation. Effects on the cash flow statement due to reclassifications are summarized below:
| Six Months Ended June 30, 2018
(in millions) | As previously reported | Reclassified amounts | As revised
Operating activities |  |  |
Accounts receivable | $ | — |  | $ | 11 |  | $ | 11 |
Unbilled revenue | — |  | 35 |  | 35 |
Prepaid income taxes | 2 |  | (2 | ) | — |
Prepaid expenses and other current assets | (23 | ) | 23 |  | — |
Prepaid expenses | — |  | (9 | ) | (9 | )
Workers' compensation collateral receivable | (6 | ) | 6 |  | — |
Accounts payable and other current liabilities | (14 | ) | (14 | ) | (28 | )
Client deposits | — |  | (24 | ) | (24 | )
Accrued wages | — |  | (28 | ) | (28 | )
Accrued corporate wages | (5 | ) | 5 |  | — |
Accrued health insurance costs | — |  | (13 | ) | (13 | )
Accrued workers' compensation costs | — |  | (8 | ) | (8 | )
Workers' compensation loss reserves and other non-current liabilities | (4 | ) | 4 |  | — |
Payroll taxes payable and other payroll withholdings | — |  | (588 | ) | (588 | )
Worksite employee related assets | 4 |  | (4 | ) | — |
Worksite employee related liabilities | (652 | ) | 652 |  | — |
Other assets | — |  | (45 | ) | (45 | )
Other liabilities | — |  | (1 | ) | (1 | )
Effects on the consolidated statements of income and comprehensive income due to reclassifications are summarized below:
| Three Months Ended | Six months ended
| June 30, 2018 | June 30, 2018
(in millions) | As previously reported | Reclassified amounts | As revised | As previously reported | Reclassified amounts | As revised
Depreciation | $ | 8 |  | $ | (8 | ) | $ | — |  | $ | 16 |  | $ | (16 | ) | $ | — |
Amortization of intangible assets | 2 |  | (2 | ) | — |  | 3 |  | (3 | ) | — |
Depreciation and amortization of intangible assets | — |  | 10 |  | 10 |  | — |  | 19 |  | 19 |
Interest expense, bank fees and other, net | (4 | ) | 4 |  | — |  | (8 | ) | 8 |  | — |
Interest expense, bank fees and other | — |  | (7 | ) | (7 | ) | — |  | (13 | ) | (13 | )
Interest income | — |  | 3 |  | 3 |  | — |  | 5 |  | 5 |
Other comprehensive income, net of tax | — |  | 1 |  | 1 |  | — |  | — |  | — |
Comprehensive income | 58 |  | 1 |  | 59 |  | 112 |  | — |  | 112 |
Use of Estimates The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect certain reported amounts and related disclosures. Significant estimates include:
• | liability for unpaid losses and loss adjustment expenses (accrued workers' compensation costs) related to workers' compensation and workers' compensation collateral receivable,
• | accrued health insurance costs,
• | liability for insurance premiums payable,
• | valuation of the investment portfolio,
• | impairments of goodwill and other intangible assets,
• | income tax assets and liabilities, and
• | liability for legal contingencies.
These estimates are based on historical experience and on various other assumptions that we believe to be reasonable from the facts available to us. Some of the assumptions are highly uncertain at the time of estimation. To the extent actual experience differs from the assumptions used, our consolidated financial statements could be materially affected. Accrued Health Insurance Costs We sponsor and administer a number of fully insured, risk-based employee benefit plans, including group health, dental, and vision as an employer plan sponsor under section 3(5) of the ERISA. In the six months ended June 30, 2019, the majority of our group health insurance costs related to risk-based plans. Our remaining group health insurance costs were for guaranteed-cost policies. Accrued health insurance costs are established to provide for the estimated unpaid costs of reimbursing the carriers for paying claims within the deductible layer in accordance with risk-based health insurance policies. These accrued costs include estimates for reported losses, plus estimates for claims incurred but not paid. We assess accrued health insurance costs regularly based upon independent actuarial studies that include other relevant factors such as current and historical claims payment patterns, plan enrollment and medical trend rates. In certain carrier contracts we are required to prepay the expected claims activity for subsequent periods. These prepaid balances by agreement permit net settlement of obligations and offset the accrued health insurance costs. As of June 30, 2019 and December 31, 2018, prepayments included in accrued health insurance costs were $39 million and $33 million, respectively. When the prepaid is in excess of our recorded liability, the net asset position is included in prepaid expenses. As of June 30, 2019 and December 31, 2018, accrued health insurance costs included in prepaid expenses were $51 million and $50 million, respectively. Derivative Instruments In June 2019, we entered into a interest rate collar derivative transaction with no upfront premium to mitigate the risk of changes in interest rates on our floating rate debt. This derivative, for which we have elected and qualify for cash flow hedge accounting, is recorded on the balance sheet at its fair value. Changes in the derivative’s fair value are recorded each period in other comprehensive income until the underlying monthly interest payment and the corresponding portion of the derivative are settled, at which point changes in fair value are recorded in net income. We evaluate this derivative each quarter to determine that it remains effective by comparing the remaining cash flows of the derivative against the related interest payments of our floating rate debt. We do not enter into any derivatives for trading or other speculative purposes. Leases We adopted ASU 2016-02 - Leases (ASC 842) effective January 1, 2019 using the optional transition method, under which we recognized the cumulative effects of initially applying the standard as an adjustment to the opening balance of retained earnings on January 1, 2019 with unchanged comparative periods. As part of this adoption, we elected the following practical expedients:
• | not to reassess 1) whether any contracts that existed prior to adoption have or contain leases, 2) the classification of our existing leases or 3) initial direct costs for existing leases,
• | to use the practical expedient of using hindsight to determine the lease terms and evaluate any impairments in right-of-use assets upon transition, and
• | not separately record non-lease and lease components for all leases in which we act as a lessee.
