| Summary of Significant Accounting Policies | Note 2—Summary of Significant Accounting Policies
Principles of consolidation
These consolidated financial statements include the accounts of the
Company, its wholly-owned subsidiaries, and its majority owned
joint venture. All intercompany transactions have been
eliminated.
The Company entered into a joint venture with Meisheng Culture
& Creative Corp., for the purpose of providing certain JAKKS
licensed and non-licensed toys and consumer products to agreed-upon
territories of the People’s Republic of China. The joint
venture includes a subsidiary in the Shanghai Free Trade Zone that
sells, distributes and markets these products, which include dolls,
plush, role play products, action figures, costumes, seasonal
items, technology and app-enhanced toys, based on top entertainment
licenses and JAKKS’ own proprietary brands. The Company owns
fifty-one percent of the joint venture and consolidates the joint
venture since control rests with the Company.
Cash and cash equivalents
The Company considers all highly liquid investments with an
original maturity of three months or less, when acquired, to be
cash equivalents. The Company maintains its cash in bank deposits
which, at times, may exceed federally insured limits. The Company
has not experienced any losses in such accounts. The Company
believes it is not exposed to any significant credit risk of cash
and cash equivalents.
Accounts Receivable and Allowance for Doubtful Accounts
Credit is granted to customers on an unsecured basis. Credit limits
and payment terms are established based on extensive evaluations
made on an ongoing basis throughout the fiscal year of the
financial performance, cash generation, financing availability, and
liquidity status of each customer. Customers are reviewed at least
annually, with more frequent reviews performed as necessary,
depending upon the customer’s financial condition and the
level of credit being extended. For customers who are experiencing
financial difficulties, management performs additional financial
analyses before shipping to those customers on credit. The Company
uses a variety of financial arrangements to ensure collectability
of accounts receivable of customers deemed to be a credit risk,
including requiring letters of credit, purchasing various forms of
credit insurance with unrelated third parties, or requiring cash in
advance of shipment.
The Company records an allowance for doubtful accounts based upon
management’s assessment of the business environment,
customers’ financial condition, historical collection
experience, accounts receivable aging, customer disputes and the
collectability of specific customer accounts.
Use
of estimates
The preparation of consolidated financial statements in conformity
with accounting principles generally accepted in the United States
of America requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the dates of the
consolidated financial statements, and the reported amounts of
revenue and expenses during the reporting periods. Actual future
results could differ from those estimates.
Revenue recognition
Revenue is recognized upon the shipment of goods to customers or
their agents, depending upon terms, provided there are no
uncertainties regarding customer acceptance, the sales price is
fixed or determinable and collectability is reasonably
assured.
Generally the Company does not allow product returns. It provides
its customers a negotiated allowance for breakage or defects, which
is recorded when the related revenue is recognized. However, the
Company does make occasional exceptions to this policy and
consequently accrues a return allowance based upon historic return
amounts and management estimates. The Company occasionally grants
credits to facilitate markdowns and sales of slow-moving
merchandise. These credits are recorded as a reduction of gross
sales at the time of the sale.
Fair value measurements
Fair value is the price that would be received to sell an asset or
paid to transfer a liability in an orderly transaction between
market participants at the measurement date. In determining fair
value, the Company uses various methods including market, income
and cost approaches. Based upon these approaches, the Company often
utilizes certain assumptions that market participants would use in
pricing the asset or liability, including assumptions about risk
and/or the risks inherent in the inputs to the valuation technique.
These inputs can be readily observable, market-corroborated, or
unobservable inputs. The Company utilizes valuation techniques that
maximize the use of observable inputs and minimize the use of
unobservable inputs. Based upon observable inputs used in the
valuation techniques, the Company is required to provide
information according to the fair value hierarchy. The fair value
hierarchy ranks the quality and reliability of the information used
to determine fair values into three broad levels as follows:
Level 1:
Valuations for assets and liabilities traded in active markets from
readily available pricing sources for market transactions involving
identical assets or liabilities.
