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Summary of Significant Accounting Policies | 9 Months Ended
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Sep. 30, 2019
Accounting Policies [Abstract] |
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Leases The company determines if an arrangement is a lease at inception. This determination generally depends on whether the arrangement conveys to the company the right to control the use of an explicitly or implicitly identified asset for a period of time in exchange for consideration. Control of an underlying asset is conveyed to the company if the company obtains the rights to direct the use of and to obtain substantially all of the economic benefits from using the underlying asset. The company has lease agreements that include lease and non-lease components, which the company accounts for as a single lease component for all personal property leases. Lease expense for variable leases and short-term leases is recognized when the expense is incurred. Operating leases are included in operating lease right-of-use (ROU) assets, other accrued liabilities and long-term operating lease liabilities on the consolidated balance sheets. Operating lease ROU assets and lease liabilities are recognized at the commencement date of the lease based on the present value of lease payments over the lease term. Operating lease payments are recognized as lease expense on a straight-line basis over the lease term. Finance leases are included in outsourcing assets, net and long-term debt on the consolidated balance sheets. Finance lease ROU assets and lease liabilities are initially measured in the same manner as operating leases. Finance lease ROU assets are amortized using the straight-line method. Finance lease liabilities are measured at amortized cost using the effective interest method. The company has not capitalized leases with terms of twelve months or less. As most of the company’s leases do not provide an implicit rate, the company uses its incremental borrowing rate, based on the information available at the lease commencement date, in determining the present value of lease payments. The lease term for all of the company’s leases includes the non-cancelable period of the lease plus any additional periods covered by either a company option to extend (or not to terminate) the lease that the company is reasonably certain to exercise, or an option to extend (or not to terminate) the lease controlled by the lessor. Lease payments included in the measurement of the lease liability are comprised of fixed payments, variable payments that depend on index or rate, amounts expected to be payable under a residual value guarantee and the exercise of the company option to purchase the underlying asset, if reasonably certain. Variable lease payments associated with the company’s leases are recognized when the event, activity, or circumstance in the lease agreement on which those payments are assessed occurs. Variable lease payments are presented as an operating expense in the company’s consolidated results of operations in the same line item as expense arising from fixed lease payments (operating leases) or amortization of the ROU asset (finance leases). The company uses the long-lived assets impairment guidance in ASC Subtopic 360-10 Property, Plant, and Equipment to determine whether a ROU asset is impaired, and if so, the amount of the impairment loss to recognize. If impaired, ROU assets for operating and finance leases are reduced for any impairment losses. The company monitors for events or changes in circumstances that require a reassessment of its leases. When a reassessment results in the remeasurement of a lease liability, a corresponding adjustment is made to the carrying amount of the corresponding ROU asset unless doing so would reduce the carrying amount of the ROU asset to an amount less than zero. In that case, the amount of the adjustment that would result in a negative ROU asset balance is recorded in the consolidated statement of income. The company has commitments under operating leases for certain facilities and equipment used in its operations. The company also has finance leases for equipment. The company’s leases generally have initial lease terms ranging from 1 year to 8 years, most of which include options to extend or renew the leases for up to 5 years, and some of which may include options to terminate the leases within 1 year. Certain lease agreements contain provisions for future rent increases. The components of lease expense for the three and nine months ended September 30, 2019 are as follows:
|  | Three Months Ended September 30, 2019 |  | Nine Months Ended September 30, 2019
Operating lease cost |  | $ | 19.0 |  |  | $ | 52.2 |
Finance lease cost |  |  |  |
Amortization of right-of-use assets |  | 0.4 |  |  | 1.2 |
Interest on lease liabilities |  | 0.2 |  |  | 0.2 |
Total finance lease cost |  | 0.6 |  |  | 1.4 |
Short-term lease costs |  | 0.2 |  |  | 0.4 |
Variable lease cost |  | 5.1 |  |  | 11.8 |
Sublease income |  | (0.1 | ) |  | (0.7 | )
Total lease cost |  | $ | 24.8 |  |  | $ | 65.1 |
Supplemental balance sheet information related to leases is as follows:
|  | September 30, 2019
Operating Leases |  |
Operating lease right-of-use assets |  | $ | 126.8 |
Other accrued liabilities |  | 69.2 |
Long-term operating lease liabilities |  | 83.8 |
Total operating lease liabilities |  | $ | 153.0 |
Finance Leases |  |
Outsourcing assets, net |  | $ | 5.0 |
Current maturities of long-term debt |  | 1.7 |
