| SIGNIFICANT ACCOUNTING POLICIES | NOTE
2:- SIGNIFICANT
ACCOUNTING POLICIES The
consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United
States (“US GAAP”).
a. Use
of estimates: The
preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and accompanying notes. The most significant assumptions
are employed in estimates used in determining values of intangible assets, tax assets and tax liabilities, warranty costs and
stock-based compensation costs. Actual results could differ from those estimates.
b. Financial
statements in U.S. dollars: The
Company’s reporting currency is the U.S. dollar. The
majority of the revenues of the Company’s Cellocator business are generated in U.S. dollars (“USD”) or linked
to the USD. In addition, a substantial portion of the Company’s Cellocator business’ costs are incurred in USD. The
Company’s management believes that the USD is the primary currency of the economic environment of the Cellocator business
and thus its functional currency. Due to the fact that Argentina has been determined to be highly inflationary, The financial
statements of Pointer Argentina have been remeasured as if its functional currency was the USD since 1 July 2018. The
majority of revenues generated by the Company’s MRM business are raised in Israeli NIS (“NIS”), or linked to
the NIS. In addition, a substantial portion of the Company’s MRM business costs are incurred in NIS. The Company’s
management believes that the NIS is the primary currency of the economic environment of the MRM business and thus its functional
currency. For
those subsidiaries whose functional currency has been determined to be their local currency (for Pointer Mexico- the Mexican peso;
for Pointer Inc. the USD; for Pointer do Brazil Comercial Ltda. the Brazilian Real), assets and liabilities are translated at
year-end exchange rates and statement of operations items are translated at average exchange rates prevailing during the year.
Such translation adjustments are recorded as a separate component, other comprehensive income (loss), in shareholders’ equity
(deficiency).
c. Principles
of consolidation: The
consolidated financial statements include the accounts of the Company and its subsidiaries. Intercompany
transactions and balances including profits from intercompany sales not yet realized outside the Company have been eliminated
upon consolidation. Changes
in the parent’s ownership interest in a subsidiary with no change of control are treated as equity transactions, rather
than step acquisitions or dilution gains or losses. Losses of partially owned consolidated subsidiaries shall be continued to
be allocated to the non-controlling interests even when their investment was already reduced to zero.
d. Cash
equivalents: Cash
equivalents are short-term highly liquid investments that are readily convertible to cash with original maturities of three months
or less at the date acquired.
e. Inventories: Inventories
are stated at the lower of cost or net realizable value. Cost is determined using the “moving average” cost method.
Inventory consists of raw materials, work in process and finished products. Inventory write-offs are provided to cover risks arising
from slow-moving items, technological obsolescence, excess inventories, and for market prices lower than cost. In 2018, 2017 and
2016, the Company and its subsidiaries wrote-off approximately net amount of $346, $129 and $147, respectively. The net write-offs
are included in the cost of revenues.
f. Property
and equipment: Property
and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated by the straight-line method over
the estimated useful lives of the assets at the following annual rates:
%
Installed products 20-33
Computers and electronic equipment 10 - 33 (mainly 33)
Office furniture and equipment 6 - 15
Motor vehicles 15 - 20 (mainly 20)
Network installation 10 - 33
Buildings 6.67
Leasehold improvements Over the term of the lease, including the option term or the useful lives of the assets, whichever is shorter
g. Goodwill: Goodwill
reflects the excess of the purchase price of the acquired activities over the fair value of net assets acquired. Pursuant to ASC
350, “Intangibles - Goodwill and Other”, goodwill is not amortized but rather tested for impairment at least annually,
at the reporting unit level. The
Company identified several reporting units based on the guidance of ASC 350. ASC
350 prescribes a two-phase process for the impairment testing of goodwill. In
the evaluation of goodwill for impairment, the Company has the option to perform a qualitative assessment to determine
whether further impairment testing is necessary or to perform a quantitative assessment by comparing the fair value of a
reporting unit to its carrying amount, including goodwill. Under the qualitative assessment, an entity is not required to
calculate the fair value of a reporting unit unless the entity determines that it is more likely than not that its fair value
is less than its carrying amount. If under the quantitative assessment the fair value of a reporting unit is less than its
carrying amount, then the amount of the impairment loss, if any, must be measured under step two of the impairment analysis.