Level 2:
Valuations for assets and liabilities traded in less active dealer
or broker markets. Valuations are obtained from third-party pricing
services for identical or similar assets or liabilities.
Level 3:
Valuations incorporate certain assumptions and projections in
determining the fair value assigned to such assets or
liabilities.
In instances where the determination of the fair value measurement
is based upon inputs from different levels of the fair value
hierarchy, the level in the fair value hierarchy within which the
entire fair value measurement falls is based upon the lowest level
input that is significant to the fair value measurement in its
entirety. The Company’s assessment of the significance of a
particular input to the fair value measurement in its entirety
requires judgment, and considers factors specific to the asset or
liability.
The following table summarizes the Company’s financial assets
measured at fair value on a recurring basis as of December 31 (in
thousands):
Fair Value Measurements
Carrying Amount as of
As of December 31, 2016
December 31, 2016
Level 1
Level 2
Level 3
Cash equivalents
$
15,312
$
15,312
$
—
$
—
Fair Value Measurements
Carrying Amount as of
As of December 31, 2017
December 31, 2017
Level 1
Level 2
Level 3
Cash equivalents
$
13,718
$
13,718
$
—
$
—
3.25% Convertible senior notes due in 2020
$
22,469
$
—
$
—
$
22,469
The following table provides a reconciliation of the beginning and
ending balances of assets measured at fair value on a recurring
basis using significant unobservable inputs (Level 3) (in
thousands):
2017
Balance at January 1, 2017
$
—
Issuance of 3.25% Convertible Senior Notes due in 2020
22,161
Change in fair value
308
Balance at December 31, 2017
$
22,469
The Company’s accounts receivable, accounts payable and
accrued expenses represent financial instruments. The carrying
value of these financial instruments is a reasonable approximation
of fair value.
In
August 2017, the Company agreed with Oasis Management and Oasis
Investments II Master Fund Ltd., the holder of approximately $21.5
million face amount of its 4.25% convertible senior notes due in
2018 (“2018 Notes”), to exchange and extend the
maturity date of these notes to November 1, 2020. In addition, the
interest rate was reduced to 3.25% per annum and the conversion
rate was increased to 328.0302 shares of the Company’s common
stock per $1,000 principal amount of notes, among other things.
These notes are hereafter referred to as the “3.25%
Convertible Senior Notes due in 2020” or “3.25% 2020
Notes.” After execution of a definitive agreement and final
approval by the other members of the Company’s Board of
Directors and Oasis’ Investment Committee, the transaction
closed on November 7, 2017. The principal balance of the remaining
2018 Notes amounted to approximately $21.2 million. In connection
with the transaction, the Company elected the fair value option of
measurement for the 3.25% 2020 Notes under ASC
815 Derivatives
and Hedging .
As a result, these notes are re-measured each reporting period
using Level 3 inputs (Monte
Carlo ,
with changes in fair value reflected in current period earnings in
our consolidated statements of operations. At December 31, 2017 the
3.25% 2020 Notes had a fair value of $22.5 million.
The fair value of the remaining 4.25% convertible senior notes
payable due 2018 as of December 31, 2016 and 2017 was $18.9 million
and $20.5 million respectively, based upon the most recent quoted
market prices, and the fair value of the 4.875% convertible senior
notes payable due 2020 as of December 31, 2016 and 2017 was $89.3
million and $89.7 million, respectively, based upon the most recent
quoted market prices. The fair values of the convertible senior
notes are considered to be Level 3 measurements on the fair value
hierarchy.
For the years ended December 31, 2016 and 2017, there was no
impairment to the value of the Company’s non-financial
assets.
