|6 Months Ended|
Jun. 30, 2019
Adoption of ASC Topic 842, "Leases"
On January 1, 2019, the Company adopted Topic 842 using the prospective transition method applied to leases that were in place as of January 1, 2019. Results for reporting periods beginning after January 1, 2019 are presented under Topic 842, while prior period amounts are not adjusted and continue to be reported in accordance with the Company's historic accounting under Topic 840. The Company's lease consists of an operating lease that relate to a real estate agreement entered into in December 2016.
Practical Expedients and Elections
The Company elected the package of practical expedients permitted under the transition guidance, which allowed the Company to carryforward its historical lease classification, the Company's assessment on whether a contract is or contains a lease, and its initial direct costs for any leases that exist prior to adoption of the new standard.
To determine the present value of minimum future lease payments for operating leases at January 1, 2019, the Company was required to estimate a rate of interest that it would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment (the "incremental borrowing rate" or "IBR").
The Company determined the appropriate IBR by identifying a reference rate and making adjustments that take into consideration financing options and certain lease-specific circumstances. For the reference rate, the Company used the Mexican Mortgage interest rate at the time of entering into the agreement and compared that rate to the Company's weighted average cost of funding at the time of entering into the operating lease. The Company determined that 10.65% was an appropriate incremental borrowing rate to apply to its real estate operating lease.
Right of use assets
Right of use assets are included in the unaudited condensed consolidated Balance Sheet are as follows:
Total Lease Cost
Individual components of the total lease cost incurred by the Company is as follows:
Maturity of Operating Leases
The amount of future minimum lease payments under operating leases are as follows:
The entire disclosure for lessee entity's leasing arrangements including, but not limited to, all of the following: (a.) The basis on which contingent rental payments are determined, (b.) The existence and terms of renewal or purchase options and escalation clauses, (c.) Restrictions imposed by lease agreements, such as those concerning dividends, additional debt, and further leasing.
Reference 1: http://fasb.org/us-gaap/role/ref/otherTransitionRef