We determine if a new contractual arrangement is a lease at contract inception. If a contract contains a lease, we evaluate whether it should be classified as an operating or a finance lease. If applicable as a lease, we record our lease liabilities and ROU assets based on the future minimum lease payments over the lease term and only include options to renew a lease in the minimum lease payments if it is reasonably certain that we will exercise that option. For certain leases with original terms of twelve months or less we recognize the lease expense as incurred and we do not recognize lease liabilities and ROU assets. We measure our lease liabilities based on the future minimum lease payments discounted over the lease term. We determine our discount rate at lease inception using our incremental borrowing rate, which is based on our outstanding term debts that are collateralized by certain corporate assets. As of June 30, 2019, the weighted-average rate used in discounting the lease liability was 4.6%. We measure our ROU assets based on the associated lease liabilities adjusted for any lease incentives such as tenant improvement allowances and classify operating ROU assets in other assets in our condensed consolidated balance sheet. For operating leases, we recognize expense for lease payments on a straight-line basis over the lease term. Recent Accounting Pronouncements Recently adopted accounting guidance Leases - In February of 2016, the FASB issued ASC 842, which replaced existing lease guidance under GAAP. Under this guidance, we recognize on our condensed balance sheet lease liabilities representing the present value of future lease payments and an associated right-of-use asset representing our right to use or control the use of specified assets for the lease term for any operating lease with a term greater than one year. The impact of our adoption of ASC 842 did not have a material impact on our income statement or cash flow statement. The impact on our condensed balance sheets is as follows:
|  | June 30, 2019
(in millions) |  | As reported |  | Balance Using Previous Standard |  | Increase (Decrease)
Balance sheet |  |  |  |  |  |
Assets |  |  |  |  |  |
Operating lease right-of-use assets |  | $ | 60 |  |  | $ | — |  |  | $ | 60 |
Liabilities |  |  |  |  |  |
Operating lease liabilities |  | 17 |  |  | — |  |  | 17 |
Operating lease liabilities, noncurrent |  | 55 |  |  | 11 |  |  | 44 |
Equity |  |  |  |  |  |
Accumulated deficit |  | (229 | ) |  | — |  |  | (229 | )
Recently issued accounting pronouncements Credit Losses - In June 2016, the FASB issued ASU 2016-13 - Financial Instruments - Credit Losses (Topic 326), which requires financial assets to be presented at the net amount expected to be collected. We will be required to use forward-looking information when evaluating an allowance for our accounts receivable, unbilled revenue and other financial assets measured at amortized cost. Topic 326 also modifies the impairment guidance for available-for-sale debt securities to require an allowance for credit losses. We will adopt Topic 326 effective January 1, 2020 using a modified retrospective approach through a cumulative-effect adjustment to retained earnings. We are currently evaluating the impact of this standard on our consolidated financial statements, including accounting policies, processes and systems.

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- Definition The entire disclosure for the business description and accounting policies concepts. Business description describes the nature and type of organization including but not limited to organizational structure as may be applicable to holding companies, parent and subsidiary relationships, business divisions, business units, business segments, affiliates and information about significant ownership of the reporting entity. Accounting policies describe 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 275 -URI http://asc.fasb.org/topic&trid=2134479 Reference 2: 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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