Leases

9 Months Ended

Sep. 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 September 30,						For the Nine Months Ended September 30,
	2019		2018		2019		2018
Compensation and benefits	$	128	$	117	$	388	$	350
Occupancy⁽¹⁾	3,736		3,739		12,801		9,793
Communication and technology	82		89		234		251
Sublease income	(143)		—		(143)		—
Total operating lease expense	$	3,803	$	3,945	$	13,280	$	10,394

⁽¹⁾ Occupancy includes a $1.5 million charge related to the abandonment of a leased office space during the nine months ended September 30, 2019, as discussed below.

During the nine months ended September 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 September 30, 2019
2019 (excluding the nine months ended September 30, 2019)	$	3,955
2020	16,167
2021	16,294
2022	14,802
2023	13,245
Thereafter	60,495
Total undiscounted lease payments	$	124,958
Adjustment to discount to present value	(22,112)
Total operating lease liabilities	$	102,846

As of September 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 Nine Months Ended September 30, 2019
Weighted average discount rate	4.7		%
Weighted average remaining lease term	8.3 years
Operating cash flows for operating leases	$	10,423

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