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New Accounting Pronouncements | 12 Months Ended
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Dec. 31, 2019
New Accounting Pronouncements and Changes in Accounting Principles [Abstract] |
New Accounting Pronouncements | Note 3—New Accounting Pronouncements Accounting Pronouncements Implemented in 2019 On January 1, 2019, the Company adopted ASC 842, and all the related amendments (the “new lease standard”) using the modified retrospective method with an effective date of January 1, 2019 (the “adoption date”) and a cumulative-effect adjustment to retained earnings. The core principle of ASC 842 is that a lessee should recognize on the balance sheet the lease assets and lease liabilities that arise from all lease arrangements with terms greater than 12 months. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods. As part of the adoption, the Company elected to utilize the package of practical expedients included in this guidance, which permitted the Company to not reassess (i) whether any expired or existing contracts contain leases; (ii) the lease classification for any expired or existing leases; and (iii) the initial direct costs for existing leases. Master Leases The most significant impact of the adoption of the new lease standard relates to the accounting for our Master Leases with GLPI. Under previous GAAP, as contained within ASC 840, the Company concluded that (i) the Penn Master Lease and (ii) the Pinnacle Master Lease to each be a failed sale-leaseback transaction resulting in (a) the land and building assets associated with the Master Leases to be recognized in “Property and equipment, net” within the Consolidated Balance Sheets, (b) the recognition of a financing obligation, with the associated interest recorded to “Interest expense, net” within the Consolidated Statements of Income, and (c) the contingent rentals to be recorded as additional interest expense. Under the provisions of the new lease standard, the Company was required to evaluate its existing sale-leaseback transactions with GLPI to determine whether a sale had occurred, and if a sale had occurred, to determine the classification (operating or finance) of each component contained within each of the Master Leases. Lease components contained within each of the Master Leases that were determined to be operating leases (consisting primarily of the land components) at the adoption date resulted in (i) the derecognition of the existing financing obligation and the carrying amount of the property and equipment with an adjustment to the opening balance of retained earnings and (ii) the recognition of an operating lease liability and an operating lease ROU asset. Lease components contained within each of the Master Leases that were determined to continue to be financing obligations (consisting primarily of the building components) at the adoption date resulted in (i) the continued recognition of the leased assets in “Property and equipment, net” within our Consolidated Balance Sheets and (ii) the continued recognition of the financing obligation utilizing assumptions as determined (a) at the lease commencement date with respect to the Penn Master Lease or (b) at the acquisition date with respect to the Pinnacle Master Lease. Our Hollywood Casino at Dayton Raceway and Hollywood Casino at Mahoning Valley Race Course (“Dayton and Mahoning Valley”) properties included within the Penn Master Lease were previously accounted for under build-to-suit guidance pursuant to ASC 840. The Company was required to evaluate the components contained within the build-to-suit arrangements and determine the classification (operating or finance) under the provisions of the new lease standard at the adoption date. The Dayton and Mahoning Valley lease components were determined to be finance leases, which resulted in (i) the recognition of a finance lease ROU asset (recorded to depreciation and amortization expense over the lease term), (ii) a corresponding finance lease liability (recorded to interest expense over the lease term), and (iii) a write-off of the previous (a) carrying amount of the property and equipment and (b) financing obligation recorded with an adjustment to the opening balance of retained earnings at the adoption date. Operating Leases, inclusive of the Meadows Lease The adoption of the new lease standard required us to recognize ROU assets and lease liabilities that had not previously been recorded within the Consolidated Balance Sheets. Upon adoption, the lease liability for operating leases was based on the present value of future lease payments and the ROU asset for operating leases was based on the operating lease liability adjusted for the reclassification of certain balance sheet amounts, such as deferred rent. Under ASC 842, deferred and prepaid rent are no longer presented separately. Leases that are short-term in nature are not recognized as ROU assets within the Consolidated Balance Sheets, but are recognized as an expense (recorded within total operating expenses) within the Consolidated Statements of Income. The impact of the adoption of the new lease standard on our Consolidated Balance Sheets at January 1, 2019 was as follows (only financial statement line items impacted are presented):