Long-term debt |  | 4.0 |
Total finance lease liabilities |  | $ | 5.7 |
Weighted-Average Remaining Lease Term |  |
Operating leases |  | 3.2 |
Finance leases |  | 3.2 |
Weighted-Average Discount Rate |  |
Operating leases |  | 6.3 | %
Finance leases |  | 4.9 | %
Supplemental cash flow information related to leases is as follows:
|  | Nine Months Ended September 30, 2019
Cash paid for amounts included in the measurement of lease liabilities: |  |
Cash payments for operating leases included in operating activities |  | $ | 51.7 |
Cash payments for finance leases included in financing activities |  | 1.3 |
Right-of-use assets obtained in exchange for lease obligations are as follows:
|  | Three Months Ended September 30, 2019 |  | Nine Months Ended September 30, 2019
Operating leases |  | $ | 8.2 |  |  | $ | 51.1 |
Finance leases |  | 1.1 |  |  | 1.5 |
Maturities of lease liabilities as of September 30, 2019 are as follows:
Year |  | Finance Leases |  | Operating Leases
2019 |  | $ | 0.5 |  |  | $ | 20.6 |
2020 |  | 2.0 |  |  | 70.1 |
2021 |  | 2.0 |  |  | 31.5 |
2022 |  | 1.4 |  |  | 18.9 |
2023 |  | 0.2 |  |  | 11.6 |
Thereafter |  | 0.1 |  |  | 16.1 |
Total lease payments |  | 6.2 |  |  | 168.8 |
Less imputed interest |  | 0.5 |  |  | 15.8 |
Total |  | $ | 5.7 |  |  | $ | 153.0 |
Maturities of lease liabilities as of December 31, 2018, prior to the adoption of ASU No. 2016-02 as described in Note 3 of this Form 10-Q are as follows:
Year |  | Finance Leases |  | Operating Leases(i)
2019 |  | $ | 1.6 |  |  | $ | 48.5 |
2020 |  | 1.6 |  |  | 42.1 |
2021 |  | 1.6 |  |  | 30.0 |
2022 |  | 1.0 |  |  | 20.8 |
2023 |  | — |  |  | 14.3 |
Thereafter |  | — |  |  | 24.4 |
Total |  | $ | 5.8 |  |  | $ | 180.1 |
(i)Such rental commitments have been reduced by minimum sublease rentals of $2.7 million, due in the future under noncancelable leases. For transactions where the company is considered the lessor, revenue for operating leases is recognized on a monthly basis over the term of the lease and for sales-type leases at the inception of the lease term. These amounts were immaterial for the three and nine months ended September 30, 2019. As of September 30, 2019, receivables under sales-type leases before the allowance for unearned income were collectible as follows:
Year |
2019 | $ | 6.4 |
2020 | 18.2 |
2021 | 12.8 |
2022 | 12.3 |
2023 | 12.3 |
Thereafter | 17.5 |
Total | $ | 79.5 |
Marketable software The cost of development of computer software to be sold or leased, incurred subsequent to establishment of technological feasibility, is capitalized and amortized to cost of sales over the estimated revenue-producing lives of the products. In assessing the estimated revenue-producing lives and recoverability of the products, the company considers operating strategies, underlying technologies utilized, estimated economic life and external market factors, such as expected levels of competition, barriers to entry by potential competitors, stability in the market and governmental regulation. The company continually reassesses the estimated revenue-producing lives of the products and any change in the company’s estimate could result in the remaining amortization expense being accelerated or spread out over a longer period. Previously, the estimated revenue-producing lives of the company’s proprietary enterprise software was three years. Due to the maturity of the company’s proprietary enterprise software product, the company increased the time between its major releases as its product has a longer useful life. In addition, the company modified its commitment to provide post-contract support from an average of three years to five years following each new proprietary enterprise software release. In the first quarter of 2019, the company validated that the revised extended timeline between major product releases and the revised post-contract support period has achieved market acceptance. The company’s historical experience is that its significant customers typically renew the software on average every five years. As a result, the company adjusted the remaining useful life of its proprietary enterprise software product, which represents approximately 65% of the company’s marketable software, to five years. This change in estimate was applied prospectively effective January 1, 2019. The adjustment resulted in a $5.8 million decrease to cost of revenue in the three months ended September 30, 2019, and accordingly increased consolidated net income by $5.8 million or $0.10 per diluted earnings per share. For the nine months ended September 30, 2019, this adjustment resulted in a $15.1 million decrease to cost of revenue, and accordingly increased consolidated net income by $15.1 million or $0.28 per diluted earnings per share. The useful lives of the remaining products classified as marketable software remain at three years, which is consistent with prior years. As of September 30, 2019, $60.5 million of marketable software was in process and the remaining $122.8 million has a weighted-average remaining life of 3.3 years. The company performs quarterly reviews to ensure that unamortized costs remain recoverable from future revenue. As of September 30, 2019, the company believes that all unamortized costs are fully recoverable.

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- Definition The entire disclosure for 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 235 -URI http://asc.fasb.org/topic&trid=2122369 + Details
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