Kodiak Sciences Inc. Notes to Consolidated Financial Statements (in thousands, except share and per share data) 115 The Company plans to adopt ASU 2016-02 effective January 1, 2019 using the modified retrospective transition approach under ASU 2018-11. The Company is currently in the process of evaluating the impact that the adoption of the new lease standard will have on the consolidated financial statements. Upon adoption, the Company expects to recognize the right- of-use asset and related liability for the lease of its office and laboratory space in Palo Alto, California (Note 7). 3. Property and Equipment, net Property and equipment, net consists of the following (in thousands): December 31, 2018 December 31, 2017 Leasehold improvement ............................................................................................... $ 1,260 $ 1,260 Laboratory equipment .................................................................................................. 1,133 1,174 Furniture and fixtures................................................................................................... 225 225 Computer software ....................................................................................................... 85 173 Office equipment.......................................................................................................... 79 79 Computer equipment.................................................................................................... — 52 Total property and equipment ...................................................................................... 2,782 2,963 Less: Accumulated depreciation .................................................................................. (1,685) (1,454) Property and equipment, net......................................................................................... $ 1,097 $ 1,509 All property and equipment are maintained in the United States. Depreciation expense, including depreciation of assets under capital leases, was $0.5 million, $0.5 million and $0.3 million for the years ended December 31, 2018, 2017 and 2016, respectively. 4. Accrued Liabilities and Other Current Liabilities Accrued liabilities and other current liabilities consist of the following (in thousands): December 31, 2018 December 31, 2017 Accrued salaries and benefits....................................................................................... $ 2,061 $ 1,129 Accrued research and development.............................................................................. 1,387 4,293 Accrued professional fees ............................................................................................ 117 19 Accrued legal fees ........................................................................................................ 82 35 Accrued other liabilities ............................................................................................... 129 326 Total accrued and other current liabilities.................................................................... $ 3,776 $ 5,802 5. Fair Value Measurements The Company applies fair value accounting for all financial assets and liabilities and non-financial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis. Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, a three-tier fair value hierarchy has been established, which prioritizes the inputs used in measuring fair value as follows: Level 1—Observable inputs, such as quoted prices in active markets for identical assets or liabilities at the measurement date. Level 2—Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3—Unobservable inputs which reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.