Inventory
Inventory, which includes the ex-factory cost of goods, capitalized
warehouse costs and in-bound freight and duty, is valued at the
lower of cost (first-in, first-out) or market, net of inventory
obsolescence reserve, and consists of the following (in
thousands):
December 31,
2016
2017
Raw materials
$
5,204
$
3,265
Finished goods
70,231
55,167
$
75,435
$
58,432
During the first quarter of 2017, the Company adopted Accounting
Standards Update (“ASU”) 2015-11, “Simplifying
the Measurement of Inventory (Topic 330)”. The amendments,
which apply to inventory that is measured using any method other
than the last-in, first-out (LIFO) or retail inventory method,
require that entities measure inventory at the lower of cost or net
realizable value. ASU 2015-11 is effective for fiscal years, and
interim periods within those years, beginning after December 15,
2016 and should be applied on a prospective basis. The adoption of
ASU 2015-11 did not have a material impact on the Company’s
consolidated financial statements.
Property and equipment
Property and equipment are stated at cost and are being depreciated
using the straight-line method over their estimated useful lives as
follows:
Office equipment
5 years
Automobiles
5 years
Furniture and fixtures
5 - 7 years
Leasehold improvements
Shorter of length of lease or 10 years
During interim reporting periods, the Company uses the usage method
as its depreciation methodology for molds and tools used in the
manufacturing of its products, which is more closely correlated to
the production of goods as it follows the seasonality of sales. The
Company believes that the usage method more accurately matches
costs with revenues. From a full-year perspective, the depreciation
methodology follows the straight-line method, based on the
estimated useful life of molds and tools of three years. Estimated
useful lives are periodically reviewed and, where appropriate,
changes are made prospectively. The carrying value of property and
equipment is reviewed when events or changes in circumstances
indicate that the carrying value of an asset may not be
recoverable. No impairment charges were recorded for the years
ended December 31, 2015, 2016 and 2017.
For the years ended December 31, 2015, 2016 and 2017, the
Company’s aggregate depreciation expense related to property
and equipment was $10.9 million, $13.9 million and $13.0 million,
respectively.
Other Comprehensive Income (Loss)
Other comprehensive income (loss) includes all changes in equity
from non-owner sources. The Company accounts for other
comprehensive income in accordance with Accounting Standards
Codification (“ASC”) ASC 220, “Comprehensive
Income.” All the activity in other comprehensive income
(loss) and all amounts in accumulated other comprehensive income
(loss) relate to foreign currency translation adjustments.
Advertising
Production costs of commercials and programming are charged to
operations in the period during which the production is first
aired. The costs of other advertising, promotion and marketing
programs are charged to operations in the period incurred.
Advertising expense for the years ended December 31, 2015, 2016 and
2017, was approximately $15.8 million, $20.1 million and $10.8
million, respectively.
The Company also participates in cooperative advertising
arrangements with certain customers, whereby it allows a discount
from invoiced product amounts in exchange for customer purchased
advertising that features the Company’s products. Typically,
these discounts range from 2% to 10% of gross sales, and are
generally based upon product purchases or specific advertising
campaigns. Such amounts are accrued when the related revenue is
recognized or when the advertising campaign is initiated. These
cooperative advertising arrangements are accounted for as direct
selling expenses.
Income taxes
The Company does not file a consolidated return with its foreign
subsidiaries. The Company files federal and state returns and its
foreign subsidiaries file returns in their respective
jurisdictions. Deferred taxes are provided on an asset and
liability method whereby deferred tax assets are recognized as
deductible temporary differences and operating loss and tax credit
carry-forwards and deferred tax liabilities are recognized for
taxable temporary differences. Temporary differences are the
differences between the reported amounts of assets and liabilities
and their tax basis. Deferred tax assets are reduced by a valuation
allowance when, in the opinion of management, it is more likely
than not that some portion or all of the deferred tax assets will
not be realized. Deferred tax assets and liabilities are adjusted
for the effects of changes in tax laws and rates on the date of
enactment.
