Annual report pursuant to Section 13 and 15(d)

Summary of Significant Accounting Policies and Basis of Presentation (Tables)

v3.19.3.a.u2
Summary of Significant Accounting Policies and Basis of Presentation (Tables)
12 Months Ended
Dec. 31, 2019
Accounting Policies [Abstract]  
Schedule of Recent Accounting Standards
Recent Accounting Standards

Standards Adopted
Standard/Description
Effective Date and Adoption Considerations
Effect on Financial Statements or Other significant Matters
ASU 2016-02, Leases (Topic 842). This standard amends existing lease accounting standards for both lessees and lessors.

Lessees must classify most leases as either finance or operating leases. For lease contracts, or contracts with an embedded lease, with a duration of more than one year in which we are the lessee, the present value of future lease payments are recognized on our consolidated balance sheets as a right-of-use asset and a corresponding lease liability.

Lessors

Lease contracts currently classified as operating leases are accounted for similarly to prior guidance. However, lessors are required to account for each lease and non-lease component, such as common area maintenance or tenant service revenues, of a contract separately. In July 2018, the FASB issued 2018-11, Leases (Topic 842) - Targeted Improvements (“ASU 2018-11”), which provides lessors optional transition relief from implementing this aspect of ASU 2016-02 if the following criteria are met: (1) both components have the same timing and pattern of revenue and (2) if accounted for separately, both components would be classified as an operating lease.

Also, under ASU 2016-02, only incremental costs or initial direct costs of executing a lease contract qualify for capitalization, while prior accounting standards allowed for the capitalization of indirect leasing costs.
We adopted the new standard as of January 1, 2019.
We adopted ASU 2016-02 as of January 1, 2019 using the modified retrospective approach and by applying the transitional practical expedients noted below. Under the modified retrospective approach, we recognized a cumulative effect adjustment of $0.9 million to distributions in excess of net income as of January 1, 2019 (see note 4 for further discussion of the impact of adoption on our consolidated financial statements). We did not elect the hindsight expedient, which would have allowed us to reevaluate lease terms in calculating lease liabilities as part of adoption.

We elected not to bifurcate lease contracts into lease and non-lease components, since: (1) the timing and pattern of revenue is not materially different and the non-lease components are not the primary component of the lease, and (2) the lease component, if accounted for separately, would be classified as an operating lease. Accordingly, both lease and non-lease components are presented in “Real estate rental revenue” in our consolidated financial statements. The adoption of ASU 2016-02 did not result in a material change to our recognition of real estate rental revenue.
           
Under ASU 2018-11, the FASB offered optional transition relief, if elected as a package, and applied consistently by an entity to all of its leases. Accordingly, upon adoption we elected, as a package, the practical expedients for all leases as follows: (1) we did not reassess whether any expired or existing contracts are or contain leases, (2) we did not reassess the lease classification for any expired or existing leases, and (3) we did not reassess initial direct costs for any existing leases under ASC 840.


New Accounting Standards Issued But Not Yet Effective
Standard/Description
Effective Date and Adoption Considerations
Effect on Financial Statements or Other significant Matters
ASU 2016-13, Measurement of Credit Losses on Financial Instruments. This standard requires financial assets measured at an amortized cost basis, including trade receivables, to be presented at the net amount expected to be collected. This standard does not apply to receivables arising from operating leases accounted for in accordance with Topic 842.
We adopted the new standard as of January 1, 2020.
The adoption of the new standard did not have a material impact on our consolidated financial statements.
ASU 2018-15, Intangibles - Goodwill and Other - Internal-Use Software. This standard requires a customer in a cloud computing arrangement that is a service contract to follow the internal-use software guidance to determine which implementation costs to capitalize as assets.
We adopted the new standard as of January 1, 2020.
The adoption of the new standard did not have a material impact on our consolidated financial statements.



Schedule of Interest and Interest Capitalized
Interest expense from continuing operations and interest capitalized to real estate assets related to development and major renovation activities for the three years ended December 31, 2019 were as follows (in thousands):
 
Year Ended December 31,
 
2019
 
2018
 
2017
Total interest incurred
$
56,948

 
$
52,592

 
$
47,757

Capitalized interest
(3,214
)
 
(2,091
)
 
(964
)
Interest expense, net of capitalized interest
$
53,734

 
$
50,501

 
$
46,793