Leases, Codification Topic 842
|6 Months Ended|
Aug. 01, 2020
ASC 842 Leases, requires the remeasurement of the lease term upon the occurrence of a significant event or a change in circumstances that is within the control of the lessee that directly affects whether the lessee is reasonably certain to exercise or not to exercise an option to extend or terminate a lease. Following the filing of the Chapter 11 Cases on May 15, 2020, the Company remeasured certain leases based on a change in their reasonably certain lease term. The weighted average discount rate used for remeasuring the leases was 22.3%. As a result of the remeasurements, the Company reduced its operating lease assets by $95 million and its operating lease liabilities by $115 million, recording a gain of $20 million, which is included in Restructuring and management transition, net (see Note 13) in the unaudited interim Consolidated Statement of Operations.
During the second quarter of 2020, the Bankruptcy Court approved the rejection of certain leases that were primarily related to leases associated with stores closed prior to the commencement of the Chapter 11 Cases. In connection with the rejection of these leases, the Company reduced its operating lease assets by $46 million and its operating lease liabilities by $112 million, recording a gain of $66 million, which is included in Reorganization items, net (see Note 2) in the unaudited interim Consolidated Statement of Operations.Additionally, in connection with scheduled store closures, during the second quarter, the Company accelerated the amortization of store operating lease assets of $11 million, which was recorded to SG&A expenses in the unaudited interim Consolidated Statement of Operations.
The entire disclosure for lessee entity's leasing arrangements including, but not limited to, all of the following: (a.) The basis on which contingent rental payments are determined, (b.) The existence and terms of renewal or purchase options and escalation clauses, (c.) Restrictions imposed by lease agreements, such as those concerning dividends, additional debt, and further leasing.
Reference 1: http://fasb.org/us-gaap/role/ref/otherTransitionRef