Rosetta Stone 2011 Annual Report Download - page 112

Table of Contents
ROSETTA STONE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
14. COMMITMENTS AND CONTINGENCIES (Continued)
kiosk's sales in excess of stipulated amounts. Kiosk site licenses range from a period of one month to 89 months. Building, warehouse and office space leases
range from twelve months to 89 months. Certain leases also include lease renewal options.
The following table summarizes future minimum operating lease payments as of December 31, 2011 and the years thereafter (in thousands):
As of
December 31,
2011
Periods Ending December 31,
2012 $ 6,616
2013 4,256
2014 1,828
2015 386
2016 —
2017 and thereafter —
$ 13,086
Total expenses under operating leases were $13.5 million and $13.0 million during the years ended December 31, 2011 and 2010, respectively.
The Company accounts for its leases under the provisions of Accounting Standards Codification topic 840, Accounting for Leases ("ASC 840"), and
subsequent amendments, which require that leases be evaluated and classified as operating leases or capital leases for financial reporting purposes. Certain
operating leases contain rent escalation clauses, which are recorded on a straight-line basis over the initial term of the lease with the difference between the
rent paid and the straight-line rent recorded as either a deferred rent asset or liability depending on the calculation. Lease incentives received from landlords
are recorded as deferred rent liabilities and are amortized on a straight-line basis over the lease term as a reduction to rent expense. The deferred rent liability
was $0.5 million at December 31, 2011. The deferred rent asset was $0.1 at December 31, 2011. The deferred rent asset is classified in prepaid and other
assets as all associated leases have less than one year remaining on their term.
The Company exited its facility at 1101 Wilson Boulevard, Arlington, Virginia in December 2008 as a result of a relocation of its headquarters to 1919
North Lynn St., Arlington, Virginia. The Company estimated its liability under operating lease agreements and accrued exit costs in accordance with
Accounting Standards Codification topic 420, Exit or Disposal Cost Obligations ("ASC 420") as the leases associated with this facility did not terminate until
December 31, 2009 and August 31, 2013, respectively. Accrued exit costs associated with our headquarters relocation were charged to general and
administrative expense in December 2008.
As a result of accelerated growth in its Arlington headquarters, the Company exceeded maximum capacity in its headquarters facility during the third
quarter of 2010. At that time, there was no additional space available for lease in the 1919 North Lynn St. location and additional space was needed to support
continued growth. The office space currently under lease at 1101 Wilson Blvd, Suite 1130 was unoccupied, and as a result of its close proximity to the 1919
North Lynn Street location, management made the decision to reoccupy the formerly abandoned space. During the
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