SAB 74 DISCLOSURE ANALYSIS FOR LEASE ACCOUNTING...6 SAB 74 DISCLOSURE ANALYSIS FOR LEASE ACCOUNTING (ASC 842) INCOME STATEMENT Under ASC 842, there is expected to be little impact

SAB 74 DISCLOSURE ANALYSIS FOR LEASE ACCOUNTINGTop 100 US Public CompaniesRanked By Leasing Obligations

ASC 842 LEASE ACCOUNTING STANDARDS

Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 SAB 74 Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 Key Findings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4

Detailed Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Balance Sheet Impacts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Income Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Cash Flow Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Early Adoption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Transition Method . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Practical Expedients . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Implementation Progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Project Team . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Software Evaluation And Selection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Policies & Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Lease Accounting Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

SAB 74 Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Additional References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Top 100 Us Companies Ranked By Leasing Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

© 2010-2018 LeaseAccelerator, Inc . All rights reserved . This document is the copyrighted work of LeaseAccelerator, Inc .

TABLE OF CONTENTS

TOP 100 US PUBLIC COMPANIES RANKED BY LEASING OBLIGATIONS 3

EXECUTIVE SUMMARY

SAB 74 DISCLOSURESAs the implementation deadlines for ASC 842 grow closer, public filers will be required to include a discussion of the potential future impacts to their financial statements from the new lease accounting standards . SEC Staff Accounting Bulletin Topic 11 .M (SAB 74) requires SEC filers to disclose the effects of accounting standards that have been announced but not yet adopted . The guidance from the bulletin encourages registrants to consider disclosing:

• A brief description of the new standard, the date that adoption is required, and the date that the registrant plans to adopt, if earlier.

• A discussion of the methods of adoption allowed by the standard and the method expected to be utilized by the registrant, if determined.

• A discussion of the impact that adoption of the standard is expected to have on the financial statements of the registrant, unless not known or reasonably estimable. In that case, a statement to that effect may be made.

Disclosure of the potential impact of other significant matters that the registrant believes might result from the adoption of the standard (such as technical violations of debt covenant agreements, planned or intended changes in business practices, etc.) is encouraged.

In an effort to assist the industry with accelerated adoption of the new lease accounting standards, LeaseAccelerator compiled 100 examples of SAB 74 disclosures from SEC registrants over the past 15 months . We focused on the top 100 US public companies as ranked by the total leasing obligations tabularized in the footnotes of annual filings . The source of the data was 10-Q and 10-K filings submitted between January 1, 2017 and March 31, 2018 .

4 SAB 74 DISCLOSURE ANALYSIS FOR LEASE ACCOUNTING (ASC 842)

KEY FINDINGS

Early Adoption

With the revenue recognition standard (ASC 606) a number of companies including Alphabet, Microsoft, General Dynamics, Ford, and Raytheon were early adopters . Only one of the 100 companies analyzed, Microsoft, adopted the standards early . No other companies stated their intention to early adopt .

Transition Approach

At the time these disclosures were analyzed, the only available transition approach for lessees was the modified retrospective approach, so companies either said they would elect that approach or did not comment on the approach . However, a new transition approach was proposed in November 2017 and approved in March 2018 . We expect companies to state their selection of transition method in their next disclosures .

Material Impacts to Balance Sheets

As expected, the new right-of-use assets and liabilities being added to balance sheets is expected to be the most material impact to financial statements . 76% of the Top 100 reported that there will be a material impact resulting from the transfer of most right-of-use assets and liabilities on to corporate balance sheets . Another 20% are still analyzing the potential impacts of the new standard .

Quantitative Impacts

Companies are still in the process of estimating the definitive size of their leasing portfolios under ASC 842 . Only 8% provided quantitative estimates of the material impact to the balance sheet, which ranged from $1 .2 billion to $13 billion .

Limited Impacts to Income Statement and Cash Flow Statements

28% of the Top 100 reported that there would not be a material impact to their income statement from ASC 842 . Another 66% are still analyzing the impacts . 19% of the Top 100 reported there would be no impact to their cash flow statements and 64% are still analyzing the impact .

Implementation Progress

The level of information disclosed about the progress of implementation efforts is still relatively limited by most filers . Of the companies we analyzed, only 18% stated they are evaluating or implementing new policies and controls to support the standard . Similarly, amongst the filers we reviewed, only 18% stated they are evaluating or have selected a lease accounting software application . Only 13% indicated that a project team had been formed to address the new standard .


DETAILED ANALYSIS

BALANCE SHEET IMPACTS

Balance Sheet Impacts will be Material

As expected, the most material impact to financial statements cited by most filers is the new right-of-use assets and liabilities being added to the balance sheets . 76% of the Top 100 reported that there will be a material impact resulting from the transfer of most right-of-use assets and lease liabilities onto corporate balance sheets . Another 20% are still analyzing the potential impacts of the new standard .

Goldman Sachs and Bank of America were the only two companies in our sample set that indicated that the impact would not be material . However, other financial institutions such as CIT, JPMorgan & Chase ($10B), and Citigroup ($5B) did indicate that the balance sheet impact would be material, so there does not appear to be an industry-wide trend for commercial banks .

Companies are still in the process of estimating the definitive size of their leasing portfolios under ASC 842 . Only 8% provided quantitative estimates of the material impact to the balance sheet, which ranged from $1 .2 billion to $13 billion .

EXAMPLES OF DISCLOSURE COMMENTS RELATED TO BALANCE SHEETS

SEC REGISTRANT EXCERPT OF DISCLOSUREApple While the Company is currently evaluating the timing and impact of adopting ASU 2016-

02, currently the Company anticipates recording lease assets and liabilities in excess of $9 .6 billion on its Condensed Consolidated Balance Sheets, with no material impact to its Condensed Consolidated Statements of Operations . However, the ultimate impact of adopting ASU 2016-02 will depend on the Company’s lease portfolio as of the adoption date .

Walt Disney As of September 30, 2017, the Company had an estimated $3 .3 billion in undiscounted future minimum lease commitments .

Southern Southern Company has substantially completed a detailed inventory and analysis of its leases . In terms of rental charges and duration of contracts, the most significant leases relate to cellular towers and PPAs where certain of Southern Company's subsidiaries are the lessee and to land and outdoor lighting where certain of Southern Company's subsidiaries are the lessor . The traditional electric operating companies are currently analyzing pole attachment agreements, and a lease determination has not been made at this time . While Southern Company has not yet determined the ultimate impact, adoption of ASU 2016-02 is expected to have a significant impact on Southern Company's balance sheet .

Charter Communications

The Company expects its leases designated as operating leases in Note 20 will be reported on the consolidated balance sheets upon adoption . The Company is currently evaluating the impact to its consolidated financial statements as it relates to other embedded lease arrangements of the business .

BALANCE SHEET IMPACTS

MaterialImpact

73%

StillEvaluating

19%

Not Material2%

Not Stated2%


INCOME STATEMENTUnder ASC 842, there is expected to be little impact to the income statement . Operating leases will still be presented on the same line-item on the income statement, the same as under the current standards, ASC 840 . For finance leases, which replace capital leases under ASC 840, the interest and amortization will still be presented separately . As a result, we expect few of the remaining 66% still evaluating and the 6% that did not comment on the income statement impacts to find a material impact to the income statement .

CASH FLOW STATEMENTThe new standard requires leases to be reported as finance activities on the cash flow statement rather than as operating activities, which was required under ASC 840 . However, this change is not expected to change net cash flows because the decrease in operating activities should result in an equal increase in finance activities . Therefore, we do not expect that many of the 64% of companies still evaluating or 18% that did not comment on cash flow statements to find that there is a material impact to their net cash flow statements .

EARLY ADOPTIONWith the revenue recognition standard (ASC 606) a number of companies including Alphabet, Microsoft, General Dynamics, Ford, and Raytheon were early adopters . The lease accounting standard has very few early adopters thus far . Only one of the 100 companies analyzed, Microsoft, has early adopted .

TRANSITION METHODWith other recent accounting changes, such as revenue recognition, much of the focus for SAB 74 disclosures was on the transition approach being adopted . However, until recently, only a modified retrospective approach was allowed under ASC 842 . The modified retrospective method would have required companies to not only transition at the date of adoption, but also provide reports of their lease data under ASC 842 from the earliest comparative period to the effective date . For example, companies who will adopt on January 1, 2019 would have been required to report their lease data from January 1, 2017 to January 1, 2019 under both ASC 840 and ASC 842 .

However, on March 7, 2018 FASB voted to offer a simpler transition method that eliminates the need for comparative reporting . We expect that many companies will choose this approach as it reduces the implementation burden for corporate accounting organizations . Several companies, including Walt Disney and Advance Auto Parts, referred to the proposal in their disclosures, though did not state whether they would elect the option if approved . We anticipate that now that the proposal has been approved, many SEC files will state which transition approach they will use in their next disclosures .


PRACTICAL EXPEDIENTSAmongst our sample set, only six companies indicated an intention to elect the practical expedients available under ASC 842 . Another five companies indicated that they were investigating the practical expedients . However, most did not provide any commentary .

ADOPTING PRACTICAL EXPEDIENTS

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EXAMPLES OF DISCLOSURE COMMENTS RELATED TO PRACTICAL EXPEDIENTS

SEC REGISTRANT EXCERPT OF DISCLOSURETarget We will take advantage of the transition package of practical expedients permitted within

the new standard, which among other things, allows us to carryforward the historical lease classification . In addition, we are electing the hindsight practical expedient to determine the reasonably certain lease term for existing leases . While lease classification will remain unchanged, hindsight will result in generally shorter accounting lease terms and useful lives of the corresponding leasehold improvements . We will make an accounting policy election that will keep leases with an initial term of 12 months or less off of the balance sheet and will result in recognizing those lease payments in the Consolidated Statements of Operations on a straight-line basis over the lease term .

Duke Energy Upon adoption, Duke Energy expects to elect the practical expedients, which would require no reassessment of whether existing contracts are or contain leases as well as no reassessment of lease classification for existing leases . Additionally, we expect to adopt the optional transition practical expedient allowing the entity not to reassess the accounting for land easements that currently exist at the adoption of the lease standard on January 1, 2019 .

Equinix The Company plans to elect the practical expedient that it will not reassess whether any expired or existing contracts are or contain leases, the lease classification for any expired or existing leases or initial direct costs for any existing leases . The Company does not plan to elect the practical expedient to use hindsight in determining the lease term and in assessing impairment of right-of-use assets .


IMPLEMENTATION PROGRESSThe level of information disclosed about the progress of implementation efforts is still relatively limited by most filers . A significant work effort will be required to comply with the new lease accounting standards by most companies with portfolios in excess of $100M . Changes will be required to accounting systems, business processes, and financial controls . A cross-functional project team will need to be formed consisting of stakeholders that use the leased assets such as Real Estate, IT, and Operations as well as corporate functions that administer the leases such as Procurement, Corporate Treasury, and Accounts Payable .

The project team will need to devise a strategy for identifying all of the leasing contracts across the enterprise including categories such as real estate, IT, fleet, material handling, and other industry-specific assets . Once the population of leases is identified, the contracts for each will need to be identified in order to abstract the data necessary for accounting . Most companies will implement a new software application designed to perform the specialized lease accounting required for ASC 842 . Once selected, the software application will need to be tested for functionality, integrated with other financial systems, and rolled out with training to end users .

EXAMPLES OF DISCLOSURE COMMENTS RELATED TO IMPLEMENTATION

SEC REGISTRANT EXCERPT OF DISCLOSUREAutoZone The Company established a cross-functional implementation team to evaluate and identify the

impact of ASU 2016-02 on the Company’s financial position, results of operations and cash flows . Based on the preliminary work completed, the Company is considering the possible implications of the new standard, including the discount rate to be used in valuing new and existing leases, the treatment of existing favorable and unfavorable lease agreements acquired in connection with previous acquisitions, procedural and operational changes that may be necessary to comply with the provisions of the guidance and all applicable financial statement disclosures required by the new guidance . The Company is also in the process of identifying changes to its business processes, systems and controls to support adoption of the new standard .

O’Reilly Automotive

We have established a task force, composed of multiple functional groups inside of the Company, which is currently in the process of evaluating critical components of this new guidance and the potential impact of the guidance on our financial position, results of operations and cash flows . Based on the preliminary work completed, we are considering the potential implications of the new standard on determining the discount rate to be used in valuing new and existing leases, the treatment of existing favorable and unfavorable lease agreements acquired in connection with previous acquisitions, procedural and operational changes that may be necessary to comply with the provisions of the guidance and all applicable financial statement disclosures required by the guidance, all of which are areas that could potentially be impacted by adoption of the guidance .

Kroger This evaluation process includes reviewing all forms of leases, performing a completeness assessment over the lease population, analyzing the practical expedients and assessing opportunities to make certain changes to the Company’s lease accounting information technology system in order to determine the best implementation strategy .

Dollar General

Specifically, the Company has formed a project team that is developing test plans for its lease accounting system, identifying and evaluating existing contracts for embedded leases, and discussing implementation plans with its lease accounting software vendor, among other activities .


PROJECT TEAMAmongst our sample set, only 13% indicated that a project team had been formed to address the new standard . Leadership of the lease accounting project typically sits within the finance or accounting team . However, unlike many other accounting change projects, there is a need for a cross-functional enterprise team to address the leasing standards .

A significant amount of business process transformation and data collection will be required from both the users of leased assets and the corporate functions that support the leasing program . The users of leased assets span almost every function in the business, including Corporate IT, Real Estate, Fleet, and Operations . The organizations that touch leases throughout their lifecycle include Legal and Procurement, Treasury and Tax, and Accounts Payable and Receivables .