In October 2016, the FASB issued ASU 2016-16, “Income Taxes
(Topic 740): Intra-Entity Transfers of Assets Other than
Inventory.” The amendments in this ASU reduces the complexity
in the accounting standards by allowing the recognition of current
and deferred income taxes for an intra-entity asset transfer, other
than inventory, when the transfer occurs. Historically, recognition
of the income tax consequence was not recognized until the asset
was sold to an outside party. This ASU is effective for fiscal
years, and interim periods within those fiscal years, beginning
after December 15, 2017. Early adoption is permitted. The Company
expects the impact of this ASU to be immaterial to its consolidated
financial statements.
Foreign Currency Translation Exposure
The Company’s reporting currency is the U.S. dollar. The
translation of its net investment in subsidiaries with non-U.S.
dollar functional currencies subjects the Company to currency
exchange rate fluctuations in its results of operations and
financial position. Assets and liabilities of subsidiaries with
non-U.S. dollar functional currencies are translated into U.S.
dollars at year-end exchange rates. Income, expense and cash flow
items are translated at average exchange rates prevailing during
the year. The resulting currency translation adjustments are
recorded as a component of accumulated other comprehensive
loss/gain within stockholders’ equity. The Company’s
primary currency translation exposures in 2015, 2016 and 2017 were
related to its net investment in entities having functional
currencies denominated in the Hong Kong dollar, British pound,
Canadian dollar, Chinese yuan, Mexican peso and the Euro.
Foreign Currency Transaction Exposure
Currency exchange rate fluctuations may impact the Company’s
results of operations and cash flows. The Company’s currency
transaction exposures include gains and losses realized on unhedged
inventory purchases and unhedged receivables and payables balances
that are denominated in a currency other than the applicable
functional currency. Gains and losses on unhedged inventory
purchases and other transactions associated with operating
activities are recorded in the components of operating income in
the consolidated statement of operations.
Accounting for the impairment of finite-lived tangible and
intangible assets
Long-lived assets with finite lives, which include property and
equipment and intangible assets other than goodwill, are evaluated
for impairment when events or changes in circumstances indicate
that the carrying amount of the assets may not be recoverable
through the estimated undiscounted future cash flows from the use
of these assets. When any such impairment exists, the related
assets will be written down to fair value. Finite-lived intangible
assets consist primarily of product technology rights, acquired
backlog, customer relationships, product lines and license
agreements. These intangible assets are amortized over the
estimated economic lives of the related assets. There were no
impairments for years ended December 31, 2015 and 2016. In 2017,
the Company recorded impairment charges of $2.9 million to write
off the remaining unamortized technology rights related to
DreamPlay, LLC which were included in product lines, and $2.3
million to write down several underutilized trademarks and trade
names that were determined to have no value.
Goodwill and other indefinite-lived intangible assets
Goodwill and indefinite-lived intangible assets are not amortized,
but are tested for impairment at least annually at the reporting
unit level and asset level, respectively. Losses in value are
recorded when material impairment has occurred in the underlying
assets or when the benefits of the identified intangible assets are
realized. Indefinite-lived intangible assets other than goodwill
consist of trademarks.
The carrying value of goodwill and trademarks are based upon cost,
which is subject to management’s current assessment of fair
value. Management evaluates fair value recoverability using both
objective and subjective factors. Objective factors include cash
flows and analysis of recent sales and earnings trends. Subjective
factors include management’s best estimates of projected
future earnings and competitive analysis and the Company’s
strategic focus.
For the years ended December 31, 2015 and 2016, there was no
impairment to the value of the Company's goodwill or trademarks. In
the third quarter of 2017, the Company determined that the fair
values of its reporting units should be retested for potential
impairment. Based on the retesting performed with the assistance of
a third-party valuation consultant as of September 30, 2017, it was
determined that the fair values of two of its three reporting units
were less than their respective carrying amounts. Accordingly, a
charge of $8.3 million for goodwill impairment was recorded.
Share-based Compensation
The Company measures all employee stock-based compensation awards
using a fair value method and records such expense in its
consolidated financial statements. The Company recorded $1.6
million, $1.6 million and $3.1 million of restricted stock expense
in 2015, 2016 and 2017, respectively. See Note 17 for further
details relating to share based compensation.
