Right-of-Use Assets and Lease Liabilities
|12 Months Ended|
Dec. 31, 2022
|Right-of-Use Assets and Lease Liabilities||Right-of-Use Assets and Lease Liabilities
The Company determines if an arrangement is or contains a lease at inception, which is the date on which the terms of the contract are agreed, and if the arrangement creates enforceable rights and obligations. Under Topic 842, a contract is or contains a lease when (i) explicitly or implicitly identified assets have been deployed in the contract and (ii) the customer obtains substantially all of the economic benefits from the use of that underlying asset and directs how and for what purpose the asset is used during the term of the contract.
The Company leases office facilities under operating lease agreements that have initial terms ranging from 1 to 12 years. Some leases include one or more options to extend the term of the lease, generally at the Company’s sole
discretion, with renewal terms that can extend the lease term up to 5 years. In addition, certain leases give the Company, the lessor, or both parties the right to terminate. Options to extend a lease are included in the lease term when it is reasonably certain that the Company will exercise the option. Options to terminate a lease are excluded from the lease term when it is reasonably certain that the Company will not exercise the option. The Company’s leases generally do not contain any material restrictive covenants or residual value guarantees.
The Company’s operating leases were as follows:
(1) Current lease liabilities are recorded in on the Company’s consolidated balance sheets.
The components of lease cost are recorded in selling, general, and administrative expenses for the year ended December 31, 2022 and were as follows:
Operating lease cost is recognized on a straight-line basis over the lease term.
Total lease expense for all office space operating leases for the years ended December 31, 2021, and 2020 was $7.2 million, and $7.0 million, respectively.
Supplemental cash flow information related to leases was as follows:
The weighted-average remaining lease term and weighted-average discount rate for the Company’s operating leases were as follows:
Maturities of the Company’s operating lease liabilities as of December 31, 2022 were as follows:
As of December 31, 2021, future minimum lease payments for operating leases under ASC Topic 840, Leases, were as follows:
The Company periodically identifies opportunities for cost savings through office consolidations or by exit from certain underutilized facilities. Cease-use costs represent lease obligation charges and executory costs for exited facilities. The Company accounts for cease-use costs pursuant to guidance under ASC 420, Costs Related to Exit or Disposal Activities. Charges related to these cease-use costs are estimated based on the discounted future cash flows of rent expense and executory costs that the Company is obligated to pay under the lease agreements, partially offset by projected sublease income, which is calculated based on certain sublease assumptions. To the extent our assessment of such assumptions changes, the change in estimate is recorded in the period in which the determination is made.
As a result of the exit from certain facilities, the Company recorded a cease-use liability in 2021. The cease-use liability of $9.0 million was reclassified and treated as a reduction to the beginning ROU asset recorded upon adoption of ASC 842, Leases, on January 1, 2022. Cease-use costs were $0.2 million during the year ended December 31, 2022, and are included as a component of selling, general and administrative expenses in the consolidated statements of operations. Cease-use costs were $10.7 million during the year ended December 31, 2021. In December 2022, the Company revised its projected sublease income and estimates of the costs the
Company is obligated to pay under certain of its lease agreements. The change in estimate resulted in a reduction of $0.7 million to cease-use costs.
Cease-use costs are included in accrued expenses and other current liabilities and other non-current liabilities on the consolidated balance sheets as of December 31, 2022, and 2021. The following table summarizes the activity for the liability for cease-use costs for the periods presented:
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.
Reference 1: http://www.xbrl.org/2003/role/disclosureRef