In the first phase of impairment testing, goodwill attributable to the reporting units is tested for impairment by comparing
the fair value of each reporting unit with its carrying value. If the carrying value of the reporting unit exceeds its fair
value, the second phase is then performed. The second phase of the goodwill impairment test compares the implied fair value
of the reporting unit’s goodwill with the carrying amount of that goodwill. If the carrying amount of the reporting unit’s
goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that
excess. No
impairment losses were identified in 2018, 2017 or 2016.
h. Identifiable
intangible assets: Intangible
assets consist of the following: a brand name, customers’ related intangibles, developed technology and acquired patents.
Intangible assets are amortized over their useful life using a method of amortization that reflects the pattern in which the economic
benefits of the intangible assets are consumed or otherwise used up. Intangible assets are stated at amortized cost. The
customers’ related intangibles are amortized over a five to nine year period. Backlog
is amortized over a three-year period. Non-
competition agreement is amortized over a three-year period. Brand
name is amortized over a ten-year period. Customer
related intangibles are amortized based on the accelerated method. For customer related intangibles in respect with the Brazil
transaction during 2013 and the transaction during 2016, the Company used the straight line method, the differences from the accelerated
method were immaterial. Other
intangibles are amortized based on straight line method over the periods above mentioned. No
impairment losses were identified in 2018, 2017 and 2016.
i. Impairment
of long-lived assets: The
Company’s long lived assets are reviewed for impairment in accordance with ASC 360-10-35, “Property, Plant, and Equipment-
Subsequent Measurement” whenever events or changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the assets
to the future undiscounted cash flows expected to be generated by the assets. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the
assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. No
impairment losses were identified in 2018, 2017 and 2016.
j. Provision
for warranty: The
Company and its subsidiaries generally grant an assurance type waaranty of one-year to three-year for their products. The Company
and its subsidiaries estimate the costs that may be incurred under its basic limited warranty and records a liability in the amount
of such costs at the time which product revenue is recognized. Factors that affect the warranty liability include the number of
installed units, historical and anticipated rates of warranty claims and cost per claim. The Company and its subsidiaries periodically
assess the adequacy of its recorded warranty liabilities and adjust the amounts as necessary. Changes in the Company’s and
its subsidiaries’ product liabilities (which are included in other accounts payable and accrued expenses and other long
term liabilities’ captions in the Balance Sheet) during 2018 and 2017 are as follows:
Year ended December 31,
2018 2017
Balance, beginning of the year 567 604
Warranties issued during the year 346 468
Settlements made during the year (118 ) (145 )
Expirations (351 ) (360 )
Balance end of year 444 567
k. Revenue
recognition: The
Company and its subsidiaries generate revenue from subscriber fees for the provision of services and sales of systems and products,
mainly in respect of asset management services, fleet management services , Adoption
of ASC Topic 606, “Revenue from Contracts with Customers”: On January
1, 2018, the Company adopted the new guidance on Revenue from Contracts with Customers under Topic 606 using the modified retrospective
transition method. Results for
reporting periods beginning after January 1, 2018 are presented under Topic 606, while prior period amounts are not adjusted and
continue to be reported in accordance with our historic accounting treatment under Topic 605. The core
principle of the standard is for companies to recognize revenue to depict the transfer of control of goods or services to customers
in amounts that reflect the consideration (that is, payment) to which the Company expects to be entitled in exchange for those
goods or services. In order
to achieve that core principle, the Company applies the following five-step approach: (1) identify the contract with a customer,
(2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price
to the performance obligations in the contract, and (5) recognize revenue when a performance obligation is satisfied .
(1) Identify the contract with a customer: A contract
is an agreement between two or more parties that creates enforceable rights and obligations. In evaluating the contract, the Company
analyzes the customer’s intent and ability to pay the amount of promised consideration (credit risk) and considers the probability
of collecting substantially all of the consideration. The Company
determines whether collectability is reasonably assured on a customer-by-customer basis pursuant to its credit review policy.
(2) Identify the performance obligations in the contract: At a contract’s
inception, the Company assesses the goods or services promised in a contract with a customer and identifies the performance obligations. The main performance
obligations are the provisions of the following: Product, services and NRE.