PROJECT TEAM

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EXAMPLES OF DISCLOSURE COMMENTS RELATED TO PROJECT TEAMS

SEC REGISTRANT EXCERPT OF DISCLOSURENew York Community Bancorp

The company has assembled a project management team, formed a working group comprised of associates from different disciplines, such as Vendor Risk Management, Real Estate, and Technology, including working with associates engaged in the procurement of goods and services used in the Company’s operations . We have made substantial progress in reviewing contractual arrangements for embedded leases in an effort to identify the Company’s full lease population and is presently evaluating all of its leases, as well as contracts that may contain embedded leases, for compliance with the new lease accounting rules .

DaVita The Company has assembled an internal lease task force that meets regularly to discuss and evaluate the overall impact of this guidance on its consolidated financial statements and related disclosures, as well as the expected timing of adoption .

Telephone & Data Systems

At Cellco, a cross-functional coordinated implementation team has been established to implement the standard update related to leases . The Partnership is in the process of determining the scope of arrangements that will be subject to this standard as well as assessing the impact to its systems, processes and internal controls to meet the standard update’s reporting and disclosure requirements .


SOFTWARE EVALUATION AND SELECTIONSimilarly, amongst the filers we reviewed only 18% are evaluating or have selected a lease accounting software application . Historically, most companies have performed lease accounting and financial reporting under the current standards using a collection of spreadsheets . Although ASC 842 does not require the use of any specific software application, we believe that most companies with leasing portfolios in excess of $50M will elect to purchase new technology .

Since the introduction of ASC 842, a number of commercial, off-the-shelf software packages have been released to the market specifically designed to support the new lease accounting requirements . These applications feature dedicated leasing subledgers that track all the necessary journal entries, accounting engines to perform multiple set-of-book reporting, and algorithms to automatically classify contracts as operating or finance leases .

SOFTWARE EVALUATION AND SELECTION

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EXAMPLES OF DISCLOSURE COMMENTS RELATED TO SOFTWARE IMPLEMENTATION

SEC REGISTRANT EXCERPT OF DISCLOSUREAdvance Auto Parts

The Company has selected its leasing software solution and is in the process of identifying changes to its business processes, systems and controls to support adoption of the new standard in 2019 .

Ascena Retail Group

The Company is also in the process of implementing a new lease administration system and identifying changes to its business processes and controls to support adoption of the new standard in Fiscal 2020 .

CenturyLink We have completed our initial assessment of our business and system requirements and we are currently developing and implementing a new lease accounting and administrative system to comply with the requirements of ASU 2016-02 .

Valero Energy We are enhancing our contracting and lease evaluation systems and related processes, and we are developing a new lease accounting system to capture our leases and support the required disclosures . During 2018, we will continue to monitor the adoption process to ensure compliance with accounting and disclosure requirements . We also continue the integration of our lease accounting system with our general ledger, and we will make modifications to the related procurement and payment processes .


POLICIES AND CONTROLSOf the companies we analyzed, only 18% are evaluating or implementing new policies and controls to support the standard . With leases representing a significant set of assets and liabilities on the balance sheet, many companies may adopt additional best practices to ensure that leasing portfolios are being optimized .

Accounting organizations will need to ensure that they maintain complete, accurate, and up-to-date records of all leases across the business not only at commencement of the contract, but also throughout the term of the agreement . New business processes will need to be put in place to ensure all the necessary data required for accounting is collected at the start of the lease . Controls will be required to ensure that any contractual updates or business plan changes resulting in a modification or reassessment are relayed to the accounting organization .

CHANGES TO POLICIES AND CONTROLS

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Evaluating Changes Implementing Changes No Comments

EXAMPLES OF DISCLOSURE COMMENTS RELATED TO POLICIES AND CONTROLSSEC REGISTRANT EXCERPT OF DISCLOSUREStarbucks In preparation for adoption of the guidance, we are in the process of implementing controls

and key system changes to enable the preparation of financial information . IBM A cross-functional implementation team has been established which is evaluating the lease

portfolio, system, process and policy change requirements .Marathon Petroleum

We are currently evaluating the impact of this standard on our financial statements and disclosures, internal controls and accounting policies . This evaluation process includes reviewing all forms of leases, performing a completeness assessment over the lease population and analyzing the practical expedients in order to determine the best path of implementing changes to existing processes and controls along with necessary system implementations . We completed our system implementation evaluation during the fourth quarter of 2017, and concluded we will implement a third-party supported lease accounting information system solution to account for our leases . We have begun a project to implement this system and are currently collecting the necessary information on our lease population, establishing a new lease accounting process and designing new internal controls for the new process . We do not plan to early adopt the standard . We believe the impact will be material on the consolidated financial statements as all leases will be recognized as a right of use asset and lease obligation . Based on results of our evaluation process to date, we also believe the impact on our existing processes, controls and information systems may be material .


LEASE ACCOUNTING CHANGE

EXAMPLES OF STANDARD DISCLOSURE COMMENTS ON ASC 842

SEC REGISTRANT EXCERPT OF DISCLOSURENRG Energy The Company will adopt the standard effective January 1, 2019, and expects to elect

certain of the practical expedients permitted, including the expedient that permits the Company to retain its existing lease assessment and classification . The Company is currently working through an adoption plan which includes the evaluation of lease contracts compared to the new standard . While the Company is currently evaluating the impact the new guidance will have on its financial position and results of operations, the Company expects to recognize lease liabilities and right of use assets . The extent of the increase to assets and liabilities associated with these amounts remains to be determined pending the Company’s review of its existing lease contracts and service contracts which may contain embedded leases . While this review is still in process, NRG believes the adoption of Topic 842 will have a material impact on its financial statements . The Company is continuing to monitor potential changes to Topic 842 that have been proposed by the FASB and will assess any necessary changes to the implementation process as the guidance is updated .

CenturyLink We have completed our initial assessment of our business and system requirements and we are currently developing and implementing a new lease accounting and administrative system to comply with the requirements of ASU 2016-02 . We plan to adopt the standard when it becomes effective for us beginning January 1, 2019 and the adoption of the standard will result in the recognition of right of use assets and lease liabilities that have not previously been recorded . Although we believe it is premature as of the date of this report to provide any estimate of the impact of adopting ASU 2016-02, we do expect that it will have a material impact on our consolidated financial statements . Additionally, upon the January 1, 2019, implementation of ASU 2016-02, accounting for the failed-sale-leaseback transaction described in Note 3—Sale of Data Centers and Colocation Business will no longer be applicable based on our facts and circumstances, and the real estate assets and corresponding financing obligation will be derecognized from our consolidated balance sheet .

ConocoPhillips We plan to adopt ASU No . 2016-02, as amended, effective January 1, 2019, and continue to evaluate the ASU to determine the impact of adoption on our consolidated financial statements and disclosures, accounting policies and systems, business processes, and internal controls . We also continue to monitor proposals issued by the FASB to clarify the ASU and certain industry implementation issues . While our evaluation of ASU No . 2016-02 and related implementation activities are ongoing, we expect the adoption of the ASU to have a material impact on our consolidated financial statements and disclosures . For additional information, see Note 24—New Accounting Standards, in the Notes to Consolidated Financial Statements .


EXCERPT FROM TOPIC 11: MISCELLANEOUS DISCLOSUREhttps://www .sec .gov/interps/account/sabcodet11 .htm#M

M . Disclosure Of The Impact That Recently Issued Accounting Standards Will Have On The Financial Statements Of The Registrant When Adopted In A Future Period

Facts: An accounting standard has been issued5 that does not require adoption until some future date . A registrant is required to include financial statements in filings with the Commission after the issuance of the standard but before it is adopted by the registrant .

Question 2: Does the staff have a view on the types of disclosure that would be meaningful and appropriate when a new accounting standard has been issued but not yet adopted by the registrant?

Interpretive Response: The staff believes that the registrant should evaluate each new accounting standard to determine the appropriate disclosure and recognizes that the level of information available to the registrant will differ with respect to various standards and from one registrant to another . The objectives of the disclosure should be to (1) notify the reader of the disclosure documents that a standard has been issued which the registrant will be required to adopt in the future and (2) assist the reader in assessing the significance of the impact that the standard will have on the financial statements of the registrant when adopted . The staff understands that the registrant will only be able to disclose information that is known .

The following disclosures should generally be considered by the registrant:

• A brief description of the new standard, the date that adoption is required and the date that the registrant plans to adopt, if earlier .

• A discussion of the methods of adoption allowed by the standard and the method expected to be utilized by the registrant, if determined .

• A discussion of the impact that adoption of the standard is expected to have on the financial statements of the registrant, unless not known or reasonably estimable . In that case, a statement to that effect may be made .

Disclosure of the potential impact of other significant matters that the registrant believes might result from the adoption of the standard (such as technical violations of debt covenant agreements, planned or intended changes in business practices, etc .) is encouraged .

SAB 74 DISCLOSURES


SAB 74 DISCLOSURES - GENERALMFA, “Reminder: SEC SAB 74 Disclosures and Controls for New Accounting Standards,” http://www .mfa cpa .com/en/Our%20Insights/2017/07/Reminder%20SEC%20SAB%2074%20Disclosures%20and%20Controls%20for%20New%20Accounting%20Standards .aspx

PwC, “Recently issued accounting standards Governance considerations,” https://www .pwc .com/us/en/cfodirect/assets/pdf/in-the-loop/sab-74-new-accounting-standards .pdf

SAB 74 DISCLOSURES FOR LEASE ACCOUNTINGKPMG, “ASC 842, Leases – Transition Disclosures,” https://frv .kpmg .us/reference-library/2017/02/asc-842-leases-transition-disclosures .html

RSM, “SAB 74 disclosures for new standard on lease accounting,” http://rsmus .com/our-insights/newsletters/financial-reporting-insights/sab-74-disclosures-for-new-standard-on-lease-accounting .html

FASB – Updated Guidance on ASC 842FASB, “Proposed Accounting Standards Update,” http://www .fasb .org/jsp/FASB/Document_C/DocumentPage?cid=1176169751791&acceptedDisclaimer=true

Thomson Reuters, “Easier Method for Completing Transition to Lease Standard Moves Forward,” https://tax .thomsonreuters .com/media-resources/news-media-resources/checkpoint-news/daily-newsstand/easier-method-for-completing-transition-to-lease-standard-moves-forward/

ADDITIONAL REFERENCES


RANK COMPANY SELECTED DISCLOSURE EXCERPTS1 Walgreens

Boots AllianceThe Company will adopt this ASU on September 1, 2019 (fiscal 2020) . The Company has begun evaluating and planning for adoption and implementation of this ASU, including selecting a new lease accounting system, evaluating practical expedient and accounting policy elections, and assessing the overall financial statement impact . This ASU will have a material impact on the Company’s financial position . The impact on the Company’s results of operations is being evaluated . The impact of this ASU is non-cash in nature and will not affect the Company’s cash flows .

2 AT&T In February 2016, the FASB issued ASU No . 2016-02, “Leases (Topic 842),” as modified (ASU 2016-02), which replaces existing leasing rules with a comprehensive lease measurement and recognition standard and expanded disclosure requirements . ASU 2016-02 will require lessees to recognize most leases on their balance sheets as liabilities, with corresponding “right-of-use” assets and is effective for annual reporting periods beginning after December 15, 2018, subject to early adoption . For income statement recognition purposes, leases will be classified as either a finance or an operating lease without relying upon the bright-line tests under current GAAP . Upon initial evaluation, we believe the key change upon adoption will be the balance sheet recognition . At adoption, we will recognize a right-to-use asset and corresponding lease liability on our consolidated balance sheets . The income statement recognition of lease expense appears similar to our current methodology . We are continuing to evaluate the magnitude and other potential impacts to our financial statements .

3 United Continental Holdings

The guidance requires lessees to recognize a right-of-use asset and a lease liability for all leases (with the exception of short-term leases) at the commencement date and recognize expenses on their income statements similar to the current Topic 840, Leases. It is effective for fiscal years and interim periods beginning after December 15, 2018, and early adoption is permitted . Lessees and lessors are required to adopt Topic 842 using a modified retrospective approach for all leases existing at or commencing after the date of initial application with an option to use certain practical expedients . We have not completed our evaluation of the impact of the new standard, but believe that it will have a significant impact on our consolidated balance sheets . The new standard is not expected to have a material impact on the Company’s results of operations or cash flows . The primary effect of adopting the new standard will be to record assets and obligations for its operating leases .

4 Amazon .com In February 2016, the FASB issued an ASU amending the accounting for leases . The new guidance requires the recognition of lease assets and liabilities for operating leases with terms of more than 12 months, in addition to those currently recorded, on our consolidated balance sheets . Presentation of leases within the consolidated statements of operations and consolidated statements of cash flows will be generally consistent with the current lease accounting guidance . The ASU is effective for reporting periods beginning after December 15, 2018, with early adoption permitted . We plan to adopt this ASU beginning in Q1 2019 . We are currently evaluating the impact and expect the ASU will have a material impact on our consolidated financial statements, primarily to the consolidated balance sheets and related disclosures .

