Get Started for Free Contexxia identifies hard-to-find pieces of information in SEC filings. No more highlighters, no more redlining, no more poring over huge documents. WAGEWORKS, INC. (1158863) 10-Q published on Jun 27, 2019 at 4:36 pm
Reporting Period: Mar 30, 2019
The Company leases office space under noncancelable operating leases. Operating lease right-of-use assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As the implicit rate is not readily determinable in most of the Company’s lease agreements, the Company uses its estimated secured incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. Lease expense is recognized on a straight-line basis over the lease term. In addition, the Company made an accounting policy election to keep leases with an initial term of 12 months or less off of the balance sheet.
The Company determines if an arrangement is a lease or contains a lease at inception. The Company applied the short-term lease measurement and recognition exemption in which right-of-use (“ROU”) assets and lease obligations are not recognized for short-term leases. The Company does not have lease agreements with residual value guarantees, sales leaseback terms or material restrictive covenants. The Company has one sublease for which the sublease income was recorded as a reduction to operating lease expense for the three months ended March 31, 2019 and 2018.
In August 2018, the FASB issued ASU No. 2018-15, “Intangibles, Goodwill and Other (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract” (ASU 2018-15). ASU 2018-15 requires implementation costs incurred by customers in cloud computing arrangements to be deferred, if those same costs would be capitalized by a customer in a software licensing arrangement under the internal-use software guidance in ASC 350-40. ASU 2018-15 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2019, with early adoption permitted. The Company elected to early adopt the new standard as of March 31, 2019. The adoption of this standard did not have a material effect on the Company’s condensed consolidated financial statements.
Because the reliability of the internal control process requires repeatable execution, the successful remediation of the company’s material weaknesses will require review and evidence of effectiveness prior to concluding that the controls are effective, and there is no assurance that additional remediation steps will not be necessary. As such, as we continue to evaluate and work to improve our internal control over financial reporting, our management may decide to take additional measures to address the material weaknesses or modify the remediation steps already underway. As noted above, although we plan to complete the remediation process as quickly as possible, we cannot at this time estimate how long it will take, and our initiatives may not prove to be successful. Accordingly, until this weakness is remediated, we are performing additional analyses and other procedures to ensure that our condensed consolidated financial statements are prepared in accordance with GAAP.
The terms of the Class III directors consisting of Stuart C. Harvey, Jr., Thomas A. Bevilacqua and Bruce G. Bodaken were to have expired at the Annual Meeting of Stockholders in 2018 and the terms of the Class I directors consisting of Jerome D. Gramglia, Robert L. Metzger and George P. Scanlon were to have expired at the Annual Meeting of Stockholders in 2019. However, the Company has not convened an Annual Meeting of Stockholders since 2017, and, consequently, the terms of the Class III and Class I directors will expire at the Company’s next Annual Meeting of Stockholders.