Leases

6 Months Ended

Jun. 30, 2019

Note 14. Leases

Artisan has lease commitments for office space, parking structures, and equipment, which are all accounted for as operating leases. Artisan records expense for operating leases on a straight-line basis over the lease term. Any lease incentives received by Artisan are also amortized on a straight-line basis over the lease term.

Artisan assesses its contractual arrangements for the existence of a lease at inception. Operating leases with an initial term greater than 12 months are recorded as operating lease assets and operating lease liabilities in the Unaudited Condensed Consolidated Statements of Financial Condition. Lease components (e.g. fixed rental payments) and non-lease components (e.g. fixed common-area maintenance costs) are generally accounted for as a single component.

Operating lease assets and operating lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. Artisan’s lease agreements generally do not provide an implicit interest rate, and therefore the present value calculation uses Artisan’s estimated incremental borrowing rate. A market-based approach was used to estimate the incremental borrowing rate for each individual lease using observable market interest rates and Artisan specific inputs. The lease terms include periods covered by options to extend or exclude periods covered by options to terminate the lease when it is reasonably certain that Artisan will exercise that option.

Operating lease expense was as follows:



	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2019		2018		2019		2018
Compensation and benefits	$	130	$	117	$	260	$	233
Occupancy⁽¹⁾	3,671		3,228		9,065		6,054
Communication and technology	74		75		152		162
Total operating lease expense	$	3,875	$	3,420	$	9,477	$	6,449
⁽¹⁾ Occupancy includes a $1.5 million charge related to the abandonment of a leased office space during the six months ended June 30, 2019, as discussed below.

During the six months ended June 30, 2019, the Company recognized an asset impairment loss of $2.1 million related to the abandonment of a leased office location. The loss is recorded in occupancy expense based on the present value of expected future cash flows and consists of a $1.5 million lease asset impairment and a $0.6 million property impairment.

The table below presents the maturity of operating lease liabilities:



	As of June 30, 2019
2019 (excluding the six months ended June 30, 2019)	$	7,637
2020	16,210
2021	16,337
2022	14,838
2023	13,265
Thereafter	60,495
Total undiscounted lease payments	$	128,782
Adjustment to discount to present value	(23,353		)
Total operating lease liabilities	$	105,429

As of June 30, 2019, there were not any leases that were signed but not yet commenced, and none of the options to extend lease terms were reasonably certain of being exercised.

Other information related to leases was as follows:



	For the Six Months Ended June 30, 2019
Weighted average discount rate	4.7		%
Weighted average remaining lease term	8.6 years
Operating cash flows for operating leases	$	6,750

At December 31, 2018, the aggregate future minimum payments for leases for each of the following five years and thereafter are as follows:



	As of December 31, 2018
2019	$	14,123
2020	15,340
2021	15,215
2022	13,748
2023	12,378
Thereafter	57,185
Total undiscounted lease payments	$	127,989