Right-of-Use Assets and Liabilities
|12 Months Ended|
Dec. 31, 2019
|Right-of-Use Assets and Liabilities|
|Right-of-Use Assets and Liabilities||
Note 15 — Right-of-Use Assets and Liabilities
On January 1, 2019, the Company adopted FASB ASU 2016-02, Leases (Topic 842). ASU 2016-02 requires lessees to recognize a right-of-use asset and lease liability in the balance sheet for all leases, including operating leases, with terms of more than twelve months. Upon adoption, we recognized an Operating Lease Right-of-Use Asset of $994,000, a current Operating Lease Liability of $533,000 and a long-term Operating Lease Liability of $461,000. We applied Topic 842 to all leases as of January 1, 2019 with comparable periods continuing to be reported under Topic 840. Upon adoption, we elected: (i) the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allowed us to carry forward the historical lease classification and (ii) the practical expedient which allows us not to separate non-lease components from lease components, as they are not considered the predominate components in our contracts. The adoption of this standard does not have a significant impact on our consolidated results of operations or cash flows.
The Company has signed several lease agreements, with the largest being for its office and manufacturing facility in the Rochester, New York area under an operating lease that commenced October 3, 2015 and expires on October 3, 2020. This lease has an original five-year term with an option by the Company to renew for two additional three-year terms at pre-agreed to lease rates. As of January 2020, we have given formal notice of our intent to exercise the first of two renewal terms, extending our current lease expiration date to October 3, 2023. This renewal term is included in our right-to-use asset and liability as of December 31, 2019 as the renewal option for our current leased facility is reasonably certain. Operating lease costs under the operating leases totaled $572,767, $462,711 and $461,246 for the years ended December 31, 2019, 2018 and 2017, respectively.
Certain leases provide for increases in future minimum annual rental payments as defined in the lease agreements. The leases generally also include real estate taxes and common area maintenance charges in the annual rental payments. Short-term leases are leases having a term of twelve (12) months or less. The Company recognizes short-term leases on a straight-line basis and does not record a related lease asset or liability for such leases.
As none of our leases provide an implicit interest rate, we use our incremental borrowing rate to determine our discount rate at lease inception based upon the information available at commencement in determining the present value of lease payments. As of December 31, 2019, the weighted average discount rate was 4.5% and the weighted average remaining lease term was 3.7 years.
Future lease payments under operating leases as of December 31, 2019 were as follows:
Tabular disclosure for lessee's operating leases. Includes, but is not limited to, description of lessee's operating lease, existence and terms of renewal or purchase options and escalation clauses, restrictions imposed by lease, such as those concerning dividends, additional debt, and further leasing, rent holidays, rent concessions, or leasehold improvement incentives and unusual provisions or conditions.
Reference 1: http://fasb.org/us-gaap/role/ref/otherTransitionRef