Quarterly report pursuant to Section 13 or 15(d)

LEASES

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LEASES
6 Months Ended
Jun. 30, 2019
Leases [Abstract]  
LEASES
6 LEASES

 

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.

  

Discount Rate

 

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:

 

    June 30,
2019
 
       
Non-current assets        
Right of use assets, operating leases, net of amortization   $ 17,154  

 

Total Lease Cost

 

Individual components of the total lease cost incurred by the Company is as follows:

 

    Three months
ended
June 30,
2019
    Six months
ended
June 30,
2019
 
                 
Operating lease expense   $ 8,849     $ 17,662  

 

Maturity of Operating Leases

 

The amount of future minimum lease payments under operating leases are as follows:

 

    Amount  
Undiscounted minimum future lease payments      
Remainder of 2019   $ 17,690  
Deferred rental on straight line amortization     68  
Imputed interest     (537 )
         
Total operating lease liability   $ 17,222  
         
Disclosed as:        
Current portion   $ 17,222  
Non-current portion      
    $ 17,222