Note 1  Basis of Presentation ? AAR CORP. and its subsidiaries are referred to herein collectively as AAR, Company, we, us, and our, unless the context indicates otherwise. The accompanying Condensed Consolidated Financial Statements include the accounts of AAR and its subsidiaries after elimination of intercompany accounts and transactions. ? We have prepared these statements without audit, pursuant to the rules and regulations of the United States Securities and Exchange Commission (SEC). The Condensed Consolidated Balance Sheet as of May 31, 2019 has been derived from audited financial statements. To prepare the financial statements in conformity with U.S. generally accepted accounting principles (GAAP), management has made a number of estimates and assumptions relating to the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities. Actual results could differ from those estimates. Certain information and note disclosures, normally included in comprehensive financial statements prepared in accordance with GAAP, have been condensed or omitted pursuant to such rules and regulations of the SEC. These Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and notes thereto included in our latest annual report on Form 10-K. ? In the opinion of management, the condensed consolidated financial statements reflect all adjustments (which consist only of normal recurring adjustments) necessary to present fairly the Condensed Consolidated Balance Sheet of AAR CORP. and its subsidiaries as of November 30, 2019, the Condensed Consolidated Statements of Income and Condensed Consolidated Statements of Comprehensive Income for the three- and six-month periods ended November 30, 2019 and 2018, the Condensed Consolidated Statements of Cash Flows for the six-month periods ended November 30, 2019 and 2018, and the Condensed Consolidated Statement of Changes in Equity for the three- and six-month periods ended November 30, 2019 and 2018. The results of operations for such interim periods are not necessarily indicative of the results for the full year. ? New Accounting Pronouncements Adopted ? In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-02, Leases (ASC 842), which amended the existing accounting standards for lease accounting. ASC 842 requires lessees to recognize a right-of-use ("ROU") asset and lease liability on the balance sheet for most lease arrangements, including those classified as operating leases. In addition, ASC 842 requires new qualitative and quantitative disclosures about our leasing activities. ? We adopted ASC 842 on June 1, 2019 using the modified retrospective transition approach. Under that approach, prior periods have not been restated and continue to be reported under the accounting standards in effect for those periods. A discussion of our revised accounting policy for leases is included in Note 10. ? We have elected the package of practical expedients, which must be elected as a package and applied consistently to all leases. This package permits us to not reassess our prior conclusions about lease identification, lease classification and initial direct costs. In addition, we have elected the practical expedients to not separate lease and non-lease components for both lessee and lessor relationships and to not apply the recognition requirements to leases with terms of less than twelve months. ? Upon adoption of ASC 842 on June 1, 2019, we recognized operating lease ROU assets of $123.2 million and operating lease liabilities of $116.8 million on our Condensed Consolidated Balance Sheet. These amounts included operating lease ROU assets of $26.6 million and operating lease liabilities of $25.3 million related to our discontinued operations. In addition, we recognized the remaining unamortized deferred gains of $2.5 million, net of tax, associated with sale-leaseback transactions as a cumulative effect adjustment to the opening balance of retained earnings as of June 1, 2019. ? The adoption of ASC 842 did not have a material impact on the Condensed Consolidated Statements of Income or Cash Flows. ? The impact of the adoption of ASC 842 on our Condensed Consolidated Balance Sheet was as follows: ? ? ? ? ? ? ? ? ? ? ? ? As of ASC 842 As of ? ? May 31, 2019 ? Adjustments ? June 1, 2019 Assets of discontinued operations ? $ 29.2 ? $ 26.6 ? $ 55.8 Other current assets ? ? 36.2 ? ? (0.5) ? ? 35.7 Intangible assets, net ? ? 22.2 ? ? (8.5) ? ? 13.7 Operating lease ROU assets ? ?  ? ? 96.6 ? ? 96.6 Other non-current assets ? 77.5 ? (1.8) ? 75.7 Accrued liabilities ? 140.5 ? 10.0 ? 150.5 Liabilities of discontinued operations ? ? 29.2 ? ? 25.3 ? ? 54.5 Operating lease liabilities ?  ? 77.7 ? 77.7 Other liabilities ? ? 28.3 ? ? (3.1) ? ? 25.2 Retained earnings ? 709.8 ? 2.5 ? 712.3 ? In February 2018, the FASB issued ASU 2018-02, Income StatementReporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income . This ASU permits the reclassification of tax effects stranded in accumulated other comprehensive income as a result of the Tax Cuts and Jobs Act (the Tax Reform Act) to retained earnings. The FASB made the reclassification optional and we did not exercise the option to reclassify the stranded tax effects caused by the Tax Reform Act. ? New Accounting Pronouncements Not Yet Adopted ? In June 2016, the FASB issued ASU 2016-13, Financial InstrumentsCredit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments . This ASU requires a change in the measurement approach for credit losses on financial assets measured on an amortized cost basis from an incurred loss method to an expected loss method, thereby eliminating the requirement that a credit loss be considered probable to impact the valuation of a financial asset measured on an amortized cost basis. This ASU also requires the measurement of expected credit losses to be based on relevant information about past events, including historical experience, current conditions, and a reasonable and supportable forecast of the collectability of the related financial asset. We continue to evaluate the impact of this ASU on our consolidated financial statements and expect to adopt this ASU on June 1, 2020.