|  |  | Impacts of: |  |  |  |
(in millions) | As Reported as of December 31, 2018 |  | Financing Obligations - Master Leases (1) |  | Finance Leases - Dayton and Mahoning Valley |  | Operating Leases - Master Leases (2) |  | Operating Lease - Meadows (3) |  | Other Operating Leases - Non-Master Leases |  | As Adjusted for ASC 842 |  | Increase/(Decrease)
Assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Current assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Prepaid expenses | $ | 63.0 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | (1.0 | ) |  | $ | 62.0 |  |  | $ | (1.0 | )
Total current assets | $ | 677.6 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | (1.0 | ) |  | $ | 676.6 |  |  | $ | (1.0 | )
Property and equipment, net (4) | $ | 6,868.8 |  |  | $ | — |  |  | $ | (164.3 | ) |  | $ | (1,407.4 | ) |  | $ | — |  |  | $ | — |  |  | $ | 5,297.1 |  |  | $ | (1,571.7 | )
Goodwill | $ | 1,228.4 |  |  | $ | 5.5 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 1,233.9 |  |  | $ | 5.5 |
Operating lease right-of-use assets (5) | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 3,541.2 |  |  | $ | 112.8 |  |  | $ | 152.5 |  |  | $ | 3,806.5 |  |  | $ | 3,806.5 |
Finance lease right-of-use assets (6) | $ | — |  |  | $ | — |  |  | $ | 224.5 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 224.5 |  |  | $ | 224.5 |
Total assets | $ | 10,961.0 |  |  | $ | 5.5 |  |  | $ | 60.2 |  |  | $ | 2,133.8 |  |  | $ | 112.8 |  |  | $ | 151.5 |  |  | $ | 13,424.8 |  |  | $ | 2,463.8 |
Liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Current liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Current portion of financing obligations (7) | $ | 67.8 |  |  | $ | — |  |  | $ | (1.5 | ) |  | $ | (16.2 | ) |  | $ | — |  |  | $ | — |  |  | $ | 50.1 |  |  | $ | (17.7 | )
Current portion of operating lease liabilities (5) | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 72.9 |  |  | $ | 20.5 |  |  | $ | 8.9 |  |  | $ | 102.3 |  |  | $ | 102.3 |
Current portion of finance lease liabilities (6) | $ | — |  |  | $ | — |  |  | $ | 5.8 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 5.8 |  |  | $ | 5.8 |
Accrued expenses and other current liabilities | $ | 578.0 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | (0.5 | ) |  | $ | 577.5 |  |  | $ | (0.5 | )
Total current liabilities | $ | 738.4 |  |  | $ | — |  |  | $ | 4.3 |  |  | $ | 56.7 |  |  | $ | 20.5 |  |  | $ | 8.4 |  |  | $ | 828.3 |  |  | $ | 89.9 |
Long-term portion of financing obligations (7) | $ | 7,080.6 |  |  | $ | 5.5 |  |  | $ | (181.3 | ) |  | $ | (2,760.6 | ) |  | $ | — |  |  | $ | — |  |  | $ | 4,144.2 |  |  | $ | (2,936.4 | )
Long-term portion of operating lease liabilities (5) | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 3,467.1 |  |  | $ | 92.3 |  |  | $ | 145.0 |  |  | $ | 3,704.4 |  |  | $ | 3,704.4 |
Long-term portion of finance lease liabilities (6) | $ | — |  |  | $ | — |  |  | $ | 218.3 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 218.3 |  |  | $ | 218.3 |
Deferred income taxes (8) | $ | — |  |  | $ | — |  |  | $ | 4.3 |  |  | $ | 299.5 |  |  | $ | — |  |  | $ | — |  |  | $ | 303.8 |  |  | $ | 303.8 |
Other long-term liabilities | $ | 60.7 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | (1.9 | ) |  | $ | 58.8 |  |  | $ | (1.9 | )
Total liabilities | $ | 10,229.8 |  |  | $ | 5.5 |  |  | $ | 45.6 |  |  | $ | 1,062.7 |  |  | $ | 112.8 |  |  | $ | 151.5 |  |  | $ | 11,607.9 |  |  | $ | 1,378.1 |
Stockholders’ equity |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Retained earnings (accumulated deficit) | $ | (968.0 | ) |  | $ | — |  |  | $ | 14.6 |  |  | $ | 1,071.1 |  |  | $ | — |  |  | $ | — |  |  | $ | 117.7 |  |  | $ | 1,085.7 |
Total Penn National stockholders’ equity | $ | 731.2 |  |  | $ | — |  |  | $ | 14.6 |  |  | $ | 1,071.1 |  |  | $ | — |  |  | $ | — |  |  | $ | 1,816.9 |  |  | $ | 1,085.7 |
Total stockholders’ equity | $ | 731.2 |  |  | $ | — |  |  | $ | 14.6 |  |  | $ | 1,071.1 |  |  | $ | — |  |  | $ | — |  |  | $ | 1,816.9 |  |  | $ | 1,085.7 |
Total liabilities and stockholders’ equity | $ | 10,961.0 |  |  | $ | 5.5 |  |  | $ | 60.2 |  |  | $ | 2,133.8 |  |  | $ | 112.8 |  |  | $ | 151.5 |  |  | $ | 13,424.8 |  |  | $ | 2,463.8 |
(1) | During the first quarter of 2019, the Company identified an adjustment to the purchase price allocation associated with the Pinnacle Acquisition. The purchase price adjustment increased the financing obligation upon the adoption of the new lease standard, resulting in an increase to goodwill (see Note 5, “Acquisitions and Other Investments”).