TOP 100 US COMPANIES RANKED BY LEASING OBLIGATIONS


RANK COMPANY SELECTED DISCLOSURE EXCERPTS

5 New York Community Bancorp

ASU No . 2016-02 will require entities that lease assets to recognize as assets and liabilities on the balance sheet the respective rights and obligations created by those leases . ASU No . 2016-02 also will require disclosures that include qualitative and quantitative requirements, providing additional information about the amounts recorded in the financial statements . The amendments in this update are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with early application permitted . In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach . The modified retrospective approach includes a number of optional practical expedients that entities we may elect to apply . These practical expedients relate to the identification and classification of leases that commenced before the effective date, initial direct costs for leases that commenced before the effective date, and the ability to use hindsight in evaluating lessee options to extend or terminate a lease or to purchase the underlying asset . An entity that elects to apply the practical expedients will, in effect, continue to account for leases that commence before the effective date in accordance with previous GAAP unless the lease is modified, except that lessees are required to recognize a right-of-use asset and a lease liability for all operating leases at each reporting date based on the present value of the remaining minimum rental payments that were tracked and disclosed under previous GAAP . The transition guidance in Topic 842 also provides specific guidance for sale and leaseback transactions, build-to-suit leases, leveraged leases, and amounts previously recognized in accordance with the business combinations guidance for leases . The Company plans to adopt ASU No . 2016-02 effective January 1, 2019 using the required modified retrospective approach, which includes presenting the cumulative effect of initial application along with supplementary disclosures . As a lessor and lessee, we do not anticipate the classification of our leases to change, but we expect to recognize right-of-use assets and lease liabilities for substantially virtually all of our operating lease commitments leases for which we are the lessee as a lease liability and corresponding right-of-use asset on our Consolidated Statements of Condition . The Company has assembled a project management team, formed a working group comprised of associates from different disciplines, such as Vendor Risk Management, Real Estate, and Technology, including working with associates engaged in the procurement of goods and services used in the Company’s operations . We have made substantial progress in reviewing contractual arrangements for embedded leases in an effort to identify the Company’s full lease population and is presently evaluating all of its leases, as well as contracts that may contain embedded leases, for compliance with the new lease accounting rules .

6 Wal-Mart Stores

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which requires lease assets and liabilities to be recorded on the balance sheet . Certain qualitative and quantitative disclosures are also required, as well as retrospective recognition and measurement of impacted leases . The Company will adopt this ASU on February 1, 2019 and is implementing new lease systems in connection with the adoption . Management is still evaluating the effect to the Company’s consolidated net income, balance sheet, cash flows and disclosures . Management expects a material impact to the consolidated balance sheet .



7 FedEx On February 25, 2016, the FASB issued a new lease accounting standard which requires lessees to put most leases on their balance sheets but recognize the expenses in their income statements in a manner similar to current practice . The new standard states that a lessee will recognize a lease liability for the obligation to make lease payments and a right-of-use asset for the right to use the underlying asset for the lease term . Expenses related to leases determined to be operating leases will be recognized on a straight-line basis, while those determined to be financing leases will be recognized following a front-loaded expense profile in which interest and amortization are presented separately in the income statement . Based on our lease portfolio, we currently anticipate recognizing a lease liability and related right-of-use asset on the balance sheet in excess of $13 billion with an immaterial impact on our income statement compared to the current lease accounting model . However, the ultimate impact of the standard will depend on the company’s lease portfolio as of the adoption date . We are currently in the process of evaluating our existing lease portfolios, including accumulating all of the necessary information required to properly account for the leases under the new standard . Additionally, we are implementing an enterprise-wide lease management system to assist in the accounting and are evaluating additional changes to our processes and internal controls to ensure we meet the standard’s reporting and disclosure requirements . These changes will be effective for our fiscal year beginning June 1, 2019 (fiscal 2020), with a modified retrospective adoption method to the beginning of 2018 .

8 CIT Group Lessor accounting: CIT is analyzing the impact of changes to the definition of ‘initial direct costs’ under the new guidance . The new standard has a narrower definition of initial direct costs, which will result in CIT recognizing increased upfront expenses offset by higher yield over the lease term . CIT is currently evaluating the bifurcation of certain non-lease components from lease revenue streams . If goods or services are determined to be a non-lease component and accounted for under ASC 606 or other applicable GAAP guidance, the income recognition may differ from current accounting . CIT expects that it will bifurcate certain maintenance components relating to our railcar business . Lessee accounting: CIT is continuing to evaluate the impact of the amended guidance on its Condensed consolidated financial statements . CIT expects to recognize right-of- use assets and lease liabilities for substantially all of its operating lease commitments based on the present value of unpaid lease payments as of the date of adoption . CIT management has assembled a project committee to assess the impact of this guidance . Initial scoping and assessment is complete and CIT is continuing to evaluate the impact on its consolidated financial statements and disclosures .


RANK COMPANY SELECTED DISCLOSURE EXCERPTS9 Bank of

America Corp .The FASB issued a new accounting standard effective on January 1, 2019 that requires substantially all leases to be recorded as assets and liabilities on the balance sheet . On January 5, 2018, the FASB issued an exposure draft proposing an amendment to the standard that, if approved, would permit companies the option to apply the provisions of the new lease standard either prospectively as of the effective date, without adjusting comparative periods presented, or using a modified retrospective transition applicable to all prior periods presented . The Corporation is in the process of reviewing its existing lease portfolios, including certain service contracts for embedded leases, to evaluate the impact of the standard on the consolidated financial statements, as well as the impact to regulatory capital and risk-weighted assets . The effect of the adoption will depend on the lease portfolio at the time of transition and the transition options ultimately available; however, the Corporation does not expect the new accounting standard to have a material impact on its consolidated financial position, results of operations or disclosures in the Notes to the Consolidated Financial Statements .

10 McDonald’s In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842),” to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements . Most prominent among the amendments is the recognition of assets and liabilities by lessees for those leases classified as operating leases under current U .S . GAAP . ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with early adoption permitted . The Company will adopt the new standard effective January 1, 2019 . At transition, the Company will recognize and measure leases using the required modified retrospective approach . The Company anticipates ASU 2016-02 will have a material impact to the consolidated balance sheet due to the significance of the Company’s operating lease portfolio as described in Leasing Arrangements . The Company will elect an optional practical expedient to retain the current classification of leases, and, therefore, anticipates a minimal initial impact on the consolidated statement of income . The impact of ASU 2016-02 is non-cash in nature; as such, it will not affect the Company’s cash flows .


RANK COMPANY SELECTED DISCLOSURE EXCERPTS11 Crown Castle

InternationalIn February 2016, the FASB issued new guidance on the recognition, measurement, presentation and disclosure of leases . The new guidance requires lessees to recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments for all leases with a term greater than 12 months . The accounting for lessors remains largely unchanged from existing guidance . This guidance is effective for the Company as of January 1, 2019 and is required to be applied using a modified retrospective approach for all leases existing at, or entered into after, the beginning of the earliest comparative period presented . Although early adoption is permitted, the Company does not expect to early adopt the new guidance prior to January 1, 2019 . With regard to the application of this guidance to the Towers segment, the Company expects that (1) its Towers lessee arrangements will continue to be classified as operating leases under the new guidance; (2) this guidance will have a material impact on its consolidated balance sheet due to the addition of right-of-use assets and lease liabilities for all lessee arrangements with a term greater than 12 months; and (3) there will not be a material impact to its consolidated statement of operations and consolidated statement of cash flows . With regard to the application of this guidance to the Fiber segment, the Company (1) has established and is progressing through the various steps of a cross-functional project plan to assess the impact of the standard; (2) expects this guidance to have a material impact on its consolidated balance sheet due to the addition of right-of-use assets and lease liabilities for all lessee arrangements with a term greater than 12 months; and (3) continues to assess additional impacts to its consolidated financial statements, including the consolidated statement of operations and the consolidated statement of cash flows .

12 American Tower

In February 2016, the FASB issued new guidance on the accounting for leases . The guidance amends the existing accounting standards for lease accounting, including the requirement that lessees recognize right of use assets and lease liabilities for leases with terms greater than twelve months in the statement of financial position . Under the new guidance, lessor accounting is largely unchanged . This guidance is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2018 . The standard is required to be applied using a modified retrospective approach for all leases existing at, or entered into after, the beginning of the earliest comparative period presented . The Company (i) has established a multidisciplinary team to assess and implement the new guidance, (ii) expects the guidance to have a material impact on its consolidated balance sheets due to the recording of right of use assets and lease liabilities for leases in which it is a lessee and which it currently treats as operating leases and (iii) continues to evaluate the impact of the new guidance .

13 JPMorgan Chase & Co .

The Firm is in the process of its implementation which has included an initial evaluation of its leasing contracts and activities . As a lessee, the Firm is developing its methodology to estimate the right-of-use assets and lease liabilities, which is based on the present value of lease payments . The Firm expects to recognize lease liabilities and corresponding right-of-use assets (at their present value) related to predominantly all of the $10 billion of future minimum payments required under operating leases as disclosed in Note 28 . However, the population of contracts subject to balance sheet recognition and their initial measurement remains under evaluation . The Firm does not expect material changes to the recognition of operating lease expense in its Consolidated statements of income . The Firm plans to adopt the new guidance in the first quarter of 2019 .


RANK COMPANY SELECTED DISCLOSURE EXCERPTS14 Apple In February 2016, the FASB issued ASU No . 2016-02, Leases (Topic 842) (“ASU

2016-02”), which modifies lease accounting for lessees to increase transparency and comparability by recording lease assets and liabilities for operating leases and disclosing key information about leasing arrangements . The Company will adopt ASU 2016-02 in its first quarter of 2020 utilizing the modified retrospective transition method . While the Company is currently evaluating the timing and impact of adopting ASU 2016-02, currently the Company anticipates recording lease assets and liabilities in excess of $9 .6 billion on its Condensed Consolidated Balance Sheets, with no material impact to its Condensed Consolidated Statements of Operations . However, the ultimate impact of adopting ASU 2016-02 will depend on the Company’s lease portfolio as of the adoption date .

15 Baxter International

Under the new guidance, lessees are required to recognize a right-of-use asset and a lease liability on the balance sheet for all leases, other than those that meet the definition of a short-term lease . This update will establish a lease asset and lease liability by lessees for those leases classified as operating under current GAAP . Leases will be classified as either operating or finance under the new guidance . Operating leases will result in straight-line expense in the income statement, similar to current operating leases, and finance leases will result in more expense being recognized in the earlier years of the lease term, similar to current capital leases . This ASU is effective for the company beginning January 1, 2019 . The company is currently evaluating the impact of this standard on its consolidated financial statements .

16 Whole Foods Market

The adoption of this ASU will result in a significant increase to the Company’s Consolidated Balance Sheets for lease liabilities and right-of-use assets, and the Company is currently evaluating the other effects of adoption of this ASU on its Consolidated Financial Statements .

17 Citigroup In February 2016, the FASB issued ASU No . 2016-02, Leases (Topic 842), which is intended to increase transparency and comparability of accounting for lease transactions . The ASU will require lessees to recognize leases on the balance sheet as lease assets and lease liabilities and will require both quantitative and qualitative disclosures regarding key information about leasing arrangements . Lessor accounting is largely unchanged . The guidance is effective beginning January 1, 2019 with an option to early adopt . The Company does not plan to early adopt the ASU . The Company estimates that upon adoption, its Consolidated Balance Sheet will have an approximate $5 billion increase in assets and liabilities . Additionally, the Company estimates an approximate $200 million increase in retained earnings due to the cumulative effect of recognizing previously deferred gains on sale/ leaseback transactions .


RANK COMPANY SELECTED DISCLOSURE EXCERPTS18 Alphabet In February 2016, the FASB issued Accounting Standards Update No . 2016-02 (Topic

842) “Leases .” Topic 842 supersedes the lease recognition requirements in Accounting Standards Codification (ASC)Topic840,” Leases .” Under Topic 842, lessees are required to recognize assets and liabilities on the balance sheet for most leases and provide enhanced disclosures . Leases will continue to be classified as either finance or operating . As currently issued, entities are required to use a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements . There are additional optional practical expedients that an entity may elect to apply . We anticipate that the adoption of Topic 842 will materially affect our Consolidated Balance Sheets . We are in the process of implementing changes to our systems and processes in conjunction with our review of existing lease agreements . We will adopt Topic 842 effective January 1, 2019 and expect to elect certain available transitional practical expedients .

19 Starbucks In February 2016, the FASB issued guidance on the recognition and measurement of leases . Under the new guidance, lessees are required to recognize a lease liability, which represents the discounted obligation to make future minimum lease payments, and a corresponding right-of-use asset on the balance sheet for most leases . The guidance retains the current accounting for lessors and does not make significant changes to the recognition, measurement, and presentation of expenses and cash flows by a lessee . Enhanced disclosures will also be required to give financial statement users the ability to assess the amount, timing and uncertainty of cash flows arising from leases . The guidance will require modified retrospective application at the beginning of our first quarter of fiscal 2020, with optional practical expedients, but permits adoption in an earlier period . We are currently evaluating the impact this guidance will have on our consolidated financial statements . We expect this adoption will result in a material increase in the assets and liabilities on our consolidated balance sheets but will likely have an insignificant impact on our consolidated statements of earnings . In preparation for adoption of the guidance, we are in the process of implementing controls and key system changes to enable the preparation of financial information .

