Lease liabilities

Operating leases

In adopting ASC Topic 842, Leases (Topic 842), the Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets and operating lease liabilities in the consolidated balance sheets. The Company did not elect the use-of-hindsight or the practical expedient pertaining to land easements; the latter is not applicable to the Company.

Upon lease inception, operating lease ROU assets and liabilities are recognized based on the present value of lease payments over the lease term discounted using the rate implicit in the lease. In cases where the implicit rate is not readily determinable, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease.

In determining the length of the lease term to its long-term lease, the Company determined it did not have an option to extend either lease.  

Short-term leases

In addition, the Company elected not to apply ASC Topic 842 to arrangements with lease terms of 12 months or less.