Earnings per share
The following table is a reconciliation of the weighted-average
shares used in the computation of basic and diluted earnings per
share (“EPS”) for the periods presented (in thousands,
except per share data):
2015
Weighted
Average
Income
Shares
Per Share
Basic EPS
Income available to common stockholders
$
23,254
19,435
$
1.20
Effect of dilutive securities:
Assumed conversion of convertible senior notes
7,385
23,369
Options and warrants
—
—
Unvested performance stock grants
—
347
Unvested restricted stock grants
—
170
Diluted EPS
Income available to common stockholders plus assumed exercises and
conversion
$
30,639
43,321
$
0.71
2016
Weighted
Average
Income
Shares
Per Share
Basic EPS
Income available to common stockholders
$
1,243
16,542
$
0.08
Effect of dilutive securities:
Assumed conversion of convertible senior notes
—
—
Options and warrants
—
—
Unvested performance stock grants
—
—
Unvested restricted stock grants
—
123
Diluted EPS
Income available to common stockholders plus assumed exercises and
conversion
$
1,243
16,665
$
0.07
2017
Weighted
Average
Loss
Shares
Per Share
Basic EPS
Loss attributable to common stockholders
$
(83,085
)
21,341
$
(3.89
)
Effect of dilutive securities:
Assumed conversion of convertible senior notes
—
—
Options and warrants
—
—
Unvested performance stock grants
—
—
Unvested restricted stock grants
—
—
Diluted EPS
Loss attributable to common stockholders plus assumed exercises and
conversion
$
(83,085
)
21,341
$
(3.89
)
Basic earnings per share is calculated using the weighted average
number of common shares outstanding during the period. Diluted
earnings per share is calculated using the weighted average number
of common shares and common share equivalents outstanding during
the period (which consist of warrants, options and convertible debt
to the extent they are dilutive). For the years ended December 31,
2015, 2016 and 2017, the convertible senior notes interest and
related common share equivalent of nil, 23,004,916 and 18,272,906,
respectively, were excluded from the diluted earnings per share
calculation because they were anti-dilutive. Potentially dilutive
stock options and warrants of 1,518,596, 1,500,000 and 1,062,500
for the years ended December 31, 2015, 2016 and 2017, respectively,
were excluded from the computation of diluted earnings per share
since they would have been anti-dilutive. Potentially dilutive
restricted stock of nil for each of the years ended December 31,
2015, 2016 and 2017 were excluded from the computation of diluted
earnings per share since they would have been anti-dilutive.
The Company is also party to a prepaid forward contract to purchase
3,112,840 shares of its common stock that are to be delivered over
a settlement period in 2020. The number of shares to be delivered
under the prepaid forward contract has been removed from the
weighted-average basic and diluted shares outstanding. Any
dividends declared and paid on the shares underlying the forward
contract are to be reverted back to the Company based on the
contractual terms of the forward contract.
Debt with Conversion and Other Options
In July 2013, the Company sold an aggregate of $100.0 million
principal amount of 4.25% convertible senior notes due 2018 (the
“2018 Notes”). The 2018 Notes are senior unsecured
obligations of the Company paying interest semi-annually in arrears
on August 1 and February 1 of each year at a rate of 4.25% per
annum and will mature on August 1, 2018. The initial and still
current conversion rate for the 2018 Notes is 114.3674 shares of
the Company’s common stock per $1,000 principal amount of
notes, equivalent to an initial conversion price of approximately
$8.74 per share of common stock, subject to adjustment in certain
events. Upon conversion, the 2018 Notes will be settled in shares
of the Company’s common stock. Holders of the 2018 Notes may
require that the Company repurchase for cash all or some of their
notes upon the occurrence of a fundamental change (as defined in
the 2018 Notes). In 2016, the Company repurchased and retired an
aggregate of approximately $6.1 million principal amount of the
2018 Notes. In 2017, the Company exchanged and retired an aggregate
of $51.1 million principal amount of the 2018 Notes at par for
$35.6 million in cash and approximately 3.0 million shares of its
common stock, reducing the principal balance of the remaining 2018
Notes to approximately $21.2 million. In addition, $21.5 million
principal amount of the 2018 Notes were exchanged and their
maturity extended to November 1, 2020 along with a reduction in the
interest rate to 3.25% per annum if paid in cash and a reduction in
the conversion price to $3.05 per share (the “3.25% 2020
Notes”).