(3) Determine the transaction price: The
transaction price is the amount of consideration to which the Company is entitled in exchange for transferring promised goods or
services to a customer. When
a contract provides a customer with payment terms of more than a year, the Company considers whether those terms create variability
in the transaction price and whether a significant financing component exists.
(4) Allocate the transaction price to the performance obligations in the contract: Revenue
is measured as the amount of consideration the Company expects to receive in exchange for transferring goods or providing services.
The contract transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the
performance obligation is satisfied. The Company does not have any significant extended payments terms. Some of
the contracts have multiple performance obligations, including contracts that combine product with installation and customer support.
For contracts with multiple performance obligations, the Company allocates the contract’s transaction price to each performance
obligation using its best estimate of the relative standalone selling price of each distinct good or service in the contract. The
primary method used to estimate the relative standalone selling price is expected costs of satisfying a performance obligation
and an appropriate margin for that distinct good or service .
(5) Recognize revenue when a performance obligation is satisfied: The Company
recognizes revenue when it satisfies a performance obligation by transferring control over a product or service to a customer . Product revenue
is recognized at a point of time when the product have been delivered. The Company recognizes revenue from products when a customer
takes possession of the product. The Company
recognizes revenues from services on a straight line over the service contractual period, starting at commencement of the services.
Renewals of service contracts create new performance obligations that are satisfied over the term with the revenues recognized
ratably over the term. Products
and services may be sold separately or in bundled packages. The typical length of a contract for service is 36 months. Services
including leased devices and installation recognized on a straight line over the service contractual period, starting at commencement
of services. For products
sold separately, customers pay in full at a point of sale. For devices sold in bundled packages, customers usually pay monthly
in equal installments over the period of 36 months. Set-up
fees are recognized at a point of time upon completion and professional services are recognized over the time on a straight line
over the services contractual period. Software as a Service (“SAAS”) revenues are recognized over the time on a straight
line over the services’ contractual period. Non-Recurring Engineering (“NRE”) services are recognized over the
time based on costs incurred. The
most significant impacts of the standard to the Company relate to the timing of revenue recognition for arrangements involving
leasing. The cumulative effect of accounting change recognized was $356 recorded as a decrease to beginning balance of accumulated
deficit, and a corresponding increase to prepaid and other current assets and a decrease in other assets. Refer
to the following table for the detailed effect to our consolidated balance sheet upon adoption:
Balance at December 31, 2017 New Revenue Standard Adjustment Balance at January 1, 2018
Assets
Prepaid and other current assets $ 2,865 $ 555 $ 3,420
Other assets 1,116 (199 ) 917
Shareholders’ Equity
Accumulated Deficit (69,597 ) 356 (69,241 ) The
following tables summarize the impacts of adopting Topic 606 on the Company’s consolidated financial statements for the
year ended December 31, 2018:
Impact of changes in accounting policies Year ended December 31, 2018
As reported Adj. Balances without adoption of Topic 606
Service revenue 52,543 344 52,887
Product revenue 25,243 (268 ) 24,975
Total revenues 77,786 76 77,862
Cost of revenues 36,778 - 36,778
Research and development expenses 4,707 - 4,707
Selling and marketing expenses 14,560 29 14,589
General and administrative expenses 11,169 - 11,169
Amortization of intangible assets 456 - 456
One time acquisition related costs 300 - 300
Financial expenses 1,133 - 1,133
Income tax expense 1,753 (5 ) 1,748
Others 3 - 3
Net income 6,927 52 6,979
1. Contract
costs: The
Company pays commissions to sales and marketing and certain management personnel based on their attainment of certain predetermined
sales goals. Sales commissions are considered incremental costs of obtaining a contract with a customer and are deferred and amortized. The
Company is required to capitalize and amortize incremental costs of obtaining a contract, such as certain sales commission costs,
over the remaining contractual term or over an expected period of benefit, which the Company has determined to be approximately
three years.
2. Disaggregation
of revenue: The
following is a description of principal activities separated by reportable segments from which the Company generates its revenue.