20 TJX In February 2016, the FASB issued updated guidance on leases that aims to increase transparency and comparability among organizations by requiring lessees to recognize lease assets and lease liabilities on the balance sheet and requiring disclosure of key information about leasing arrangements . The new standard is effective for annual periods beginning after December 15, 2018, and interim periods within those annual periods; early adoption is permitted and modified retrospective application is required . The Company has established a cross-functional team to implement the updated lease guidance and is in the process of evaluating its lease portfolio and the impact this standard will have on our Consolidated Financial Statements and Notes thereto . The Company expects this standard to have a material impact on its statement of financial condition as it will record a significant asset and liability associated with its more than 4,000 leased locations . The Company continues to assess if the initial lease term will differ under the new standard versus current accounting practice . If the lease term remains unchanged, the income statement impact of the new standard is not expected to be material . We plan to adopt this standard in the first quarter of the fiscal year ending February 1, 2020 .


RANK COMPANY SELECTED DISCLOSURE EXCERPTS21 Berkshire

HathawayIn 2016, the FASB issued ASU 2016-02 “Leases .” ASU 2016-02 requires a lessee to recognize in the statement of financial position a liability to make lease payments and a right-of-use asset representing its right to use the underlying asset for the lease term and also requires additional qualitative and quantitative disclosures . ASU 2016-02 is effective for reporting periods beginning after December 15, 2018, with early adoption permitted . We are currently evaluating the effect this standard will have on our Consolidated Financial Statements .

22 Kroger In February 2016, the FASB issued ASU 2016-02, “Leases,” which provides guidance for the recognition of lease agreements . The standard’s core principle is that a company will now recognize most leases on its balance sheet as lease liabilities with corresponding right-of-use assets . This guidance will be effective for the Company in the first quarter of fiscal year ending February 1, 2020 . Early adoption is permitted . The adoption of this ASU will result in a significant increase to the Company’s Consolidated Balance Sheets for lease liabilities and right-of-use assets, and the Company is currently evaluating the other effects of adoption of this ASU on its Consolidated Financial Statements . This evaluation process includes reviewing all forms of leases, performing a completeness assessment over the lease population, analyzing the practical expedients and assessing opportunities to make certain changes to the Company’s lease accounting information technology system in order to determine the best implementation strategy .

23 Dollar General In February 2016, the FASB issued new guidance related to lease accounting, which when effective will require a dual approach for lessee accounting under which a lessee will account for leases as finance leases or operating leases . Both finance leases and operating leases will result in the lessee recognizing a right-of-use asset and a corresponding lease liability on its balance sheet, with differing methodology for income statement recognition . This guidance is effective for public business entities for fiscal years, and interim periods within those years, beginning after December 15, 2018, and early adoption is permitted . A modified retrospective approach is required for all leases existing or entered into after the beginning of the earliest comparative period in the consolidated financial statements . The Company is currently assessing the impact that adoption of this guidance will have on its consolidated financial statements . Specifically, the Company has formed a project team that is developing test plans for its lease accounting system, identifying and evaluating existing contracts for embedded leases, and discussing implementation plans with its lease accounting software vendor, among other activities . The Company anticipates a material impact to its consolidated financial statements as it is party to a significant number of lease contracts .


RANK COMPANY SELECTED DISCLOSURE EXCERPTS24 Microsoft In February 2016, the Financial Accounting Standards Board (“FASB”) issued a

new standard related to leases to increase transparency and comparability among organizations by requiring the recognition of ROU assets and lease liabilities on the balance sheet . Most prominent among the changes in the standard is the recognition of ROU assets and lease liabilities by lessees for those leases classified as operating leases . Under the standard, disclosures are required to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases . We are also required to recognize and measure leases existing at, or entered into after, the beginning of the earliest comparative period presented using a modified retrospective approach, with certain practical expedients available . We elected to early adopt the standard effective July 1, 2017 concurrent with our adoption of the new standard related to revenue recognition . We elected the available practical expedients and implemented internal controls and key system functionality to enable the preparation of financial information on adoption . The standard had a material impact on our consolidated balance sheets, but did not have an impact on our consolidated income statements . The most significant impact was the recognition of ROU assets and lease liabilities for operating leases, while our accounting for finance leases remained substantially unchanged . Adoption of the standard required us to restate certain previously reported results, including the recognition of additional ROU assets and lease liabilities for operating leases . Refer to Impacts to Previously Reported Results below for the impact of adoption of the standard on our consolidated financial statements .

25 Home Depot In February 2016, the FASB issued ASU No . 2016-02, “Leases (Topic 842),” which requires an entity that is a lessee to recognize the assets and liabilities arising from leases on the balance sheet . ASU No . 2016-02 also requires disclosures about the amount, timing, and uncertainty of cash flows arising from leases . ASU No . 2016-02 is effective for us in the first quarter of fiscal 2019 using a modified retrospective approach . Early adoption is permitted . We are evaluating and planning for the adoption and implementation of ASU No . 2016-02 . We believe that ASU No . 2016-02 will have a material impact on our financial position, as a result of the requirement to recognize right-of-use assets and lease liabilities on our consolidated balance sheets . The impact to our results of operations is being evaluated, and we do not believe there will be a material impact to our cash flows upon adoption of ASU No . 2016-02 .

26 Rite Aid In February 2016, the FASB issued ASU No . 2016-02, Leases, (Topic 842), which is intended to improve financial reporting around leasing transactions . The ASU affects all companies and other organizations that engage in lease transactions (both lessee and lessor) that lease assets such as real estate and manufacturing equipment . This ASU will require organizations that lease assets—referred to as “leases”—to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases . ASU No . 2016-02 is effective for fiscal years and interim periods within those years beginning January 1, 2019 (fiscal 2020) . During its November 29, 2017 meeting, the FASB tentatively decided to amend certain aspects of the new leasing standard . The tentative amendments include a provision to allow entities to elect not to restate comparative periods in the period of adoption when transitioning to the new standard . The Company believes that the new standard will have a material impact on its financial position . The Company is currently evaluating the impact this standard implementation will have on its results of operations and cash flows .



27 Dollar Tree In February 2016, the FASB issued ASU No . 2016-02, “Leases.” This update will replace existing lease guidance in GAAP and will require lessees to recognize lease assets and lease liabilities on the balance sheet for all leases and disclose key information about leasing arrangements, such as information about variable lease payments and options to renew and terminate leases . When implemented, lessees and lessors will be required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach . The update is effective for interim and annual reporting periods beginning after December 15, 2018 . Early adoption is permitted . The Company has engaged a third party to assist in its preparation for implementation and its evaluation of the impact of the new pronouncement on its consolidated financial statements . The Company expects the adoption of this pronouncement to result in a material increase in the assets and liabilities on its consolidated balance sheets and to not have a material impact on its consolidated income statements . The Company is in the process of implementing software to assist in the quantification of the expected impact on the consolidated balance sheets and to facilitate the calculations of the related accounting entries and disclosures .

28 International Business Machines

In February 2016, the FASB issued guidance which changes the accounting for leases . The guidance requires lessees to recognize right-of-use assets and lease liabilities for most leases in the Consolidated Statement of Financial Position . The guidance makes some changes to lessor accounting, including the elimination of the use of third-party residual value guarantee insurance in the capital lease test, and overall aligns with the new revenue recognition guidance . The guidance also requires qualitative and quantitative disclosures to assess the amount, timing and uncertainty of cash flows arising from leases . The guidance is effective January 1, 2019 and early adoption is permitted . The company will adopt the guidance as of the effective date . A cross-functional implementation team has been established which is evaluating the lease portfolio, system, process and policy change requirements . The company is currently evaluating the impact of the new guidance on its consolidated financial results and expects it will have a material impact on the Consolidated Statement of Financial Position . The company’s operating lease commitments were $6 .9 billion at December 31, 2016 . In 2016, the use of third-party residual value guarantee insurance resulted in the company recognizing $220 million of sales-type lease revenue that would otherwise have been recognized over the lease period as operating lease revenue .

29 Wells Fargo We expect to adopt the guidance in first quarter 2019 using the modified retrospective method and practical expedients for transition . The practical expedients allow us to largely account for our existing leases consistent with current guidance except for the incremental balance sheet recognition for lessees . We have started our implementation of the Update which has included an initial evaluation of our leasing contracts and activities . As a lessee we are developing our methodology to estimate the right-of use assets and lease liabilities, which is based on the present value of lease payments (the December 31, 2016 future minimum lease payments were $6 .9 billion) . We do not expect a material change to the timing of expense recognition . Given the limited changes to lessor accounting, we do not expect material changes to recognition or measurement, but we are early in the implementation process and will continue to evaluate the impact . We are evaluating our existing disclosures and may need to provide additional information as a result of adoption of the Update .


RANK COMPANY SELECTED DISCLOSURE EXCERPTS30 Gap In February 2016, the FASB issued ASU No . 2016-02, Leases . Under the new

guidance, lessees will be required to recognize a lease liability and a right-of-use asset for all leases (with the exception of short-term leases) at the commencement date . The ASU is effective for fiscal years and interim periods within those years beginning after December 15, 2018 . We are still assessing the impact of this ASU on our Consolidated Financial Statements, but it will result in a substantial increase in our long-term assets and liabilities . We will adopt the ASU beginning in the first quarter of fiscal 2019 .

31 Lowe’s In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The guidance in this ASU supersedes the leasing guidance in Topic 840, Leases. Under the new guidance, lessees are required to recognize lease assets and lease liabilities on the balance sheet for those leases previously classified as operating leases . For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities . If a lessee makes this election, it should recognize lease expense for such leases generally on a straight-line basis over the lease term . This ASU is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years, with early adoption permitted . The Company is currently evaluating the impact of adopting this ASU on its consolidated financial statements but expects the ASU to have a material impact on its consolidated balance sheets, as a result of the requirement to recognize right-of-use assets and lease liabilities .

32 Albertsons Cos .

In February 2016, the FASB issued ASU 2016-02, “Leases” (Topic 842) . The ASU will require organizations that lease assets to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases . The new guidance will require both classifications of leases, operating and capital, to be recognized on the balance sheet . Consistent with current GAAP, the recognition, measurement and presentation of expenses and cash flows arising from a lease will depend on its classification . The ASU also will require disclosures to help investors and other financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases . The Company plans to adopt this guidance in the first quarter of fiscal 2019 . The adoption of this ASU will result in the recognition of significant right-of-use assets and lease liabilities in the Company’s Consolidated Balance Sheets . The Company’s assessment is ongoing, including the assessment of other potential impacts of this pronouncement on the Consolidated Financial Statements and disclosures .

33 Kohl’s Approximately 5% of our store leases and all of our land leases are not currently recorded on our balance sheet . Recording right of use assets and liabilities for these and other non-store leases is expected to have a material impact on our balance sheet . We are also evaluating the impact that recording right of use assets and liabilities will have on our income statement and the financial statement impact that the standard will have on leases which are currently recorded on our balance sheet .

34 L Brands The Company is currently evaluating the impacts that this standard will have on its Consolidated Statements of Income and Comprehensive Income, Balance Sheets and Statements of Cash Flows . The Company currently expects that most of its operating lease commitments will be recognized as operating lease liabilities and right-of-use assets upon adoption of the standard . Thus, the Company expects adoption will result in a material increase to the assets and liabilities on the Consolidated Balance Sheet . The Company will adopt the standard in the first quarter of fiscal 2019 .


RANK COMPANY SELECTED DISCLOSURE EXCERPTS35 Yum China

HoldingsIn February 2016, the FASB issued ASU No . 2016-02, Leases (Topic 842) (ASU 2016-02), which increases transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements . ASU 2016-02 is effective for the Company in our first quarter of fiscal 2019, with early adoption permitted . The standard must be adopted using a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements . We expect that this standard will have a material effect on our financial statements . While we are continuing to assess the effect of adoption, we currently believe the most significant changes relate to the recognition of right-of-use (“ROU”) assets and lease liabilities on our balance sheet for operating leases of the land and/or building of our restaurants and office space . At December 31, 2017, we operated more than 6,200 restaurants, leasing the underlying land and/or building, with our commitments expiring within 20 years from the inception of the lease . The amount of our future minimum lease payments under operating leases was approximately $3 billion as of December 31, 2017 . We anticipate continuing to add more restaurants and increase our leasing activity between now and adoption .

36 Yum Brands In February 2016, the FASB issued a standard on the recognition and measurement of leases, which is intended to increase transparency and comparability among organizations by requiring that substantially all lease assets and liabilities be recognized on the balance sheet and by requiring the disclosure of key information about leasing arrangements . This standard is effective for the Company in our first quarter of 2019 with early adoption permitted . The standard must be adopted using a modified retrospective transition method . We currently plan to adopt this standard in the first quarter of 2019 and we are evaluating the impact the adoption of this standard will have on our Financial Statements . Based on our current volume of store leases and subleases to franchisees (see Note 12) we expect this adoption will result in a material increase in the assets and liabilities on our Consolidated Balance Sheets; however, we believe the impact will be less material over time as we execute our strategy to be at least 98% franchised by 2019 and thus are a party to fewer leases . Further, we do not anticipate adoption will have a significant impact on our Consolidated Statements of Income or Cash Flows .

37 Penske Automotive Group

In February 2016, the FASB issued ASU No . 2016-02, “Leases (Topic 842) .” Under this new guidance, a company will now recognize most leases on its balance sheet as lease liabilities with corresponding right-of-use assets . For public companies, this ASU is effective for financial statements issued for annual periods beginning after December 15, 2018, and interim periods within those annual periods, with early adoption permitted . We intend to adopt this ASU on January 1, 2019 . The amendments from this update are to be applied using a modified retrospective approach . The adoption of this ASU will result in a significant increase to our consolidated balance sheets for lease liabilities and right-of-use assets . We are currently evaluating the other effects the adoption of this ASU will have on our consolidated financial statements . We believe our current off-balance sheet leasing commitments are reflected in our credit rating .