In June 2014, the Company sold an aggregate of $115.0 million
principal amount of 4.875% convertible senior notes due 2020 (the
“2020 Notes”). The 2020 Notes are senior unsecured
obligations of the Company paying interest semi-annually in arrears
on June 1 and December 1 of each year at a rate of 4.875% per annum
and will mature on June 1, 2020. The initial and still current
conversion rate for the 2020 Notes is 103.7613 shares of the
Company’s common stock per $1,000 principal amount of notes,
equivalent to an initial conversion price of approximately $9.64
per share of common stock, subject to adjustment in certain events.
Upon conversion, the 2020 Notes will be settled in shares of the
Company’s common stock. Holders of the 2020 Notes may require
that the Company repurchase for cash all or some of their notes
upon the occurrence of a fundamental change (as defined in the 2020
Notes). The Company received net proceeds of approximately $110.4
million from the offering of which $24.0 million was used to
repurchase 3.1 million shares of the Company’s common stock
under a prepaid forward purchase contract. In January 2016, the
Company repurchased and retired an aggregate of $2.0 million
principal amount of the 2020 Notes.
In June 2014, the Company effectively repurchased 3,112,840 shares
of its common stock at an average cost of $7.71 per share for an
aggregate amount of $24.0 million pursuant to a prepaid forward
share repurchase agreement entered into with Merrill Lynch
International (“ML”). These repurchased shares are
treated as retired for basic and diluted EPS purposes although they
remain legally outstanding. The Company reflects the aggregate
purchase price of its common shares repurchased as a reduction to
stockholders’ equity allocated to treasury stock. Any
dividends declared and paid on the shares underlying the forward
contract are to be reverted back to the Company based on the
contractual terms of the forward contract.
Reclassifications
Certain reclassifications were made to the prior year consolidated
financial statements to conform to current year presentation.
Recent Accounting Pronouncements
In May 2014, the FASB issued ASU 2014-09, “Revenue from
Contracts with Customers (Topic 606)”, which supersedes the
revenue recognition requirements in ASC 605, (Topic 605), and most
industry-specific guidance. Under the new model, recognition of
revenue occurs when a customer obtains control of promised goods or
services in an amount that reflects the consideration to which the
entity expects to be entitled in exchange for those goods or
services. In addition, the new standard requires that reporting
companies disclose the nature, amount, timing, and uncertainty of
revenue and cash flows arising from contracts with customers. In
August 2015, the FASB issued ASU 2015-14, “Revenue from
Contracts with Customers – Deferral of the Effective
Date”, which defers the effective date of ASU 2014-09 to
annual reporting periods beginning after December 15, 2017, and
interim periods therein. In 2016, the FASB issued ASU 2016-08,
“Principal versus Agent Considerations (Reporting Revenue
Gross versus Net)”, ASU 2016-10, “Identifying
Performance Obligations and Licensing”, and ASU 2016-12,
“Revenue from Contracts with Customers - Narrow-Scope
Improvements and Practical Expedients”. Entities have the
choice to adopt these updates using either of the following
transition methods: (i) a full retrospective approach reflecting
the application of the standard in each prior reporting period with
the option to elect certain practical expedients, or (ii) a
modified retrospective approach with the cumulative effect of these
standards recognized at the date of the adoption.
