CASH 2018 Annual Report

121 The new standard provides several optional practical expedients in transition. The Company expects to elect the ‘package of practical expedients,’ which permits the Company not to reassess under the new standard the Company's prior conclusions about lease identification, lease classification and initial direct costs. The Company does not expect to elect the use-of-hindsight or the practical expedient pertaining to land easements; the latter not being applicable to the Company. As a lessee, the Company expects this new standard to have a material effect on its financial statements. While the Company continues to assess all of the effects of adoption, the Company currently believes the most significant effects relate to (1) the recognition of ROU assets and lease liabilities on the balance sheet for the Company's office and equipment operating leases; (2) providing significant new disclosures about the Company's leasing activities. As a lessor, the Company is still in the process of assessing the impact of the standard on its existing lease portfolio. The Company does not expect a significant change in its leasing activities between now and adoption. The new standard also provides practical expedients for a lessee’s and lessor’s ongoing accounting. The Company currently expects to elect the short-term lease recognition exemption for all leases that qualify. This means, for those leases that qualify, the Company (as lessee) would not recognize ROU assets or lease liabilities. The Company (as lessee and lessor) also currently expects to elect the practical expedient to not separate lease and non-lease components for all of its leases that qualify. ASU No. 2014-9, Revenue Recognition – Revenue from Contracts with Customers (Topic 606) In May 2014, the FASB issued a new standard related to revenue recognition. Under the standard, revenue is recognized when a customer obtains control of promised goods or services in an amount that reflects the consideration the entity expects to receive in exchange for those goods or services. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The Company adopted the standard effective October 1, 2018, using the modified retrospective approach with a cumulative effect adjustment included in Retained Earnings upon the date of adoption. Results for prior period amounts will not be adjusted and will continue to be reported in accordance with the Company’s historical accounting policies. The Company implemented internal controls and key system functionality to enable the preparation of financial information on adoption. The most significant impact of the standard relates to the Company's accounting for revenues of prepaid cards in its MPS division, specifically, breakage on unregistered, unused cardholder balances. For such balances, the Company recognizes breakage revenue predominantly after the month of the card balance expiration rather than ratably over the life of the prepaid card. The Company performed an analysis on such revenues and has determined an approximate impact to Retained Earnings of $2.0 million in additional earned revenue upon adoption at October 1, 2018. All other revenue streams remain substantially unchanged. ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments This ASU addresses eight classification issues related to the statement of cash flows including; debt prepayment or debt extinguishment costs, settlement of zero-coupon bonds, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies, distributions received from equity method investees, beneficial interests in securitization transactions, and separately identifiable cash flows and application of the predominance principle. This update is effective for annual periods and interim periods in fiscal years beginning after December 15, 2017, and the Company is currently assessing the potential impact to the Consolidated Financial Statements. ASU 2017-08, Receivables - Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities This ASU requires entities to shorten the amortization period for certain callable debt securities held at a premium. Specifically, the amendments in this update require the premium to be amortized to the earliest call date. The amendments do not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity. The amendments in this update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018, and is not expected to have an impact on the Consolidated Financial Statements.