63 / Schnitzer Steel Industries, Inc. Form 10-K 2021 As of August 31, 2021, the useful lives used for depreciation and amortization were as follows: Useful Life (in years) Machinery and equipment 3 to 40 Land improvements 3 to 35 Buildings and leasehold improvements 5 to 40 Enterprise Resource Planning (“ERP”) systems 6 to 17 Office equipment and other software licenses 3 to 10 Prepaid Expenses The Company’s prepaid expenses, reported within prepaid expenses and other current assets in the Consolidated Balance Sheets, totaled $22 million and $23 million as of August 31, 2021 and 2020, respectively, and consisted primarily of prepaid insurance, deposits on capital projects, prepaid services, and prepaid property taxes. Other Assets The Company’s other assets, exclusive of prepaid expenses and assets relating to certain employee benefit plans, consisted primarily of receivables from insurers, capitalized implementation costs for cloud computing arrangements, major spare parts and equipment, cash held in a client trust account relating to a legal settlement, an equity investment, debt issuance costs, and notes and other contractual receivables. Other assets are reported within either prepaid expenses and other current assets or other assets in the Consolidated Balance Sheets based on their expected use either during or beyond the current operating cycle of one year from the reporting date. See Note 12 – Employee Benefits for further detail on the Company’s assets relating to employee benefit plans. Receivables from insurers represent the portion of insured losses expected to be recovered from the Company’s insurance carriers. The receivable is recorded at an amount not to exceed the recorded loss and only if the terms of legally enforceable insurance contracts support that the insurance recovery will not be disputed and is deemed collectible. Receivables from insurers totaled $21 million and $5 million as of August 31, 2021 and 2020, respectively. As of August 31, 2021, receivables from insurers comprised primarily $10 million relating to property damage and other claims in connection with the May 2021 fire at the Company’s melt shop operations, $6 million relating to environmental claims, and $4 million relating to workers’ compensation claims. As of August 31, 2020, receivables from insurers comprised primarily $4 million relating to workers’ compensation claims. See “Accounting for Impacts of Steel Mill Fire” below in this Note for further discussion of receivables from insurers relating to property damage and business interruption claims. Other assets as of August 31, 2021 also included approximately $7.6 million in cash deposited into a client trust account in the second quarter of fiscal 2021 to fund the remediation of a site a portion of which was previously leased to and operated by an indirect, whollyowned subsidiary. The cash was deposited into the client trust account by other potentially liable parties in connection with settlement of a lawsuit relating to allocation of the remediation costs, including agreement by the Company’s subsidiary to perform certain remedial actions. See “Other Legacy Environmental Loss Contingencies” within “Contingencies – Environmental” in Note 9 - Commitments and Contingencies for further discussion of this matter. The Company invested $6 million in the equity of a privately-held waste and recycling entity in fiscal 2017. The equity investment does not have a readily determinable fair value and, therefore, is carried at cost and adjusted for impairments and observable price changes. The investment is reported within other assets in the Consolidated Balance Sheets. The carrying value of the investment was $6 million as of August 31, 2021 and 2020. The Company has not recorded any impairments or upward or downward adjustments to the carrying value of the investment since acquisition. The Company’s cloud computing arrangements primarily comprise hosting arrangements which are service contracts, whereby the Company gains remote access to use enterprise software hosted by the vendor or another third party on an as-needed basis for a period of time in exchange for a subscription fee. Subscription fees are usually prepaid and recorded in operating expense over the period that the Company has access to use the software. Implementation costs for cloud computing arrangements are capitalized if certain criteria are met and consist of internal and external costs directly attributable to developing and configuring cloud computing software for its intended use. Amortization of capitalized implementation costs is recorded on a straight-line basis over the term of the cloud computing arrangement, which is the non-cancellable period of the agreement, together with periods covered by renewal options which the Company is reasonably certain to exercise. Debt issuance costs consist primarily of costs incurred by the Company to enter or modify its credit facilities. The Company reports deferred debt issuance costs within other assets in the Consolidated Balance Sheets and amortizes them to interest expense on a straightline basis over the contractual term of the arrangement.
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