RANK COMPANY SELECTED DISCLOSURE EXCERPTS38 Facebook In February 2016, the FASB issued Accounting Standards Update No . 2016-02,

Leases (Topic 842) (ASU 2016-02), which generally requires companies to recognize operating and financing lease liabilities and corresponding right-of-use assets on the balance sheet . This guidance will be effective for us in the first quarter of 2019 on a modified retrospective basis and early adoption is permitted . We will adopt the new standard effective January 1, 2019 . We have selected a lease accounting system and we are in the process of implementing such system as well as evaluating the use of the optional practical expedients . While we continue to evaluate the effect of adopting this guidance on our consolidated financial statements and related disclosures, we expect our operating leases, as disclosed in Note 9 — Commitments and Contingencies in the accompanying notes to the consolidated financial statements included in Part II, Item 8, “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K, will be subject to the new standard . We will recognize right-of-use assets and operating lease liabilities on our consolidated balance sheets upon adoption, which will increase our total assets and liabilities .

39 Foot Locker In February 2016, the FASB issued ASU 2016-02, Leases. This ASU requires lessees to recognize a lease liability and a right-of-use asset for all leases, as well as additional disclosure regarding leasing arrangements . This standard will be effective for fiscal years beginning after December 15, 2018, including interim periods therein, and requires a modified retrospective adoption, with earlier adoption permitted . The Company does not expect to adopt this ASU until required and is evaluating the effect of this guidance . The Company has historically presented a non-GAAP measure to adjust its balance sheet to present operating leases as if they were capital leases . Based upon that analysis and preliminary evaluation of the standard, we estimate the adoption will result in the addition of $3 billion to $4 billion of assets and liabilities to our consolidated balance sheet, with no significant change to our consolidated statements of operations or cash flows .

40 EOG Resources

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)” (ASU 2016-02), which significantly changes accounting for leases by requiring that lessees recognize a right-of-use asset and a related lease liability representing the obligation to make lease payments, for virtually all lease transactions . Additional disclosures about an entity’s lease transactions will also be required . ASU 2016-02 defines a lease as “a contract, or part of a contract, that conveys the right to control the use of identified property, plant or equipment (an identified asset) for a period of time in exchange for consideration .” ASU 2016-02 is effective for interim and annual periods beginning after December 31, 2018 and early application is permitted . Lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented in the financial statements using a modified retrospective approach . EOG is continuing its assessment of ASU 2016-02 and has further developed its project plan, evaluated certain operational and corporate processes and selected certain contracts for additional review .


RANK COMPANY SELECTED DISCLOSURE EXCERPTS41 General

ElectricThe new standard establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months . Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition . Similarly, lessors will be required to classify leases as sales-type, finance or operating, with classification affecting the pattern of income recognition . Classification for both lessees and lessors will be based on an assessment of whether risks and rewards as well as substantive control have been transferred through a lease contract . The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with early adoption permitted . A modified retrospective transition approach is required for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available . While we continue to evaluate the effect of the standard on our ongoing financial reporting, we anticipate that the adoption of the ASU may materially affect our Statement of Financial Position .

42 iHeartMedia During the first quarter of 2016, the FASB issued ASU No . 2016-02, Leases (Topic 842) . The new leasing standard presents significant changes to the balance sheets of lessees . Lessor accounting is updated to align with certain changes in the lessee model and the new revenue recognition standard which was issued in the third quarter of 2015 . The standard is effective for annual periods, and for interim periods within those annual periods, beginning after December 15, 2018 . The Company is currently evaluating the impact of the provisions of this new standard on its consolidated financial statements .

43 Comcast In February 2016, the FASB updated the accounting guidance related to leases . The updated accounting guidance requires lessees to recognize a right-of-use asset and a lease liability on the balance sheet for all leases with the exception of short-term leases . The asset and liability are initially measured based on the present value of committed lease payments . For a lessee, the recognition, measurement and presentation of expenses and cash flows arising from a lease do not significantly change from previous guidance . For a lessor, the accounting applied is also largely unchanged from previous guidance . The updated guidance is effective for us as of January 1, 2019 and early adoption is permitted . The updated accounting guidance must be adopted using a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements . We are currently in the process of determining the impact that the updated accounting guidance will have on our consolidated financial statements . See Note 16 for a summary of our undiscounted minimum rental commitments under operating leases as of December 31, 2017 .


RANK COMPANY SELECTED DISCLOSURE EXCERPTS44 Hewlett

Packard Enterprise

In February 2016, the FASB amended the existing accounting standards for leases . The amendments require lessees to record, at lease inception, a lease liability for the obligation to make lease payments and a right-of-use (“ROU”) asset for the right to use the underlying asset for the lease term on their balance sheets . Lessees may elect to not recognize lease liabilities and ROU assets for most leases with terms of 12 months or less . The lease liability is measured at the present value of the lease payments over the lease term . The ROU asset will be based on the liability, adjusted for lease prepayments, lease incentives received, and the lessee’s initial direct costs . For finance leases, lease expense will be the sum of interest on the lease obligation and amortization of the ROU asset, resulting in a front-loaded expense pattern . For operating leases, lease expense will generally be recognized on a straight-line basis over the lease term . The amended lessor accounting model is similar to the current model, updated to align with certain changes to the lessee model and the new revenue standard . The current sale-leaseback guidance, including guidance applicable to real estate, is also replaced with a new model for both lessees and lessors . The Company is required to adopt the guidance in the first quarter of fiscal 2020 using a modified retrospective approach . Early adoption is permitted . The Company is currently evaluating the timing and the impact of these amendments on its Consolidated and Combined Financial Statements .

45 Dick’s Sporting Goods

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)”. This update requires an entity to recognize lease assets and lease liabilities on the balance sheet and to disclose key information about the entity’s leasing arrangements . ASU 2016-02 is effective for annual reporting periods, and interim periods therein, beginning after December 15, 2018, with early application permitted . A modified retrospective approach is required . The Company is currently evaluating the impact of the adoption of ASU 2016-02 on the Company’s Consolidated Financial Statements but anticipates that it will result in significant right of use assets and related liabilities as all of the Company’s retail locations and the majority of our supply chain facilities are currently categorized as operating leases .

46 Chipotle Mexican Grill

In February 2016, the FASB issued ASU No . 2016-02, “Leases (Topic 842) .” The pronouncement requires lessees to recognize a liability for lease obligations, which represent the discounted obligation to make future minimum lease payments, and a corresponding right-of-use asset on the balance sheet . The guidance requires disclosure of key information about leasing arrangements which are intended to give financial statement users the ability to assess the amount, timing, and potential uncertainty of cash flows related to leases . We expect to adopt the requirements of the new lease standard effective January 1, 2019 . We are currently evaluating the provisions of the new lease standard, including optional practical expedients, and assessing our existing lease portfolio in order to determine the impact to our accounting systems, processes and internal control over financial reporting . The adoption of ASU 2016-02 will have a significant impact on our consolidated balance sheet because we will record material assets and obligations for current operating leases . We are still assessing the expected impact on our consolidated statements of income and cash flows .


RANK COMPANY SELECTED DISCLOSURE EXCERPTS47 Nike In February 2016, the FASB issued ASU No . 2016-02, Leases (Topic 842), which

replaces existing lease accounting guidance . The new standard is intended to provide enhanced transparency and comparability by requiring lessees to record right-of-use assets and corresponding lease liabilities on the balance sheet . The new guidance will require the Company to continue to classify leases as either operating or financing, with classification affecting the pattern of expense recognition in the income statement . The Company will adopt the standard on June 1, 2019 . The ASU is required to be applied using a modified retrospective approach at the beginning of the earliest period presented, with optional practical expedients . The Company continues to assess the effect the guidance will have on its existing accounting policies and the Consolidated Financial Statements and expects there will be an increase in assets and liabilities on the Consolidated Balance Sheets at adoption due to the recording of right-of-use assets and corresponding lease liabilities, which may be material . Refer to Note 15 — Commitments and Contingencies of the Annual Report on Form 10-K for the fiscal year ended May 31, 2017 for information about the Company’s lease obligations .

48 Target We must adopt the standard no later than the first quarter of 2019, which begins on February 3, 2019 . A modified retrospective transition approach is required for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements . We plan to adopt the standard in the first quarter of 2018 . We will take advantage of the transition package of practical expedients permitted within the new standard, which among other things, allows us to carryforward the historical lease classification . In addition, we are electing the hindsight practical expedient to determine the reasonably certain lease term for existing leases . While lease classification will remain unchanged, hindsight will result in generally shorter accounting lease terms and useful lives of the corresponding leasehold improvements . We will make an accounting policy election that will keep leases with an initial term of 12 months or less off of the balance sheet and will result in recognizing those lease payments in the Consolidated Statements of Operations on a straight-line basis over the lease term . While we are continuing to assess all potential impacts of the standard, we expect total liabilities to increase by $1 .3-$1 .5 billion, with an offsetting increase to leased assets of $1 .2-$1 .4 billion as of the date of adoption . The difference between these amounts will be recorded as an adjustment to retained earnings . We do not believe the standard will materially affect our consolidated net earnings . These estimates — based on our current lease portfolio — may change as we continue to evaluate the new standard and as we implement a new lease accounting information system . The estimates could also change due to changes in the lease portfolio, which could include (a) lease volume, (b) lease commencement dates, and (c) renewal option and lease termination expectations . We will update our estimates each quarter as changes occur . We do not believe the new standard will have a notable impact on our liquidity . The standard will have no impact on our debt-covenant compliance under our current agreements .


RANK COMPANY SELECTED DISCLOSURE EXCERPTS49 TravelCenters

of AmericaIn February 2016, the FASB issued Accounting Standards Update 2016-02, Leases , which establishes a comprehensive lease standard under GAAP for virtually all industries . The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase of the leased asset by the lessee . This classification will determine whether the lease expense is recognized based on an effective interest method or on a straight line basis over the term of the lease . A lessee is also required to record a right of use asset and a lease liability on the consolidated balance sheets for all leases with a term of greater than 12 months regardless of their classification . Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases . 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 . The new standard will apply for annual periods beginning after December 15, 2018, including interim periods therein, and requires modified retrospective application . Early adoption is permitted . We are in the process of evaluating the effects the adoption of this update may have on our consolidated financial statements . We believe the adoption of this update will have a material impact on our consolidated balance sheets due to the recognition of the lease rights and obligations as assets and liabilities . While the adoption of this standard will have no effect on the cash we pay under our lease agreements, we expect amounts within our consolidated statements of operations and comprehensive income (loss) will change materially .

50 Exxon Mobil Effective January 1, 2019, ExxonMobil will adopt the Financial Accounting Standards Board’s standard, Leases . The standard requires all leases with an initial term greater than one year be recorded on the balance sheet as an asset and a lease liability . The Corporation is gathering and evaluating data and recently acquired a system to facilitate implementation . We are progressing an assessment of the magnitude of the effect on the Corporation’s financial statements .

51 Publix Super Markets

In February 2016, the FASB issued an ASU on lease accounting . The ASU requires the lease rights and obligations arising from lease contracts, including existing and new arrangements, to be recognized as assets and liabilities on the balance sheet . The ASU is effective for reporting periods beginning after December 15, 2018 with early adoption permitted . While the Company is still evaluating the ASU, the Company expects the adoption of the ASU to have a material effect on the Company’s financial condition due to the recognition of approximately $3 billion of lease rights and obligations as assets and liabilities on the consolidated balance sheets . The Company does not expect the adoption of the ASU to have a material effect on the Company’s results of operations . The adoption of the ASU will have no effect on the Company’s cash flows .


RANK COMPANY SELECTED DISCLOSURE EXCERPTS52 Macy’s The new standard is effective for the Company on February 3, 2019, with early

adoption permitted . The new standard is to be adopted utilizing a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the consolidated financial statements, with certain practical expedients available . The Company has not yet decided whether it will early adopt the new standard but the Company currently plans to elect the majority of the standard’s available practical expedients on adoption . The Company expects that the new lease standard will have a material impact on the Company’s consolidated financial statements . While the Company is continuing to assess the effects of adoption, the Company currently believes the most significant changes relate to the recognition of new ROU assets and lease liabilities on the consolidated balance sheets for real property and personal property operating leases as well as changes to the timing of recognition of certain real estate asset sale gains in the consolidated statements of income due to application of the new sale-leaseback guidance and ASU No . 2017-05 as discussed above . The Company expects that substantially all of its operating lease commitments will be subject to the new guidance and will be recognized as operating lease liabilities and ROU assets upon adoption . A significant change in leasing activity between the date of this report and adoption is not expected .

53 Sears Holdings

In February 2016, the FASB issued an accounting standards update which replaces the current lease accounting standard . The update will require, among other items, lessees to recognize a right-of-use asset and a lease liability for most leases . Extensive quantitative and qualitative disclosures, including significant judgments made by management, will be required to provide greater insight into the extent of revenue and expense recognized and expected to be recognized from existing contracts . The update is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years, with early adoption permitted . The new standard must be adopted using a modified retrospective transition, and provides for certain practical expedients . Transition will require application of the new guidance at the beginning of the earliest comparative period presented . We are currently evaluating the effect the update will have on our consolidated financial statements, and expect the update will have a material impact on our consolidated financial statements .

