Annual report pursuant to Section 13 and 15(d)

New Accounting Pronouncements

v3.10.0.1
New Accounting Pronouncements
12 Months Ended
Dec. 31, 2018
Accounting Changes And Error Corrections [Abstract]  
New Accounting Pronouncements

2.

NEW ACCOUNTING PRONOUNCEMENTS

Impact of New Revenue Recognition Standard

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606), (“ASC Topic 606”), which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers.  ASC Topic 606 replaces most existing revenue recognition guidance in U.S. generally accepted accounting principles.  In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from the contracts with customers.  The Company adopted ASC Topic 606 effective January 1, 2018.  See Note 3 for further discussion.  

Impact of New Lease Accounting Standard

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), (“ASC Topic 842”). The purpose of ASU 2016-02 is to provide financial statement users a better understanding of the amount, timing, and uncertainty of cash flows arising from leases. The adoption of ASC Topic 842 will result in the recognition of a right-of-use asset and a lease liability for most operating leases.  New disclosure requirements include qualitative and quantitative information about the amounts recorded in the financial statements related to leases. ASC Topic 842 is effective for fiscal years beginning after December 15, 2018. ASC Topic 842 requires a modified retrospective transition by means of a cumulative-effect adjustment to retained earnings as of the earliest period presented with the option to elect certain practical expedients. ASC Topic 842 provides an additional transition method in which an entity initially applies ASC Topic 842 at the adoption date and recognizes a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption.  This additional transition method changes only when an entity is required to initially apply the transition requirements outlined in ASC Topic 842; it does not change how those requirements are applied.  The Company used this transition method upon adoption.  

The Company adopted ASC Topic 842 effective January 1, 2019.  The Company is finalizing its evaluation of the impact of ASC Topic 842 on its consolidated financial statements, and expects the most significant impacts to be as follows:

 

1.

The Company will recognize liabilities representing the present value of the remaining future minimum lease payments for all of its operating leases as of January 1, 2019.  The Company estimates these liabilities will be between $1,400,000 and $1,700,000.

 

2.

The Company will recognize right of use assets for all of its operating leases equal to the liabilities calculated in (1) above, adjusted for the balances of long-term prepaid rent, favorable lease intangible assets, deferred lease expense, unfavorable lease liabilities and deferred lease incentive liabilities as of January 1, 2019.  

 

3.

The Company has theatre leases for which it was involved in construction that failed sale-leaseback accounting at the end of the construction period.  These leases, which were accounted for as capital leases, will be derecognized upon adoption of ASC Topic 842 and evaluated to determine classification upon adoption.  Some of these leases will be classified as operating leases upon adoption and, beginning in 2019, lease payments for these leases will be recorded as facility lease expense on the consolidated income statement.  Previously, as capital leases, lease payments were classified as interest expense and reductions of the capital lease obligations.

 

4.

For the capital leases derecognized as discussed in (3) above, the Company will write-off of the net book value of the capital lease asset and capital lease liability, with the difference between those amounts resulting in an adjustment to beginning retained earnings as of January 1, 2019.

Other Accounting Pronouncements

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments – a consensus of the FASB Emerging Issues Task Force, (“ASU 2016-15”). The purpose of ASU 2016-15 is to reduce the diversity in practice regarding how certain cash receipts and cash payments are presented and classified in the statement of cash flows. ASU 2016-15 is effective for fiscal years beginning after December 15, 2017, including interim periods within that year. A retrospective transition method should be used in the application of the amendments within ASU 2016-15. Early adoption is permitted.  The Company adopted ASU 2016-15 in the first quarter of 2018.  Upon adoption, the Company reclassified $11,076 and $521 of cash payments recorded in loss on debt amendments and refinancing from operating activities to financing activities for the years ended December 31, 2016 and 2017, respectively.  The amendments in ASU 2016-15 did not have any other material impact on the consolidated financial statements.

In May 2017, the FASB issued ASU 2017-09, Compensation – Stock Compensation (Topic 718): Scope Modification Accounting, (“ASU 2017-09”). The amendments in ASU 2017-09 provide guidance on which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting as described in ASC Topic 718. The amendments should be applied on a prospective basis. ASU 2017-09 is effective for fiscal years beginning after December 15, 2017, including interim periods within that year. Early adoption is permitted. The Company adopted ASU 2017-09 during the first quarter of 2018.  The amendments in ASU 2017-09 did not have a material impact on the consolidated financial statements.

In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, (“ASU 2017-12”). The amendments in ASU 2017-12 improve the financial reporting of hedging relationships to better reflect the economic results of an entity’s risk management activities in its financial statements. Additionally, the amendments in ASU 2017-12 simplify certain steps of applying hedge accounting guidance. ASU 2017-12 is effective for fiscal years beginning after December 15, 2017, including interim periods within that year. Early adoption is permitted. The Company adopted ASU 2017-12 effective January 1, 2018 and applied the related guidance when evaluating three new interest rate swap agreements entered into during 2018, which were designated as cash flow hedges by the Company (see Note 11).

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement, (“ASU 2018-13”).  The purpose of ASU 2018-13 is to improve the disclosures related to fair value measurements in the financial statements.  The improvements in ASU include the removal, modification and addition of certain disclosure requirements primarily related to Level 3 fair value measurements.  ASU 2018-13 is effective for fiscal years beginning after December 15, 2019, including interim periods within that year.  The amendments in ASU 2018-13 should be applied prospectively.  The Company does not expect ASU 2018-13 to have a significant impact on the consolidated financial statements.

U.S. Tax Reform

On December 22, 2017, the U.S. government enacted comprehensive tax legislation, the Tax Cuts and Jobs Act (the "Tax Act"). The Tax Act made changes to the U.S. tax code, which included (1) reduced U.S. corporate tax rate from 35 percent to 21 percent, (2) generally eliminated U.S. federal income taxes on dividends from foreign subsidiaries,  (3) a one-time transition tax on certain undistributed earnings of foreign subsidiaries, and (4) created new taxes on certain foreign-sourced earnings.  As of December 31, 2018, the amounts recorded for the Tax Act are final for the 2017 transition tax, the re-measurement of deferred taxes, and our reassessment of valuation allowances.  See further discussion at Note 17.