Summary of Significant Accounting Policies (Tables)
|9 Months Ended
Sep. 30, 2022
|Accounting Policies [Abstract]
|Unusual Risks and Uncertainties
COVID-19 – The COVID-19 pandemic negatively impacted the global economy beginning in the first quarter of 2020 and continues to affect the global economy and supply chain. The impact on the economy has affected both consumer demand and the supply of manufactured goods, both of which continue to impact our business. The global automotive supply chain has been significantly disrupted since the onset of the pandemic, primarily related to the production of semiconductors and other components that are used in many modern automobiles, in addition to workforce-related production delays and stoppages. As a result, automobile manufacturing has operated for multiple years at lower than usual production levels, reducing the amount of new vehicle inventory and certain parts inventory available to our dealerships. These inventory constraints, coupled with strong consumer demand and elevated levels of consumer savings, have led to low new and used vehicle inventory and a high new and used vehicle pricing environment, which drove retail new vehicle unit sales volumes lower across the industry.
Recent Accounting Pronouncements – In March 2020, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2020-04, “Reference Rate Reform (Accounting Standards Codification (“ASC”) Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” ASU 2020-04 provides optional guidance for a limited period of time to ease the potential accounting impact associated with transitioning away from reference rates that are expected to be discontinued, such as the London InterBank Offered Rate (“LIBOR”). The amendments in this ASU apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued. The amendments in ASU 2020-04 could be adopted beginning January 1, 2020 and are effective through December 31, 2022. In January 2021, the FASB issued ASU 2021-01, which clarifies that certain optional expedients and exceptions in ASC Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. In October 2022, Sonic entered into Amendment No. 2 to Fifth Amended, Restated and Consolidated Credit Agreement (the “Second Credit Agreement Amendment”) which amended the Credit Agreement to, among other things: (i) replace the Credit Agreement’s LIBOR-based Eurodollar reference interest rate option with a reference interest rate option based upon one month Term SOFR (as defined in the Credit Agreement); (ii) amend the provisions relating to the basis for inclusion of real property owned by the Company or certain of its subsidiaries in the borrowing base for the Revolving Credit Facility; (iii) amend the minimum amount for commitments under the Revolving Credit Facility and the proportion that such commitments under the Revolving Credit Facility may compose of the total commitments made by the lenders; and (iv) adjust aspects of the offset account used for voluntary reductions to loans under the Floor Plan Facilities.