10. Leases

CRA is a lessee under certain operating leases for office space and equipment. Prior to adopting ASC 842, CRA followed the lease accounting guidance as issued in ASC 840. Under ASC 840, CRA classified its leases as operating or capital leases based on evaluation of certain criteria of the lease agreement. For leases that contained rent escalations or rent holidays, CRA recorded the total rent expense during the lease term on a straight-line basis over the term of the lease and recorded the difference between the rents paid and the straight-line rent expense as deferred rent on the balance sheet. Any tenant improvement allowances received from the lessor were recorded as a reduction to rent expense over the term of the lease.

ASC 842, which CRA adopted on December 30, 2018, requires lessees to recognize leases on the balance sheet as a lease liability with a corresponding right-of-use asset (“ROU”), subject to certain permitted accounting policy elections. As a result of adopting the new standard, CRA recognized ROU assets of $82.3 million and lease liabilities of $106.8 million related to its operating leases as of December 30, 2018. The difference between the amount of ROU assets and lease liabilities recognized was an adjustment to eliminate the deferred rent balance, which was a component of ASC 840.

Under ASC 842, CRA determines, at the inception of the contract, whether the contract is or contains a lease based on whether the contract provides CRA the right to control the use of a physically distinct asset or substantially all of the capacity of an asset. Leases with an initial noncancelable term of twelve months or less that do not include an option to purchase the underlying asset that CRA is reasonably certain to exercise are classified as short-term leases. CRA has elected as an accounting policy to exclude from the consolidated balance sheets the ROU assets and lease liabilities related to short-term leases. CRA recognizes rent expense for its operating leases on a straight-line basis over the term of the lease.

Many of CRA’s equipment leases are short-term or cancellable with notice. CRA’s office space leases have remaining lease terms between one and approximately twelve years, many of which include one or more options to extend the term for periods of up to five years for each option. Certain leases contain options to terminate the lease early, which may include a penalty for exercising the option. Many of the termination options require notice within a specified period, after which the option is no longer available to CRA if not exercised. The extension options and termination options may be exercised at CRA’s sole discretion. CRA does not consider in the measurement of ROU assets and lease liabilities an option to extend or terminate a lease if CRA is not reasonably certain to exercise the option. As of March 30, 2019, CRA has not included any options to extend or terminate in its measurement of ROU assets or lease liabilities.

Certain of CRA’s leases include covenants that oblige CRA, at its sole expense, to repair and maintain the leased asset periodically during the lease term. CRA is not a party to any leases that contain residual value guarantees nor is CRA a party to any leases that provide an option to purchase the underlying asset.

Many of CRA’s office space leases include fixed and variable payments. Variable payments relate to real estate taxes, insurance, operating expenses, and common area maintenance, which are usually billed at actual amounts incurred proportionate to CRA’s rented square feet of the building. Variable payments that do not depend on an index or rate are expensed by CRA as they are incurred and are not included in the measurement of the lease liability.

Many of CRA’s leases contain both lease and non-lease components. Fixed and variable payments are allocated to each component relative to observable or estimated standalone prices. CRA measures its variable lease costs as the portion of variable payments that are allocated to lease components.

CRA measures its lease liability for each leased asset as the present value of lease payments, as defined in ASC 842, allocated to the lease component, discounted using an incremental borrowing rate specific to the underlying asset. CRA’s ROU assets are equal to the lease liability, adjusted for lease incentives received, including tenant improvement allowances, and payments made to the lessor prior to the lease commencement date. CRA estimates its incremental borrowing rate for each leased asset based on the interest rate CRA would incur to borrow an amount equal to the lease payments on a collateralized basis over a similar term in a similar economic environment.

The components of CRA’s lease expenses for the fiscal quarter ended March 30, 2019, which are included in the condensed consolidated income statement, are as follows (in thousands):


	March 30, 2019
Operating lease cost	$	3,211
Short-term lease cost		108
Variable lease cost		936
Total lease cost	$	4,255

Supplemental cash flow information related to CRA’s leases for the fiscal quarter ended March 30, 2019 is as follows (in thousands):


	March 30, 2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	4,627

Right-of-use assets obtained in exchange for lease obligations
Operating leases	$	713

The following table presents supplemental balance sheet information related to CRA’s operating leases as of March 30, 2019 (in thousands):


	March 30, 2019
Assets:
Operating lease right-of-use assets	$	81,480
Liabilities:
Current portion of lease liabilities	$	9,558
Non-current portion of lease liabilities		94,939
Total operating lease liabilities	$	104,497

Weighted average remaining lease term – operating leases		9.0	years
Weighted average discount rate – operating leases		3.7	%

At March 30, 2019, CRA had the following maturities of lease liabilities related to office space and equipment, all of which are under non-cancellable operating leases (in thousands):


		Operating
		Lease
Fiscal Year		Commitments
2019 (excluding the three months ended March 30, 2019)		10,988
2020		14,083
2021		14,028
2022		14,070
2023		14,178
Thereafter		55,320
Total lease payments		122,667
Less: imputed interest		(18,170)
Total		104,497

As of March 30, 2019, CRA had additional operating leases for office space that have not yet commenced that have minimum rental commitments of $52.7 million. These operating leases will commence in fiscal year 2019 and have lease terms of approximately five years to eleven years, which exclude certain options to extend these leases.