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Note 14 - Leases Obligations | 12 Months Ended
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Dec. 31, 2020
Notes to Financial Statements |
Lessee, Operating Leases [Text Block] | 14. Lease Obligations The Company is a lessee under certain operating leases for office space and equipment. Prior to adopting ASC 842, the Company followed the lease accounting guidance as issued in ASC 840. Under ASC 840, the Company 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, ASC 840 requires that total rent expense during the lease term be recorded on a straight-line basis over the term of the lease and record 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 would also be recorded as a reduction to rent expense over the term of the lease. ASC 842 requires lessees to recognize leases on the balance sheet as a lease liability with a corresponding ROU, subject to certain permitted accounting policy elections. Under ASC 842, the SPAR Group determines, at the inception of the contract, whether the contract is or contains a lease based on whether the contract provides the SPAR Group the right to control the use of a physically distinct asset or substantially all of the capacity of an asset. Many of SPAR's equipment leases are short-term or cancellable with notice. The SPAR's Group office space leases have remaining lease terms between one and approximately eleven years, many of which include one or more options to extend the term for periods thereafter. 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 SPAR if not exercised. The extension options and termination options may be exercised at the SPAR's Group sole discretion. The SPAR Group does not consider in the measurement of ROU assets and lease liabilities an option to extend or terminate a lease if the SPAR Group is not reasonably certain to exercise the option. As of December 31, 2020 and 2019, SPAR has not included any options to extend or terminate a lease in its measurement of ROU assets or lease liabilities. The Company adopted ASC 842 at the beginning of the first quarter of 2019. As a result of adopting the new standard, SPAR recognized ROU assets and liability of $5.7 million. There was no adjustment to deferred taxes as a result of SPAR's adoption of ASC 842. The adoption of ASC 842 did not have a material impact on SPAR's results of operations or cash flows, nor did it have an impact on any of SPAR's existing debt covenants. Certain of the SPAR's Group leases include covenants that oblige the SPAR Group, at its sole expense, to repair and maintain the leased asset periodically during the lease term. The SPAR Group is not a party to any leases that contain residual value guarantees nor is SPAR a party to any leases that provide an option to purchase the underlying asset. Many of the SPAR's Group 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 the SPAR's Group rented square feet of the building. Variable payments that do not depend on an index or rate are expensed by the SPAR Group as they are incurred and are not included in the measurement of the lease liability. Some of the SPAR's Group leases contain both lease and non-lease components. Fixed and variable payments are allocated to each component relative to observable or estimated standalone prices. The SPAR Group measures its variable lease costs as the portion of variable payments that are allocated to lease components. SPAR Group 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. The SPAR's Group ROU assets are equal to the lease liability, the SPAR Group estimates its incremental borrowing rate based on the interest rate the SPAR Group 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 the SPAR's Group lease expenses for the year ended December 31, 2020 and 2019, which are included in the consolidated income statement, are as follows (in thousands):
|  |  |  | Year Ended |  |  | Year Ended |
Lease Costs |  | Classification |  | December 31, 2020 |  |  | December 31, 2019 |
Operating lease cost |  | Selling, General and Administrative Expense |  | $ | 3,002 |  |  | $ | 2,030 |
Short-term lease cost |  | Selling, General and Administrative Expense |  |  | 216 |  |  |  | 85 |
Variable costs |  | Selling, General and Administrative Expense |  |  | 56 |  |  |  | 290 |
Total lease cost |  | $ | 3,274 |  |  | $ | 2,405 |
Supplemental cash flow information related to SPAR's leases for the years ended December 31, 2020 and 2019 is as follows (in thousands):
|  | Year Ended |  | Year Ended
|  | December 31, 2020 |  | December 31, 2019
Cash paid for amounts included in the measurement of lease liabilities |  |  |  |
Operating cash flows from operating leases | $ | 3,232 | $ | 1,980
Right-of-use assets obtained in exchange for lease obligations |  |  |  |
Operating leases (a) | $ | 368 | $ | 6,928
(a) Amounts for the year ended December 31, 2019 include the transition adjustment for the adoption of ASU 2016 - 02.
Leases |  | December 31, 2020 |  | December 31, 2019
Assets: |  |  |  |
Operating lease right-of-use assets | $ | 2,900 | $ | 4,948
Liabilities: |  |  |  |
Current portion of operating lease liabilities | $ | 1,398 | $ | 2,828
Non-current portion of operating lease liabilities |  | 1,502 |  | 2,120
Total operating lease liabilities | $ | 2,900 | $ | 4,948
Weighted average remaining lease term - operating leases (in years) |  | 2.95 |  | 5.9
Weighted average discount rate - operating leases |  | 9.9% |  | 8.9%
At December 31, 2020, SPAR had the following maturities of lease liabilities related to office space and equipment, all of which are under non-cancellable operating leases (in thousands):
For the Year Ended December 31, |  | Amount |
2021 |  | $ | 1,550 |
2022 |  |  | 781 |
2023 |  |  | 331 |
2024 |  |  | 246 |
2025 |  |  | 392 |
Thereafter |  |  | 142 |
Total future operating lease liability |  |  | 3,443 |
Less: amount representing interest |  |  | 543 |
Present value of operating lease liabilities |  | $ | 2,900 |

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- Definition The entire disclosure for operating leases of lessee. Includes, but is not limited to, description of operating lease and maturity analysis of operating lease liability. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 842 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=77888251 + Details
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