For more detailed information about reportable segments, see Note 17. In
the following table, revenue is disaggregated by primary geographical market, major product line, and timing of revenue recognition.
The table also includes a reconciliation of the disaggregated revenue with the reportable segments:
Reportable segments results of operations for the year ended December 31, 2018
Cellocator segment MRM segment Elimination Total
Revenue recognized:
At a point of time 22,137 10,733 (7,627 ) 25,243
Over a period of time 1,627 51,669 (753 ) 52,543
24,764 62,402 (8,380 ) 77,786
3. Contract
balances: The
following table provides information about contract assets and liabilities:
Balance at December 31, 2018 Balance at December 31, 2017
Contract assets $ 808 $ 973
Contract liabilities $ 267 $ 313 The
contract assets primarily relate to the Company’s rights to consideration for work completed but not billed at the reporting
date. The contract assets are transferred to the receivables when the rights become unconditional. The contract liabilities primarily relate to the advance consideration received from customers, for which transfer if control
occurs, and therefore revenue is recognized on completion.
l. Research
and development costs: Research
and development costs are charged to expenses as incurred.
m. Advertising
expenses: Advertising
expenses are charged to the statement of operations as incurred. Advertising expenses for the years ended December 31, 2018, 2017
and 2016 were $1,466, $1,459 and $1,337, respectively.
n. Income
taxes: The
Company accounts for income taxes in accordance with ASC 740, “Income Taxes”. This ASC prescribes the use of the liability
method whereby deferred tax assets and liability account balances are determined based on differences between financial reporting
and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the
differences are expected to reverse. The Company provides a valuation allowance, if necessary, to reduce deferred tax assets to
their estimated realizable value. The
Company adopted an amendment to ASC 740, “Income Taxes”. The amendment clarifies the accounting for uncertainties
in income taxes by establishing minimum standards for the recognition and measurement of tax positions taken or expected to be
taken in a tax return. Under the requirements of ASC 740, the Company must review all of its tax positions and make a determination
as to whether its position is more likely than not to be sustained upon examination by regulatory authorities. If a tax position
meets the more likely than not standard, then the related tax benefit is measured based on a cumulative probability analysis of
the amount that is more-likely-than-not to be realized upon ultimate settlement or disposition of the underlying issue. In
the years ended December 31, 2018, 2017 and 2016, the Company recorded tax expenses in connection to uncertainties in income taxes
of $144, $127 and $0 respectively.
o. Basic
and diluted net earnings per share: Basic
and diluted net earnings per share are computed based on the weighted average number of ordinary shares outstanding during
the year. Diluted net earnings (loss) per share further include the dilutive effect of stock options outstanding during the
year, in accordance with ASC 260, “Earnings Per Share”. Part of the Company’s outstanding stock options and
warrants has been excluded from the calculation of the diluted earnings per share because such securities are anti-dilutive.
The total weighted average number of the Company’s shares related to the outstanding options and warrants excluded from
the calculations of diluted earnings per share was 18,750, 20,125 and 202,000 for the years ended December 31, 2018, 2017 and
2016, respectively.
p. Accounting
for stock-based compensation: The
Company applies ASC 718, “Compensation: Stock Compensation”. In accordance with ASC 718, all grants of employee equity
based stock options are recognized in the financial statements based on their grant date fair values. The fair value of graded
vesting options,
as measured at the date of grant, is charged to expenses, based on the accelerated attribution method over the requisite service
period of each of the awards, net of estimated forfeitures. Effective
as of January 1, 2017, the Company adopted Accounting Standards Update 2016-09, “Compensation: Stock Compensation (Topic
718)” (“ASU2016-09”) on a modified, retrospective basis. Upon
adoption of ASU 2016-09, the Company elected to change its accounting policy to account for forfeitures as they occur. During
the years ended December 31, 2018, 2017 and 2016, the Company recognized stock-based compensation expenses related to employee
stock options in the amounts of $1,198, $380 and $320, respectively. According
to ASC 718, a change in any of the terms or conditions of the Company’s stock options is accounted for as a modification.