54 Ross Stores In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) . The ASU requires balance sheet recognition for all leases with lease terms greater than one year including a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term . ASU 2016-02 is effective for the Company’s annual and interim reporting periods beginning in fiscal 2019 . The Company is currently evaluating the effect adoption of this new guidance will have on its consolidated financial statements . Due to the substantial number of leases that it has, the Company believes this ASU will increase assets and liabilities by the same material amount on its consolidated balance sheet . The Company’s current undiscounted minimum commitments under noncancelable operating leases is approximately $3 .6 billion . The Company does not believe adoption of this ASU will have a significant impact to its consolidated statements of earnings, stockholders’ equity, and cash flows .


RANK COMPANY SELECTED DISCLOSURE EXCERPTS55 Ally Financial In February 2016, the FASB issued ASU 2016-02 . The amendments in this update

primarily replace the existing accounting requirements for operating leases for lessees . Lessee accounting requirements for finance leases, and lessor accounting requirements for operating leases and sales type and direct financing leases (sales type and direct financing leases were both previously referred to as capital leases) are largely unchanged . The amendments require the lessee of an operating lease to record a balance sheet gross-up upon lease commencement by recognizing a right-of-use asset and lease liability equal to the present value of the lease payments . The right-of-use asset and lease liability should be derecognized in a manner that effectively yields a straight line lease expense over the lease term . In addition to the changes to the lessee operating lease accounting requirements, the amendments also change the types of costs that can be capitalized related to a lease agreement for both lessees and lessors for all types of leases . The amendments also require additional disclosures for all lease types for both lessees and lessors . The amendments are effective on January 1, 2019, with early adoption permitted . The amendments must be applied on a modified retrospective basis with a cumulative adjustment to the beginning of the earliest fiscal year presented in the financial statements in the period of adoption . Management is currently evaluating the impact of these amendments . Upon adoption, we expect to record a balance sheet gross-up, reflecting our right-of-use asset and lease liability for our operating leases where we are the lessee (for example, our facility leases) . We are currently reviewing our operating lease contracts where we are the lessee to determine the impact of the gross-up and the changes to capitalizable costs . We are also reviewing our leases where we are the lessor to determine the impact of the changes to capitalizable costs . We currently plan to adopt these amendments on January 1, 2019, and expect to use the modified retrospective approach as required .

56 Walt Disney In February 2016, the FASB issued a new lease accounting standard, which requires the present value of committed operating lease payments to be recorded as right-of-use lease assets and lease liabilities on the balance sheet . As of September 30, 2017, the Company had an estimated $3 .3 billion in undiscounted future minimum lease commitments . The Company is currently assessing the impact of the new guidance on its financial statements . The guidance is required to be adopted retrospectively, and is effective beginning in the first quarter of the Company’s 2020 fiscal year (with early adoption permitted) . The FASB has recently proposed guidance that would allow adoption of the standard as of the effective date without restating prior periods .

57 Bed Bath & Beyond

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). This guidance requires an entity to recognize lease liabilities and a right-of-use asset for all leases on the balance sheet and to disclose key information about the entity’s leasing arrangements . ASU 2016-02 is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period, with earlier adoption permitted . ASU 2016-02 must be adopted using a modified retrospective approach for all leases existing at, or entered into after the date of initial adoption, with an option to elect to use certain transition relief . The Company is currently evaluating the impact of this new standard on its consolidated financial statements and related disclosures, but expects that it will result in a significant increase in the assets and liabilities recorded on the consolidated balance sheet .


RANK COMPANY SELECTED DISCLOSURE EXCERPTS58 DaVita In February 2016, the FASB issued ASU No . 2016-02, Leases (Topic 842). The

amendments in this ASU revise the accounting related to lessee accounting . Under the new guidance, lessees will be required to recognize a lease liability and a right-of-use asset for substantially all leases with lease terms in excess of twelve months . The new lease guidance also simplifies the accounting for sale and leaseback transactions primarily because lessees must recognize lease assets and lease liabilities . The amendments in this ASU are effective for the Company beginning on January 1, 2019 and are to be applied through a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements . Early adoption is permitted . The Company has assembled an internal lease task force that meets regularly to discuss and evaluate the overall impact of this guidance on its consolidated financial statements and related disclosures, as well as the expected timing of adoption . The Company is currently gathering information from its existing leases and believes that the new standard will have a material impact on its consolidated balance sheet but will not have a material impact on its results of operations or liquidity . The Company expects to adopt this ASU on January 1, 2019, and continues to evaluate the effect that the implementation of this ASU will have on its consolidated financial statements, related disclosures and controls .

59 Advance Auto Parts

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842) .” This ASU is a comprehensive new leases standard that amends various aspects of existing guidance for leases and requires additional disclosures about leasing arrangements . It will require lessees to recognize lease assets and lease liabilities for most leases, including those leases previously classified as operating leases under current GAAP . Topic 842 retains a distinction between finance leases and operating leases . The classification criteria for distinguishing between finance leases and operating leases are substantially similar to the classification criteria for distinguishing between capital leases and operating leases in the previous leases guidance . The ASU is effective for annual periods beginning after December 15, 2018, including interim periods within those years; earlier adoption is permitted . The FASB issued an exposure draft to amend Topic 842 to provide entities with an additional transition method with which to adopt Topic 842 . The proposed transition method would enable entities to apply the transition requirements in Topic 842 at the effective date of that Topic (rather than at the beginning of the earliest comparative period presented as currently required) with the effects of initially applying Topic 842 recognized as a cumulative-effect adjustment to retained earnings in the period of adoption . Consequently, an entity’s reporting for the comparative periods presented in the year of adoption would continue to be in accordance with Topic 840, including the disclosure requirements of that Topic . Practical expedients are available for election as a package and if applied consistently to all leases . The Company has selected its leasing software solution and is in the process of identifying changes to its business processes, systems and controls to support adoption of the new standard in 2019 . The Company is evaluating the impact that the new standard will have on the consolidated financial statements . While the Company is unable to quantify the impact at this time, it expects the adoption of the new standard to result in a material increase in the assets and liabilities in the consolidated financial statements . At this time, the Company does not expect adoption of ASU 2016-02 to have a material impact on its consolidated statements of operations as the majority of its leases will remain operating in nature . As such, the expense recognition will be similar to previously required straight-line expense treatment .


RANK COMPANY SELECTED DISCLOSURE EXCERPTS60 Darden

RestaurantsIn February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) . This update requires a lessee to recognize on the balance sheet a liability to make lease payments and a corresponding right-of-use asset . The guidance also requires certain qualitative and quantitative disclosures about the amount, timing and uncertainty of cash flows arising from leases . This update is effective for us in the first quarter of fiscal 2020, which is when we plan to adopt these provisions . We plan to elect the available practical expedients upon adoption . We expect our balance sheet presentation to be materially impacted upon adoption due to the recognition of right-of-use assets and lease liabilities for operating leases . However, we do not expect adoption to have a material impact on our consolidated statements of earnings . We do not expect our accounting for capital leases to substantially change . We are continuing to evaluate the effect this guidance will have on our consolidated financial statements and related disclosures .

61 Best Buy In February 2016, the FASB issued ASU 2016-02, Leases . The new guidance was issued to increase transparency and comparability among companies by requiring most leases to be included on the balance sheet and by expanding disclosure requirements . Based on the effective dates, we expect to adopt the new guidance in the first quarter of fiscal 2020 using the modified retrospective method . While we expect adoption to lead to a material increase in the assets and liabilities recorded on our balance sheet and an increase to our footnote disclosures related to leases, we are still evaluating the impact on our consolidated statement of earnings . We also expect that adoption of the new standard will require changes to our internal controls over financial reporting .

62 Costco Wholesale

In February 2016, the FASB issued guidance on leases, which will require recognition on the balance sheet for the rights and obligations created by leases with terms greater than twelve months . The standard is effective for fiscal years and interim periods within those years beginning after December 15, 2018, with early adoption permitted . The Company plans to adopt this guidance at the beginning of its first quarter of fiscal year 2020 . While the Company continues to evaluate this standard and the effect on related disclosures, the primary effect of adoption will be to require recording right-of-use assets and corresponding lease obligations for current operating leases . The adoption is expected to have a material impact on the Company’s consolidated balance sheets, but not on the consolidated statements of income or consolidated statements of cash flows .

63 ConocoPhillips We plan to adopt ASU No . 2016-02, as amended, effective January 1, 2019, and continue to evaluate the ASU to determine the impact of adoption on our consolidated financial statements and disclosures, accounting policies and systems, business processes, and internal controls . We also continue to monitor proposals issued by the FASB to clarify the ASU and certain industry implementation issues . While our evaluation of ASU No . 2016-02 and related implementation activities are ongoing, we expect the adoption of the ASU to have a material impact on our consolidated financial statements and disclosures . For additional information, see Note 24—New Accounting Standards, in the Notes to Consolidated Financial Statements .



64 Brookdale Senior Living

In February 2016, the FASB issued ASU 2016-02, Leases (“ASU 2016-02”) . ASU 2016-02 amends the existing accounting principles for the recognition, measurement, presentation and disclosure of leases for both lessees and lessors . ASU 2016-02 requires a lessee to recognize a right-of-use asset and a lease liability on the balance sheet for most leases . Additionally, ASU 2016-02 makes targeted changes to lessor accounting . ASU 2016-02 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018, and early adoption is permitted . For the year ended December 31, 2017, the Company made cash lease payments of $365 .1 million for long-term community leases accounted for as operating leases under ASC 840 . The Company anticipates that the adoption of ASU 2016-02 will result in the recognition of material lease liabilities and right-of use assets on the consolidated balance sheet for these community operating leases . The Company continues to evaluate the impact that the adoption of ASU 2016-02 will have on its consolidated financial statements and disclosures .

65 salesforce .com In February 2016, the FASB issued Accounting Standards Update No . 2016-02, “Leases (Topic 842)” (“ASU 2016-02”), which requires lessees to record most leases on their balance sheets but recognize the expenses on their statements of operations in a manner similar to current accounting rules . ASU 2016-02 states that a lessee would recognize a lease liability for the obligation to make lease payments and a right-to-use asset for the right to use the underlying asset for the lease term . The new standard is effective for interim and annual periods beginning after December 15, 2018 on a modified retrospective basis . The Company is in the process of implementing changes to its systems, processes and controls, in conjunction with its review of existing lease agreements, in order to adopt the new standard in its first quarter of fiscal 2020 . The Company expects its leases designated as operating leases in Note 13, “Commitments,” will be reported on the consolidated balance sheets upon adoption . The Company is currently evaluating the impact to its consolidated financial statements as it relates to other aspects of the business .

66 Regal Entertainment Group

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) . ASU 2016-02 establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months . Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement . The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years . A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available . The Company is evaluating the impact that ASU 2016-02 will have on its consolidated financial statements and related disclosures and believes that the significance of its future minimum rental payments will result in a material increase in ROU assets and lease liabilities .



67 Nordstrom In February 2016, the FASB issued ASU No . 2016-02, Leases. This ASU increases transparency and comparability by recognizing a lessee’s rights and obligations resulting from leases by recording them on the balance sheet as right-of-use assets and lease liabilities . The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee . This classification dictates whether lease expense is to be recognized based on an effective interest method or on a straight-line basis over the term of the lease . Additional qualitative and quantitative disclosures will be required to give financial statement users information on the amount, timing and judgments related to a reporting entity’s cash flows arising from leases . This ASU is effective for us beginning in the first quarter of 2019 . We are currently evaluating the impact of the standard, which will require recognizing and measuring leases at the beginning of the earliest period presented using a modified retrospective approach . We expect adoption of this standard will have a material impact on our Consolidated Financial Statements .

68 Hess In February 2016, the FASB issued ASU 2016-02, Leases, as a new ASC Topic, ASC 842 . The new standard will require assets and liabilities to be reported on the Consolidated Balance Sheet for all leases with lease terms greater than one year, including leases currently treated as operating leases under the existing standard . This ASU is effective for us beginning in the first quarter of 2019, with early adoption permitted . We have developed and are executing a project plan for the implementation of ASC 842 in the first quarter of 2019 . We are progressing our assessment of existing leases and evaluating our disclosure processes with reference to the requirements of the standard . We continue to assess the impact of the ASU on our consolidated financial statements .

69 Ascena Retail Group

In February 2016, the FASB issued ASU 2016-02, “Leases .” The guidance requires the lessee to recognize the assets and liabilities for the rights and obligations created by leases with terms of 12 months or more . The guidance is effective for fiscal years beginning after December 15, 2018 and interim periods therein, with early adoption permitted . Adoption of the standard requires a modified retrospective approach where the guidance is applied to the earliest comparative period presented . The Company does not expect that the guidance will have a significant impact on its condensed consolidated statements of cash flows and is currently evaluating the guidance and its impact on its other condensed consolidated financial statements, but expects that it will result in a significant increase to its long-term assets and liabilities . The Company is also in the process of implementing a new lease administration system and identifying changes to its business processes and controls to support adoption of the new standard in Fiscal 2020 .


RANK COMPANY SELECTED DISCLOSURE EXCERPTS70 International

PaperIn February 2016, the FASB issued ASU 2016-02, Leases Topic (842): “Leases .” This ASU will require most leases to be recognized on the balance sheet which will increase reported assets and liabilities . Lessor accounting will remain substantially similar to current U .S . GAAP . This ASU is effective for annual reporting periods beginning after December 15, 2018, and interim periods within those years, and mandates a modified retrospective transition method for all entities . The Company expects to adopt this guidance using a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements . We expect to recognize a liability and corresponding asset associated with in-scope operating and finance leases but we are still in the process of determining those amounts and the processes required to account for leasing activity on an ongoing basis .