The Company’s approach to analyze the impact of the standard
on its revenue contracts included a review of existing contracts
with customers, an evaluation of the specific terms of those
contracts and the appropriate treatment under the new standards,
and a comparison of that new treatment to its existing accounting
policies to identify differences. The Company will adopt the
requirements of the new standard on January 1, 2018 using the
modified retrospective approach.
The Company identified the same performance obligation (sale of our
products) under Topic 606 as compared with deliverables and
separate units of account previously identified under Topic
605.
The Company does offer certain types of variable consideration to
customers such as discounts, pricing allowances and collaborative
marketing arrangements. The standard requires us to estimate these
amounts. The Company anticipates that the timing and measurement of
revenue will be consistent with its current revenue recognition
although the approach to revenue recognition will now be based on
the transfer of control. As a result, there will be no impact to
the Company’s consolidated financial statements on the
adoption of the new standard as of January 1, 2018.
The Company established new key controls within its financial
reporting infrastructure specific to its adoption of ASC 606.
Furthermore, additional disclosures will be required to enable
users to understand the nature, amount, timing, and uncertainty of
revenue and cash flows arising from contracts with customers.
Beginning in the first quarter of 2018, additional disclosures will
include, but are not limited to, significant judgments and
practical expedients elected in the adoption of Topic 606.
In January 2016, the FASB issued ASU 2016-01, “Financial
Instruments - Overall: Recognition and Measurement of Financial
Assets and Financial Liabilities” (“ASU
2016-01”). The new guidance is intended to improve the
recognition and measurement of financial instruments. The ASU is
effective for fiscal years and interim periods within those years
beginning after December 15, 2017. The adoption of this standard is
not expected to have a material impact on the Company’s
consolidated financial statements.
In February 2016, the FASB issued Accounting Standards Update
2016-02, “Leases” (“ASU 2016-02”). ASU
2016-02 establishes a right-of-use (“ROU”) model that
requires a lessee to record a ROU asset and a lease liability on
the balance sheet for all leases with terms longer than 12 months.
Leases will be classified as either finance or operating, with
classification affecting the pattern of expense recognition in the
income statement. ASU 2016-02 is effective for fiscal years
beginning after December 15, 2018, including interim periods within
those fiscal years. Early adoption is permitted. A modified
retrospective transition approach is required for lessees for
capital and operating leases existing at, or entered into after,
the beginning of the earliest comparative period presented in the
financial statements, with certain practical expedients available.
The Company is currently evaluating the impact of the pending
adoption of this new standard on its consolidated financial
statements.
In August 2016, the FASB issued ASU 2016-15, “Statement of
Cash Flows (Topic 230): Classification of Certain Cash Receipts and
Cash Payments.” The new guidance is intended to reduce
diversity in practice in how transactions are classified in the
statement of cash flows. This ASU is effective for fiscal years,
and for interim periods within those fiscal years, beginning after
December 15, 2017. The adoption of this standard is not expected to
have a material impact on the Company’s consolidated
financial statements.
In October 2016, the FASB issued ASU 2016-16, “Income Taxes
(Topic 740): Intra-Entity Transfers of Assets Other than
Inventory.” The amendments in this ASU reduces the complexity
in the accounting standards by allowing the recognition of current
and deferred income taxes for an intra-entity asset transfer, other
than inventory, when the transfer occurs. Historically, recognition
of the income tax consequence was not recognized until the asset
was sold to an outside party. This ASU is effective for fiscal
years, and interim periods within those fiscal years, beginning
after December 15, 2017. Early adoption is permitted. The adoption
of this standard is not expected to have a material impact on the
Company’s consolidated financial statements.
In November 2016, the FASB issued ASU 2016-18, “Statement of
Cash Flows (Topic 230): Restricted Cash”. The update requires
that amounts generally described as restricted cash or restricted
cash equivalents be included with cash and cash equivalents when
reconciling the beginning-of-period and end-of-period total amounts
shown on the statement of cash flows. The new standard will be
effective for fiscal years beginning after December 15, 2017,
including interim periods within those fiscal years, and early
adoption is permitted. |