Therefore, if the terms of an award are modified, the Company calculates incremental compensation costs as the excess of the fair
value of the modified option over the fair value of the original option immediately before its terms are modified, measured based
on the share price and other pertinent factors existing at the modification date. For vested options, the Company recognizes any
incremental compensation cost immediately in the period the modification occurs, whereas for unvested options, the Company recognizes,
over the new requisite service period, any incremental compensation cost due to the modification and any remaining unrecognized
compensation cost for the original award over its term.
q. Data
related to options to purchase the Company shares:
1. The
fair value of the Company’s stock options granted to employees and directors for
the years ended December 31, 2018, 2017 and 2016 was estimated using the Black-Scholes
option-pricing model, with the following weighted average assumptions:
Year
ended December
31,
2018 2017 2016
Risk
free interest rate 0.78%-2.96% 0.86%-1.39% 0.8%-1.00
Dividend
yield 0 0% 0
Expected
volatility 40.16%-51.76 52.25%-57.73 55.81%-60.84
Expected
term (in years) 4.00-5.50 4.00-5.50 4.00-5.50
Forfeiture
rate 0 0% 2% The
Black-Scholes option pricing model requires a number of assumptions, of which the most significant are expected stock price
volatility and the expected option term. Expected volatility was calculated based upon actual historical stock price movements.
The expected option term represents the period that the Company’s stock options are expected to be outstanding and was determined
for plain vanilla options as the average of the vesting period and the contractual term, based on the simplified method permitted
by SAB 107 and extended by SAB 110, in cases that the Company encounters difficulties in making a refind estimate of expected
term, due to lack of historical information. The
Company adopted SAB 110 and continues to apply the simplified method until enough historical experience is available to provide
a reasonable estimate of the expected term for stock option grants. In a few limited cases, the Company did not use the simplified
method in measuring the fair value of modified awards, either when the options were deeply out of the money immediately before
the modification or when the Company accelerated the vesting and extended the exercise period after an employee’s resignation.
Since in both instances, the entire remaining contractual term of the options was relatively short, we assumed that the expected
life to be the entire remaining contractual term. The
risk-free interest rate is based on the yield from U.S. Treasury bill with accordance to the expected term of the options. The
Company has historically not paid dividends and has no foreseeable plans to pay dividends and therefore uses an expected dividend
yield of zero in the option pricing model. The Company is required to estimate forfeitures at the time of grant and revise those
estimates in subsequent periods if actual forfeitures differ from those estimates. The Company uses historical data to estimate
pre-vesting option forfeitures and record share-based compensation expense only for those awards that are expected to vest. On
October 2, 2017, the Company sold 2,519,544 ordinary shares of Pointer South Africa, representing approximately 12% of Pointer
South Africa’s issued and outstanding share capital as of the date thereof, to Ms. Preshnee Moodley, who serves on Pointer
South Africa’s Board of Directors, in exchange to its services.
r. Severance
pay: The
liability of the Company and its subsidiaries in Israel for severance pay is calculated pursuant to Israel’s Severance Pay
Law 5273-1963 (the “Severance Law”) based on the most recent salary of the employees multiplied by the number of years
of employment as of balance sheet date and are presented on an undiscounted basis (the “Shut Down Method”). Employees
are entitled to one month’s salary for each year of employment, or a portion thereof. The liability for the Company and
its subsidiaries in Israel is fully provided by monthly deposits with insurance policies and by accrual. The value of these policies
is recorded as an asset in the Company’s balance sheet. The
deposited funds may be withdrawn only upon the fulfillment of the obligation pursuant to the Severance Law or labor agreements.
The value of the deposited funds is based on the cash surrendered value of these policies, and includes profits or losses accumulated
to balance sheet date. Some
of the Company’s employees are subject to Section 14 of the Severance Law and the General Approval of the Labor Minister
dated June 30, 1998, issued in accordance to the said Section 14, mandating that upon termination of such employees’ employment,
all the amounts accrued in their insurance policies shall be released to them. The severance pay liabilities and deposits covered
by these plans are not reflected in the balance sheet as the severance pay risks have been irrevocably transferred to the severance
funds. Severance
pay expenses for the years ended December 31, 2018, 2017 and 2016 were $978, $1,037 and $728, respectively.
s. Concentrations
of credit risk: Financial
instruments that potentially subject the Company and its subsidiaries to concentrations of credit risk consist principally of
cash and cash equivalents, trade receivables, trade payables and derivatives. The
Company’s cash and cash equivalents are invested primarily in deposits with major banks worldwide, mainly in Israel. Generally,
these deposits may be redeemed upon demand and, therefore, bear low risk. Management believes that the financial institutions
that hold the Company’s investments have a high credit rating. The
Company’s trade receivables include amounts billed to clients located mainly in Israel, Latin America and Europe.