(2) | Represents components contained within each of the Master Leases determined to be operating leases (primarily land).
(3) | Represents the triple net lease with GLPI for the real estate assets used in the operations of Meadows Racetrack and Casino (the “Meadows Lease”).
(4) | Represents the (i) derecognition of the carrying amount of the property and equipment, net, associated with land components contained within our Master Leases determined to be operating leases upon the adoption of the new lease standard; and (ii) derecognition of the carrying amount of the property and equipment, net, associated with land and building components associated with Dayton and Mahoning Valley determined to be finance leases upon the adoption of the new lease standard.
(5) | Operating lease ROU assets represent (i) the land components contained within the Master Leases determined to be operating leases upon the adoption of the new lease standard; and (ii) with respect to other Operating Leases, represent (a) the Meadows Lease, which was acquired by the Company in conjunction with the acquisition of Pinnacle; (b) ground and levee leases with landlords, which were not assumed by GLPI and remain an obligation of the Company; and (c) buildings and equipment not associated with our Master Leases. For leases where the rate implicit in the lease was not readily determinable, we used our incremental borrowing rate based on the information available at the lease commencement date in determining the present value of lease payments. We utilized the incremental borrowing rate on the adoption date for operating leases that commenced prior to that date. The operating lease liability is based on the net present value of future lease payments.
(6) | Amounts primarily represent finance leases associated with Dayton and Mahoning Valley, which are included in the Penn Master Lease, that under ASC 840 utilized specific build-to-suit guidance. The adoption of the new lease standard required the Company to evaluate the components under current guidance contained within the new lease standard, which resulted in all components being classified as finance leases. Finance leases result in (i) the recognition of a finance lease ROU asset amortized over the lease term and (ii) a corresponding finance lease liability (recorded to interest expense over the lease term). We utilized our incremental borrowing rate based on the information available at the adoption date in determining the present value of lease payments. The finance lease liability is based on the net present value of future lease payments.
(7) | Represents components associated with our Master Leases that remain financing obligations (primarily buildings). The financing obligation at the adoption date was calculated utilizing previous assumptions as determined (a) at the lease commencement date with respect to the Penn Master Lease and (b) at the acquisition date with respect to the Pinnacle Master Lease.
(8) | Represents the tax impacts related to the adoption of the new lease standard. See Note 13, “Income Taxes.”
Accounting Pronouncements to be Implemented in 2020 In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurements of Credit Losses on Financial Instruments” (“ASU 2016-13”), which sets forth a “current expected credit loss” (referred to as “CECL”) model which requires the Company to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions, and reasonable supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost and applies to some off-balance sheet credit exposures. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, and must be applied through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. Although we are still finalizing our assessment of the impact of the adoption of ASU 2016-13, which is effective January 1, 2020, we currently do not expect it to have a material impact on our Consolidated Financial Statements. In August 2018, the FASB issued ASU No. 2018-15, “Customer’s Accounting for Implementation Cost Incurred in a Cloud Computing Arrangement That Is a Service Contract” (“ASU 2018-15”). Under the new guidance, customers will apply the same criteria for capitalizing implementation costs as they would for an arrangement that has a software license. This will result in certain implementation costs being capitalized; the associated amortization charge will, however, be recorded as an operating expense. Under the previous guidance, costs incurred when implementing a cloud computing arrangement deemed to be a service contract are recorded as an operating expense when incurred. ASU 2018-15 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Entities can choose to adopt the new guidance prospectively to eligible costs incurred on or after the date the guidance is first applied or retrospectively. We have elected to adopt the net guidance on a prospective basis. Although we are still finalizing our assessment of the impact of the adoption of ASU 2018-15, which is effective January 1, 2020, we currently do not expect it to have a material impact on our Consolidated Financial Statements. Accounting Pronouncements to be Implemented in 2021 In December 2019, the FASB issued ASU No. 2019-12, “Simplifying the Accounting for Income Taxes” (“ASU 2019-12”), which intends to simplify the guidance by removing certain exceptions to the general principles and clarifying or amending existing guidance. ASU 2019-12 is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. Although we are currently evaluating the impact of the adoption of ASU 2019-12, we do not expect it to have a material impact on our Consolidated Financial Statements.

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- Definition The entire disclosure of changes in accounting principles, including adoption of new accounting pronouncements, that describes the new methods, amount and effects on financial statement line items. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 250 -URI http://asc.fasb.org/topic&trid=2122394 + Details
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