71 Dow Chemical

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842),” which requires organizations that lease assets to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases . The new guidance requires that a lessee recognize assets and liabilities for leases with lease terms of more than twelve months and recognition, presentation and measurement in the financial statements will depend on its classification as a finance or operating lease . In addition, the new guidance will require disclosures to help investors and other financial statement users better understand the amount, timing and uncertainty of cash flows arising from leases . Lessor accounting remains largely unchanged from current U .S . GAAP but does contain some targeted improvements to align with the new revenue recognition guidance issued in 2014 . The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018, using a modified retrospective approach, and early adoption is permitted . The Company has a team in place to evaluate the new guidance and is in the process of implementing a software solution to facilitate the development of business processes and controls around leases to meet the new accounting and disclosure requirements upon adoption in the first quarter of 2019 .

72 Global Partners

In February 2016, the FASB issued ASU 2016-02, “Leases,” and has modified the standard thereafter . This standard, as amended, amends the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting . This standard is effective beginning in the first quarter of 2019 . Early adoption of this standard is permitted . The standard requires a modified retrospective transition approach for all leases existing at, or entered into after, the date of initial application, with an option to use certain transition relief . The Partnership is assessing the impact this standard will have on its consolidated financial statements .


RANK COMPANY SELECTED DISCLOSURE EXCERPTS73 Avis Budget

GroupIn February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842),” which requires a lessee to recognize all long-term leases on its balance sheet as a liability for its lease obligation, measured at the present value of lease payments not yet paid, and a corresponding asset representing its right to use the underlying asset over the lease term and expands disclosure of key information about leasing arrangements . The ASU does not significantly change a lessee’s recognition, measurement and presentation of expenses and cash flows . Additionally, ASU 2016-02 aligns key aspects of lessor accounting with the new revenue recognition guidance in ASU 2014-09 (see above) . ASU 2016-02 becomes effective for the Company on January 1, 2019 . Early adoption is permitted . In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach which includes a number of optional practical expedients that entities may elect to apply . The Company is currently evaluating and planning for the implementation of this ASU, including assessing its overall impact, and expects most of its operating lease commitments will be subject to the new standard and recognized as operating lease liabilities and right-of-use assets upon adoption, which will materially increase total assets and total liabilities relative to such amounts prior to adoption . The Company has determined portions of its vehicle rental contracts that convey the right to control the use of identified assets are within the scope of the accounting guidance contained in ASU 2016-02 . As discussed in Revenue from Contracts with Customers above, the Company’s vehicle rental revenues will be accounted for under the revenue accounting standard Topic 606 effective January 1, 2018, until the adoption of this accounting pronouncement on January 1, 2019 .

74 J .C . Penney In February 2016, the FASB issued ASC Topic 842, Leases (Topic 842), a replacement of Leases (Topic 840), which will require lessees to recognize most leases on their balance sheets as lease liabilities with corresponding right-of-use assets . While many aspects of lessor accounting would remain the same, the new standard would make some changes, such as eliminating today’s real estate-specific guidance . As a globally converged standard, lessees and lessors would be required to classify most leases using a principle generally consistent with that of International Accounting Standards . The standard also would change what would be considered the initial direct costs of a lease . The standard would be effective for annual periods beginning after December 15, 2018 and interim periods within that year and must be adopted on a modified retrospective method, with elective reliefs, which requires application of the new guidance for all periods presented . We have developed a project team to analyze the impacts of the new standard on our current accounting policies and internal controls and the changes required to be made by our leasing software provider . With almost 70% of our store locations involved in an operating lease, the new standard will have a significant impact on our financial statements due to the recognition of lease liabilities and right-of-use assets that were not required by the current accounting requirements for operating leases . Given the magnitude of the project to implement the new standard, we are still evaluating the effect that the new accounting guidance will have on our financial condition, results of operations and cash flows .


RANK COMPANY SELECTED DISCLOSURE EXCERPTS75 Union Pacific In February 2016, the FASB issued Accounting Standards Update No . 2016-02

(ASU 2016-02), Leases (Subtopic 842) . ASU 2016-02 will require companies to recognize lease assets and lease liabilities on the balance sheet and disclose key information about leasing arrangements . For public companies, this standard is effective for annual reporting periods beginning after December 15, 2018, and early adoption is permitted . Management is currently evaluating the impact of this standard on our consolidated financial position, results of operations, and cash flows, and expects that the adoption will result in an increase in the Company’s assets and liabilities of over $2 billion .

76 McKesson Leases: In February 2016, amended guidance was issued for lease arrangements . The amended standard will require lessees to recognize assets and liabilities on the balance sheet for all leases with terms longer than 12 months and provide enhanced disclosures on key information of leasing arrangements . The amended guidance is effective for us commencing in the first quarter of 2020, on a modified retrospective basis . Early adoption is permitted . We plan to adopt the new standard on the effective date and are currently evaluating the impact of this amended guidance on our consolidated financial statements . We anticipate that the adoption of the amended lease guidance will materially affect our condensed consolidated balance sheet and will require certain changes to our systems and processes .

77 Burlington Stores

In February 2016, the FASB issued ASU 2016-02, “Leases .” The standard’s core principle is to increase transparency and comparability among organizations by recognizing lease assets and liabilities on the balance sheet and disclosing key information about leasing arrangements . This standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years . This ASU will be effective for the Company as of the beginning of the fiscal year ending February 1, 2020 (Fiscal 2019) . Early adoption is permitted . While the Company is continuing to evaluate the impact of the adoption of this guidance on its consolidated financial statements or notes thereto, it does expect that this new guidance will result in a significant increase to the assets and liabilities presented on its consolidated balance sheets . Refer to Note 13 to the Company’s Consolidated Financial Statements included in the Fiscal 2016 10-K (entitled “Lease Commitments”) for further detail of the Company’s future minimum lease payments . This guidance is not expected, however, to have a material impact on the Company’s liquidity .

78 Tractor Supply In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842) .” This update requires a dual approach for lessee accounting under which a lessee will account for leases as finance leases or operating leases . Both finance leases and operating leases will result in the lessee recognizing a right-of-use asset and a corresponding lease liability on its balance sheet, with differing methodology for income statement recognition . This guidance is effective for public business entities for fiscal years, and interim periods within those years, beginning after December 15, 2018, with early adoption permitted . A modified retrospective approach is required for all leases existing or entered into after the beginning of the earliest comparative period in the consolidated financial statements . The Company is currently assessing the impact that adoption of this guidance will have on its Consolidated Financial Statements and related disclosures .


RANK COMPANY SELECTED DISCLOSURE EXCERPTS79 Chevron In February 2016, the FASB issued ASU 2016-02, which becomes effective for the

company January 1, 2019 . The standard requires that lessees present right-of-use assets and lease liabilities on the balance sheet . The company’s implementation efforts are focused on accounting policy and disclosure updates and system enhancements necessary to meet the standard’s requirements . The company is evaluating the effect of the standard on the company’s consolidated financial statements .

80 NRG Energy In February 2016, the FASB issued ASU No . 2016-02, Leases (Topic 842), or Topic 842, with the objective to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and to improve financial reporting by expanding the related disclosures . The guidance in Topic 842 provides that a lessee that may have previously accounted for a lease as an operating lease under current GAAP should recognize the assets and liabilities that arise from a lease on the balance sheet . In addition, Topic 842 expands the required quantitative and qualitative disclosures with regards to lease arrangements . The Company will adopt the standard effective January 1, 2019, and expects to elect certain of the practical expedients permitted, including the expedient that permits the Company to retain its existing lease assessment and classification . The Company is currently working through an adoption plan which includes the evaluation of lease contracts compared to the new standard . While the Company is currently evaluating the impact the new guidance will have on its financial position and results of operations, the Company expects to recognize lease liabilities and right of use assets . The extent of the increase to assets and liabilities associated with these amounts remains to be determined pending the Company’s review of its existing lease contracts and service contracts which may contain embedded leases . While this review is still in process, NRG believes the adoption of Topic 842 will have a material impact on its financial statements . The Company is continuing to monitor potential changes to Topic 842 that have been proposed by the FASB and will assess any necessary changes to the implementation process as the guidance is updated .

81 Coach In February 2016, the FASB issued ASU No . 2016-02, “Leases (Topic 842),” which is intended to increase transparency and comparability among companies that enter into leasing arrangements . This ASU requires recognition of lease assets and lease liabilities on the balance sheet for nearly all leases (other than short-term leases), as well as a retrospective recognition and measurement of existing impacted leases . The requirements of the new standard will be effective for annual reporting periods beginning after December 15, 2018, and interim periods within those annual periods, which for the Company is the first quarter of fiscal 2020 . Early adoption is permitted . The new standard is required to be applied with a modified retrospective approach to each prior reporting period with various optional practical expedients . The Company is currently performing a comprehensive evaluation of the impact of adopting this guidance on its consolidated financial statements and notes thereto . The Company expects the guidance will result in a significant increase to long-term assets and long-term liabilities on its consolidated balance sheets and does not expect it to have a material impact on the consolidated statements of operations . This guidance is not expected to have a material impact on the Company’s liquidity .



82 Iron Mountain In February 2016, the FASB issued ASU No . 2016-02, Leases (Topic 842) (“ASU 2016-02”) . ASU 2016-02 requires lessees to recognize assets and liabilities on the balance sheet for the rights and obligations created by all leases with terms of more than 12 months . ASU 2016-02 also will require certain qualitative and quantitative disclosures designed to give financial statement users information on the amount, timing, and uncertainty of cash flows arising from leases . ASU 2016-02 will be effective for us on January 1, 2019, with early adoption permitted . We will adopt ASU 2016-02 on January 1, 2019 and are currently evaluating the impact ASU 2016-02 will have on our consolidated financial statements .

83 Estée Lauder In February 2016, the FASB issued authoritative guidance that requires lessees to account for most leases on their balance sheets with the liability being equal to the present value of the lease payments . The right-of-use asset will be based on the lease liability adjusted for certain costs such as direct costs . Lease expense will be recognized similar to current accounting guidance with operating leases resulting in a straight-line expense, and financing leases resulting in a front-loaded expense similar to the current accounting for capital leases . This guidance must be adopted using a modified retrospective transition approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements, and provides for certain practical expedients . Effective for the Company — Fiscal 2020 first quarter, with early adoption permitted . Impact on consolidated financial statements — The Company currently has an implementation team in place that is performing a comprehensive evaluation of the impact of the adoption of this guidance . While the Company has not completed its evaluation, it believes the adoption of this standard will have a significant impact on its consolidated balance sheets . As disclosed in Note 15 — Commitments and Contingencies in the notes to consolidated financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2017, the Company had $2,427 million in future minimum lease commitments as of June 30, 2017 . Upon adoption, the Company’s lease liability will generally be based on the present value of such payments, and the related right-of use asset will generally be based on the lease liability, adjusted for initial direct costs .



84 Edison International

In February 2016, the FASB issued an accounting standards update related to lease accounting, effective January 1, 2019 . Under the new standard, a lease is defined as a contract, or part of a contract, that conveys the right to control the use of identified assets for a period of time in exchange for consideration . Lessees will need to recognize leases on the balance sheet as a right-of-use asset and a related lease liability, and classify the leases as either operating or finance . The liability will be equal to the present value of lease payments . The asset will be based on the liability, subject to adjustments, such as initial direct costs . Edison International operating leases will result in straight-line expense while finance leases will result in a higher initial expense pattern due to the interest component . SCE, as a regulated entity, is permitted to continue to recognize expense using the timing that conforms to the regulatory rate treatment . Lessees can elect to exclude from the balance sheet short-term contracts of one year or less . The standard requires retrospective application to previously issued financial statements for 2018 and 2017 . Although permitted, Edison and SCE will not elect to adopt this standard prior to January 1, 2019 . The standard will provide entities with an optional transition method to apply the new requirements in the period of adoption without retrospective application to previous periods . Edison International and SCE are evaluating whether to elect this optional transition method . The adoption of this standard will increase right-of-use assets and lease liabilities in Edison International’s and SCE’s consolidated balance sheets . Edison International and SCE are currently implementing a new lease accounting system and are evaluating the impact this standard will have on the consolidated balance sheets and lease disclosures .

85 PVH The FASB issued in February 2016 a new accounting standard on leases . The new standard, among other changes, will require lessees to recognize a right-of-use asset and a lease liability in the balance sheet for most leases . The lease liability will be measured at the present value of the lease payments over the lease term . The right-of-use asset will be measured at the lease liability amount, adjusted for lease prepayments, lease incentives received and the lessee’s initial direct costs (e .g ., commissions) . The guidance will be effective for the Company in the first quarter of 2019, with early adoption permitted . The adoption will require a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest period presented . The Company is currently evaluating the standard to determine the impact of the adoption on its consolidated financial statements but expects that the standard will result in a significant increase to its other assets and other liabilities .



86 Kindred Healthcare

In February 2016, the FASB issued amended authoritative guidance on accounting for leases . The new provisions require that a lessee of operating leases recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term . The lease liability will be equal to the present value of lease payments, with the right-of-use asset based upon the lease liability . The classification criteria for distinguishing between finance (or capital) leases and operating leases are substantially similar to the previous lease guidance, but with no explicit bright lines . As such, operating leases will result in straight-line rent expense similar to current practice . For short term leases (term of 12 months or less), a lessee is permitted to make an accounting election not to recognize lease assets and lease liabilities, which would generally result in lease expense being recognized on a straight-line basis over the lease term . The guidance is effective for annual and interim periods beginning after December 15, 2018, and will require application of the new guidance at the beginning of the earliest comparable period presented . We will not elect early adoption and will apply the modified retrospective approach as required . The adoption of this standard is expected to have a material impact on our financial position . We do not expect an impact on our business, results of operations or liquidity .