Management periodically evaluates the collectability of its trade receivables to reflect the amounts estimated to be
collectible. An allowance is determined in respect to specific debts whose collection, in management’s opinion, is
doubtful. In 2018, 2017 and 2016, the Company recorded expenses in respect to such debts in the amount of $539, $802 and
$511, respectively. As for major customers, see Note 17d. Changes
in the allowance for doubtful accounts during 2018 and 2017 are as follows:
Year ended December 31,
2018 2017
Balance at beginning of the year 1,127 1,281
Deductions during the year (57 ) (992 )
Charged to expenses 539 802
Foreign currency translation adjustment (145 ) 36
Balance at end of year 1,464 1,127
t. Fair
value measurements: The
following methods and assumptions were used by the Company and its subsidiaries in estimating fair value disclosures for financial
instruments: The
carrying amounts reported in the balance sheet for cash and cash equivalents, trade receivables, other accounts receivable, short-term
bank credit, trade payables and other accounts payable approximate their fair values due to the short-term maturities of such
instruments. Amounts
recorded for long-term loans approximate fair values. The fair value was estimated using discounted cash flow analysis, based
on the Company’s incremental borrowing rates for similar type of borrowing arrangements. The
Company accounts for certain assets and liabilities at fair value under ASC 820, “Fair Value Measurements and Disclosures”.
Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in
an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined
based on assumptions that market participants would use in pricing an asset or a liability. As a basis for considering such assumptions,
ASC 820 establishes a three tier value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring
fair value:
Level 1 - Observable
inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets;
Level 2 - Significant
other observable inputs based on market data obtained from sources independent of the reporting entity;
Level 3 - Unobservable
inputs which are supported by little or no market activity (for example cash flow modeling inputs based on assumptions). The
fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs
when measuring fair value. The Company categorized each of its fair value measurements in one of these three levels of hierarchy. Assets
and Liabilities that are measured at Fair Value on a Nonrecurring Basis subsequent to their initial recognition. During
2018, 2017 and 2016 there were no impairment losses regarding goodwill.
u. Discontinued
operations Under
ASC 205, “Presentation of Financial Statements - Discontinued Operation” when a component of an entity, as
defined in ASC 205, has been disposed of or is classified as held for sale, the results of its operations, including the gain
or loss on its disposal are classified as discontinued operations and the assets and liabilities of such component are
classified as assets and liabilities attributed to discontinued operations; that is, provided that the operations, assets and
liabilities and cash flows of the component have been eliminated from the Company’s consolidated operations and the
Company will no longer have any significant continuing involvement in the operations of the component.
v. New
accounting pronouncements not yet effective:
1. In
February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2016-02 (Topic 842)
“Leases” Topic 842 supersedes the lease requirements in Accounting Standards Codification (ASC) Topic 840,
“Leases”. Under Topic 842, lessees are required to recognize assets and liabilities on the balance sheet for
leases and provide enhanced disclosures. ASU No. 2016-02 is effective for interim and annual reporting periods beginning
after December 15, 2018, early adoption is permitted. In July 2018, the FASB issued amendments in ASU 2018-11, which provide
another transition method in addition to the existing transition method, by allowing entities to initially apply the new
leases standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings
in the period of adoption, and to not apply the new guidance in the comparative periods they present in the financial
statements. The Company has elected to apply the standard retrospectively at the beginning of the period of adoption through
a cumulative-effect adjustment. The new standard requires lessors to account for leases using an approach that is
substantially equivalent to existing guidance for sales-type leases, direct financing leases and operating leases. ASC 842
supersedes the previous leases standard, ASC 840, “Leases”.
The Company also expects to elect certain relief options offered in ASU 2016-02 including certain available transitional
practical expedients. The Company is in the process of implementing changes to |
