Page 19 - 2019 Annual Report

NOTES TO FINANCIAL STATEMENTS (continued)

Mineral reserves and mineral interests acquired in connection with a business combination are valued using an income
approach over the life of the reserves.
Depreciation is computed based on estimated service lives using the straight‐line method. Depletion of mineral reserves is
calculated based on proven and probable reserves using the units‐of‐production method on a quarry‐by‐quarry basis.
Property, plant and equipment are reviewed for impairment whenever facts and circumstances indicate that the carrying
amount of an asset group may not be recoverable. An impairment loss is recognized if expected future undiscounted cash flows
over the estimated remaining service life of the related asset are less than the asset’s carrying value.

Repair and Maintenance Costs. Repair and maintenance costs that do not substantially extend the life of the Company’s plant
and equipment are expensed as incurred.

Leases. Effective January 1, 2019, if the Company determines a contract is or contains a lease at inception of the agreement,
the Company records right‐of‐use (ROU) assets, which represent the Company’s right to use an underlying leased asset, and
lease liabilities, which represent the Company’s obligation to make lease payments arising from the lease, on the consolidated
balance sheet at the present value of the future lease payments over the lease term at commencement date. The Company
determines the present value of lease payments based on the implicit rate, which may be explicitly stated in the lease, if
available, or may be the Company’s estimated collateralized incremental borrowing rate based on the term of the lease. Initial
ROU assets also include any lease payments made at or before commencement date and any initial direct costs incurred and
exclude lease incentives. Certain of the Company’s leases contain renewal and/or termination options. The Company
recognizes renewal or termination options as part of its ROU assets and lease liabilities when the Company has the unilateral
right to renew or terminate and it is reasonably certain these options will be exercised.

Some leases require the Company pay non‐lease components, which may include taxes, maintenance, insurance and certain
other expenses applicable to the leased property, and are primarily considered variable costs. The Company accounts for lease
and non‐lease components as a single amount, with the exception of railcar and fleet vehicle leases, for which the Company
separately accounts for the lease and non‐lease components.
Leases are evaluated and determined to be operating or finance leases. If a lease transfers ownership to the underlying asset
by the end of the lease term; includes a purchase option that is reasonably certain to be exercised; has a lease term for the
major part of the remaining economic life of the underlying asset; has a present value of the sum of the lease payments that
equals or exceeds substantially all of the fair value of the underlying asset; is for an underlying asset that is of a specialized
nature and is expected to have no alternative use to the lessor at the end of the lease term, the lease is a finance lease. If none
of these terms exist, the lease is an operating lease.
As allowed by Accounting Standards Codification 842, Leases (ASC 842), leases with an initial lease term of one year or less are
not recorded on the balance sheet. Costs for these leases are expensed as incurred.
In the consolidated statements of earnings, operating lease expense, which is recognized on a straight‐line basis over the lease
term, and the amortization of finance lease ROU assets are included in cost of revenues or selling, general and administrative
expenses. Accretion on the liabilities for finance leases is included in interest expense.

Goodwill and Intangible Assets. Goodwill represents the excess purchase price paid for acquired businesses over the estimated
fair value of identifiable assets and liabilities. Other intangibles represent amounts assigned principally to contractual
agreements and are amortized ratably over periods based on related contractual terms. If an intangible asset is deemed to
have an indefinite life, it is not amortized.
The Company’s reporting units, which represent the level at which goodwill is tested for impairment, are based on the operating
segments of the Building Materials business. Goodwill is assigned to the respective reporting unit(s) based on the location of
acquisitions at the time of consummation. Goodwill is tested for impairment by comparing each reporting unit’s fair value to
its carrying value, which represents a Step 1 approach. However, prior to Step 1, the Company may perform an optional
qualitative assessment and evaluate macroeconomic conditions, industry and market conditions, cost factors, overall financial
performance and other business or reporting unit‐specific events. If the Company concludes it is more‐likely‐than‐not (i.e., a
likelihood of more than 50%) that a reporting unit’s fair value is higher than its carrying value, the Company does not perform
any further goodwill impairment testing for that reporting unit. Otherwise, the Company proceeds to Step 1 of its goodwill
impairment analysis. The Company may bypass the qualitative assessment for any reporting unit in any period and proceed
directly with the quantitative calculation in Step 1. If the reporting unit’s fair value exceeds its carrying value, no further
calculation is necessary. A reporting unit with a carrying value in excess of its fair value constitutes a Step 1 failure and will lead
to an impairment charge.

Celebrating 25 Years as a Public Company Annual Report ♦ Page 17