87 UnitedHealth Group

In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update (ASU) No . 2016-02, “Leases (Topic 842)” (ASU 2016-02) . Under ASU 2016-02, an entity will be required to recognize assets and liabilities for the rights and obligations created by leases on the entity’s balance sheet for both finance and operating leases . For leases with a term of 12 months or less, an entity may elect to not recognize lease assets and lease liabilities and expense the lease over a straight-line basis for the term of the lease . ASU 2016-02 will require new disclosures that depict the amount, timing and uncertainty of cash flows pertaining to an entity’s leases . Companies are currently required to adopt the new standard using a modified retrospective approach for annual and interim periods beginning after December 15, 2018 . Early adoption of ASU 2016-02 is permitted . When adopted, the Company does not expect ASU 2016-02 to have a material impact on its results of operations, equity or cash flows . The impact of ASU 2016-02 on the Company’s consolidated financial position will be based on leases outstanding at the time of adoption .

88 CenturyLink We have completed our initial assessment of our business and system requirements and we are currently developing and implementing a new lease accounting and administrative system to comply with the requirements of ASU 2016-02 . We plan to adopt the standard when it becomes effective for us beginning January 1, 2019 and the adoption of the standard will result in the recognition of right of use assets and lease liabilities that have not previously been recorded . Although we believe it is premature as of the date of this report to provide any estimate of the impact of adopting ASU 2016-02, we do expect that it will have a material impact on our consolidated financial statements . Additionally, upon the January 1, 2019, implementation of ASU 2016-02, accounting for the failed-sale-leaseback transaction described in Note 3—Sale of Data Centers and Colocation Business will no longer be applicable based on our facts and circumstances, and the real estate assets and corresponding financing obligation will be derecognized from our consolidated balance sheet .



89 United Technologies

The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years . A modified retrospective transition approach is required for lessees for capital and operating leases and lessors for sales-type, direct financing, and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available . In November 2017, the FASB announced a decision to offer an additional practical expedient related to the transition to the new lease accounting standard which allows for its prospective adoption . The FASB is expected to formally communicate this new practical expedient through an Accounting Standards Update to be released in early 2018 . While we are still evaluating the impact of our pending adoption of the new standard on our consolidated financial statements, we expect that upon adoption we will recognize ROU assets and lease liabilities and that the amounts could be material . We do not expect the ASU to have a material impact on our cash flows or results of operations .

90 Calpine In February 2016, the FASB issued Accounting Standards Update 2016-02, “Leases .” The comprehensive new lease standard will supersede all existing lease guidance . The standard requires that a lessee should recognize a right-to-use asset and a lease liability for substantially all operating leases based on the present value of the minimum rental payments . Entities may make an accounting policy election to not recognize lease assets and liabilities for leases with a term of 12 months or less . For lessors, the accounting for leases remains substantially unchanged . The standard also requires expanded disclosures surrounding leases . The standard is effective for fiscal periods beginning after December 15, 2018, including interim periods within that reporting period and requires modified retrospective adoption with early adoption permitted . In January 2018, the FASB issued Accounting Standards Update 2018-01, “Land Easement Practical Expedient for Transition to Topic 842” that allows an entity to not evaluate existing and expired land easements that were not previously accounted for as leases upon adoption of Accounting Standards Update 2016-02 . Any land easements entered into prospectively or modified after adoption should be evaluated to assess whether they meet the definition of a lease . We expect to adopt the standard in the first quarter of 2019 . We have completed our initial evaluation of the standard and believe that the key changes that will affect us relate to our accounting for operating leases that are currently off-balance sheet and tolling contracts which we currently account for as operating leases . Additionally, we are evaluating the potential effects of the removal of the real estate guidance currently applicable to lessors . We are also considering electing the practical expedients in our implementation of the standard; however, this may change as we complete our assessment of the standard .


RANK COMPANY SELECTED DISCLOSURE EXCERPTS91 Interpublic

GroupIn February 2016, the FASB issued amended guidance on lease accounting which requires an entity to recognize a right-of-use asset and a corresponding lease liability on its balance sheet for virtually all of its leases with a term of more than 12 months, including those classified as operating leases . Both the asset and liability will initially be measured at the present value of the future minimum lease payments, with the asset being subject to adjustments such as initial direct costs . Consistent with current U .S . GAAP, the presentation of expenses and cash flows will depend primarily on the classification of the lease as either a finance or an operating lease . The new standard also requires additional quantitative and qualitative disclosures regarding the amount, timing and uncertainty of cash flows arising from leases in order to provide additional information about the nature of an organization’s leasing activities . This amended guidance, which will be effective beginning January 1, 2019, requires modified retrospective application, with early adoption permitted . We expect the adoption of this amended guidance to have a significant impact on our Consolidated Balance Sheets but not on our Consolidated Statements of Operations .

92 American Airlines Group

The New Lease Standard requires lessees to recognize a lease liability and a right-of-use asset on the balance sheet and aligns many of the underlying principles of the new lessor model with those in the New Revenue Standard . The New Lease Standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years . Early adoption is permitted . We expect we will adopt the New Lease Standard effective January 1, 2019 . Entities are required to adopt the New Lease Standard using a modified retrospective approach, which results in the recast of each prior reporting period presented, for all leases existing at or commencing after the date of initial application with an option to use certain practical expedients . We are currently evaluating how the adoption of the New Lease Standard will impact our consolidated financial statements . Interpretations are on-going and could have a material impact on our implementation . Currently, we expect that the adoption of the New Lease Standard will have a material impact on our consolidated balance sheet due to the recognition of right-of-use assets and lease liabilities principally for certain leases currently accounted for as operating leases .

93 Goldman Sachs Group

The ASU is effective for the firm in January 2019 under a modified retrospective approach . Early adoption is permitted . The firm’s implementation efforts include reviewing the terms of existing leases and service contracts, which may include embedded leases . Based on the implementation efforts to date, the firm expects a gross up on its consolidated statements of financial condition upon recognition of the right-of-use assets and lease liabilities and does not expect the amount of the gross up to have a material impact on its financial condition .


RANK COMPANY SELECTED DISCLOSURE EXCERPTS94 MetLife In February 2016, the FASB issued new guidance on leasing transactions (ASU 2016-

02, Leases - Topic 842). The new guidance is effective for the fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, and requires a modified retrospective transition approach . Early adoption is permitted . The new guidance requires a lessee to recognize assets and liabilities for leases with lease terms of more than 12 months . Leases would be classified as finance or operating leases and both types of leases will be recognized on the balance sheet . Lessor accounting will remain largely unchanged from current guidance except for certain targeted changes . The new guidance will also require new qualitative and quantitative disclosures . The Company’s implementation efforts are primarily focused on the review of its existing lease contracts, identification of other contracts that may fall under the scope of the new guidance, and performing a gap analysis on the current state of lease-related activities compared with the future state of lease-related activities . The Company is currently evaluating the overall impact of the new guidance on its consolidated financial statements .

95 Dell Technologies

In February 2016, the FASB issued amended guidance on the accounting for leasing transactions . The primary objective of this update is to increase transparency and comparability among organizations by requiring lessees to recognize lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements . The guidance makes some changes to lessor accounting, including the elimination of the use of third-party residual value guarantee insurance in the sales-type lease test . Public entities must adopt the new guidance for reporting periods beginning after December 15, 2018, with early adoption permitted . Companies are required to use a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements . The Company is currently evaluating the impact that the standard will have on the Consolidated Financial Statements .

96 AutoZone ASU 2016-02 requires an entity to recognize a right-of-use asset and lease liability for all leases with terms of more than 12 months . Recognition, measurement and presentation of expenses will depend on classification as a finance or operating lease . The amendments also require certain quantitative and qualitative disclosures about leasing arrangements . Early adoption is permitted . The updated guidance requires a modified retrospective adoption . This update will be effective for the Company at the beginning of its fiscal 2020 year . The Company established a cross-functional implementation team to evaluate and identify the impact of ASU 2016-02 on the Company’s financial position, results of operations and cash flows . Based on the preliminary work completed, the Company is considering the possible implications of the new standard, including the discount rate to be used in valuing new and existing leases, the treatment of existing favorable and unfavorable lease agreements acquired in connection with previous acquisitions, procedural and operational changes that may be necessary to comply with the provisions of the guidance and all applicable financial statement disclosures required by the new guidance . The Company is also in the process of identifying changes to its business processes, systems and controls to support adoption of the new standard . At this time, the team has not completed its full analysis and is unable to quantify the impact; however, the Company believes the adoption of the new guidance will have a material impact on the total assets and total liabilities reported on the Company’s consolidated balance sheets .


RANK COMPANY SELECTED DISCLOSURE EXCERPTSRANK COMPANY SELECTED DISCLOSURE EXCERPTS97 Twenty-First

Century FoxIn February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)” (“ASU 2016-02”) . The amendments in ASU 2016-02 require recognition of lease assets and liabilities on the balance sheet and disclosure of key information about leasing arrangements . ASU 2016-02 will be effective for the Company for annual and interim reporting periods beginning July 1, 2019 . The Company is currently evaluating the impact ASU 2016-02 will have on its consolidated financial statements . Since the Company has a significant amount of minimum lease commitments (See Note 15 – Commitments and Contingencies), the Company expects that the impact of recognizing lease assets and liabilities will be significant to the Company’s Consolidated Balance Sheet .

98 Marsh & McLennan

In February 2016, the FASB issued new guidance intended to improve financial reporting for leases . Under the new guidance, a lessee will be required to recognize assets and liabilities for leases with lease terms of more than 12 months . Consistent with current GAAP, the recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification as a financing or operating lease . However, unlike current GAAP, which requires that only capital leases be recognized on the balance sheet, the new guidance requires that both types of leases be recognized on the balance sheet . The new guidance will require additional disclosures to help investors and other financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases . These disclosures include qualitative and quantitative requirements, and additional information about the amounts recorded in the financial statements . The accounting by organizations that own the assets (“lessor”) leased by the lessee will remain largely unchanged from current GAAP . However, the guidance contains targeted improvements that are intended to align, where necessary, lessor accounting with the lessee accounting model . The new guidance on leases is effective for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018 . Early application is permitted . The Company is currently evaluating the impact the adoption of the guidance will have on its financial position and results of operations, but expects material “right to use” assets and lease liabilities to be recorded on its consolidated balance sheets .


RANK COMPANY SELECTED DISCLOSURE EXCERPTSRANK COMPANY SELECTED DISCLOSURE EXCERPTS99 O’Reilly

AutomotiveIn February of 2016, the FASB issued ASU No . 2016-02, “Leases (Topic 842)” (“ASU 2016-02”) . Under ASU 2016-02, an entity will be required to recognize right-of-use assets and lease liabilities on its balance sheet and disclose key information about leasing arrangements . ASU 2016-02 offers specific accounting guidance for a lessee, a lessor and sale and leaseback transactions . Lessees and lessors are required to disclose qualitative and quantitative information about leasing arrangements to enable a user of the financial statements to assess the amount, timing and uncertainty of cash flows arising from leases . For public companies, ASU 2016-02 is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period, and requires a modified retrospective adoption, with early adoption permitted . We will adopt this guidance beginning with our first quarter ending March 31, 2019 . We have established a task force, composed of multiple functional groups inside of the Company, which is currently in the process of evaluating critical components of this new guidance and the potential impact of the guidance on our financial position, results of operations and cash flows . Based on the preliminary work completed, we are considering the potential implications of the new standard on determining the discount rate to be used in valuing new and existing leases, the treatment of existing favorable and unfavorable lease agreements acquired in connection with previous acquisitions, procedural and operational changes that may be necessary to comply with the provisions of the guidance and all applicable financial statement disclosures required by the guidance, all of which are areas that could potentially be impacted by adoption of the guidance . At this time, the task force has not completed its full evaluation; however, we believe the adoption of the new guidance will have a material impact on the total assets and total liabilities reported on our consolidated balance sheets .

100 Anadarko Petroleum

ASU 2016-02, Leases (Topic 842), requires lessees to recognize a lease liability and a right-of-use (ROU) asset for all leases, including operating leases, with a term greater than 12 months on the balance sheet . This ASU modifies the definition of a lease and outlines the recognition, measurement, presentation, and disclosure of leasing arrangements by both lessees and lessors . Certain practical expedients will be used to implement the new standard, and the Company will not reassess contracts that commenced prior to adoption . The Company will make a policy election not to recognize ROU assets or lease liabilities for leases with a term of 12 months or less . Anadarko is reviewing contracts for its portfolio of leased assets to assess the impact of adopting the new standard, which is expected to primarily affect other assets and other long-term liabilities . The Company is also evaluating its systems, processes, and internal controls to facilitate compliance with the new standard . The Company will complete its evaluation in 2018 and adopt this new standard on January 1, 2019, using a modified retrospective approach for all comparative periods presented .

LeaseAccelerator Inc .

10700 Parkridge Blvd Suite P50

Reston, VA 20191

United States

1-866-446-0980

https://www .leaseaccelerator .com

SAB 74 DISCLOSURE ANALYSIS FOR LEASE ACCOUNTING...6 SAB 74 DISCLOSURE ANALYSIS FOR LEASE ACCOUNTING (ASC 842) INCOME STATEMENT Under ASC 842, there is expected to be little impact

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