| Summary of Significant Accounting Policies | 1. Summary of Significant Accounting Policies
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
NATURE OF OPERATIONS Through its operating subsidiaries, Autoliv is a
supplier of automotive safety systems with a broad range of product
offerings, including modules and components for passenger and
driver airbags, side airbags, curtain airbags, seatbelts, steering
wheels, passive safety electronics, brake control systems and
active safety systems such as night vision, radar, camera vision
systems and position related technologies. Autoliv is also a
supplier of anti-whiplash systems, pedestrian protection systems
and child seats.
PRINCIPLES OF CONSOLIDATION The consolidated financial statements have been
prepared in accordance with United States (U.S.) Generally Accepted
Accounting Principles (GAAP) and include
Autoliv, Inc. and all companies over which Autoliv, Inc. directly
or indirectly exercises control, which as a general rule means that
the Company owns more than 50% of the voting rights. Consolidation is also required when the Company has
both the power to direct the activities of a variable interest
entity (VIE) and the obligation to absorb losses or the right to
receive benefits from the VIE that could be significant to the
VIE. All intercompany accounts and transactions within
the Company have been eliminated from the consolidated financial
statements. Investments in affiliated companies in which the
Company exercises significant influence over the operations and
financial policies, but does not control, are reported using the
equity method of accounting. Generally, the Company owns between 20
and 50 percent of such investments.
BUSINESS COMBINATIONS Transactions in which the Company obtains control
of a business are accounted for according to the acquisition method
as described in Financial Accounting Standards Board (FASB)
Accounting Standards Codification (ASC) 805, Business Combinations.
The assets acquired and liabilities assumed are recognized and
measured at their fair values as of the date control is obtained.
Acquisition related costs in connection with a business combination
are expensed as incurred. Contingent consideration is recognized
and measured at fair value at the acquisition date and until paid
is re-measured on a recurring basis. It is classified as a
liability based on appropriate GAAP.
USE OF ESTIMATES The preparation of consolidated financial
statements in conformity with GAAP requires management to make
estimates and assumptions that affect the reported amounts of
assets and liabilities, disclosures of contingent assets and
liabilities at the date of the consolidated financial statements,
and the reported amounts of net sales and expenses during the
reporting period. The accounting estimates that require
management’s most significant judgments include the
estimation of retroactive price adjustments, estimations associated
with purchase price allocations regarding business combinations,
valuation of stock based payments, assessment of recoverability of
goodwill and intangible assets, estimation of pension benefit
obligations based on actuarial assumptions, estimation of accruals
for warranty and product liabilities, restructuring charges,
uncertain tax positions, valuation allowances and legal
proceedings. Actual results could differ from those estimates.
REVENUE RECOGNITION Revenues are recognized when there is evidence of a
sales agreement, delivery of goods has occurred, the sales price is
fixed or determinable and the collectability of revenue is
reasonably assured. The Company records revenue from the sale of
manufactured products upon shipment to customers and transfer of
title and risk of loss under standard commercial terms (typically
F.O.B. shipping point). In those limited instances where other
terms are negotiated and agreed, revenue is recorded when title and
risk of loss are transferred to the customer. Accruals are made for retroactive price adjustments
when probable and able to be reasonably estimated. Net sales exclude taxes assessed by a governmental
authority that are directly imposed on revenue-producing
transactions between the Company and its customers.
COST OF SALES Shipping and handling costs are included in Cost of
sales in the Consolidated Statements of Net Income. Contracts to
supply products which extend for periods in excess of one year are
reviewed when conditions indicate that costs may exceed selling
prices, resulting in losses. Losses on long-term supply contracts
are recognized when probable and estimable.
RESEARCH, DEVELOPMENT AND ENGINEERING (R,D&E) Research and development and most engineering
expenses are expensed as incurred. These expenses are reported net
of income from contracts to perform engineering design and product
development services. Such income is not significant in any period
presented. Certain engineering expenses related to long-term
supply arrangements are capitalized when defined criteria, such as
the existence of a contractual guarantee for reimbursement, are
met. The aggregate amount of such assets is not significant in any
period presented. Tooling is generally agreed upon as a separate
contract or a separate component of an engineering contract, as a
pre-production project. Capitalization of tooling costs is made
only when the specific criteria for capitalization of customer
funded tooling are met or the criteria for capitalization as
Property, Plant & Equipment (P,P&E) for tools owned by
the Company are fulfilled. Depreciation on the Company’s own
tooling is recognized in the Consolidated Statements of Net Income
as Cost of sales.
STOCK BASED COMPENSATION The compensation costs for all of the
Company’s stock-based compensation awards are determined
based on the fair value method as defined in ASC 718,
Compensation—Stock Compensation. The Company records the
compensation expense for awards under the Stock Incentive Plan,
including Restricted Stock Units (RSUs), Performance Shares (PSs)
and stock options (SOs), over the respective vesting period. For
further details, see Note 15.
INCOME TAXES Current tax liabilities and assets are recognized
for the estimated taxes payable or refundable on the tax returns
for the current year. In certain circumstances, payments or refunds
may extend beyond twelve months, in such cases amounts would be
classified as non-current taxes payable or refundable. Deferred tax
liabilities or assets are recognized for the estimated future tax
effects attributable to temporary differences and carryforwards
that result from events that have been recognized in either the
financial statements or the tax returns, but not both. The
measurement of current and deferred tax liabilities and assets is
based on provisions of enacted tax laws. Deferred tax assets are
reduced by the amount of any tax benefits that are not expected to
be realized. A valuation allowance is recognized if, based on the
weight of all available evidence, it is more likely than not that
some portion, or all, of the deferred tax asset will not be
realized. Evaluation of the realizability of deferred tax assets is
subject to significant judgment requiring careful consideration of
all facts and circumstances. Starting 2016 the Company classified
deferred tax assets and liabilities non-current in the Consolidated
Balance Sheets to reflect the adoption of ASU 2015-17. Tax assets
and liabilities are not offset unless attributable to the same tax
jurisdiction and netting is possible according to law and expected
to take place in the same period.
Tax benefits associated with tax positions taken in
the Company’s income tax returns are initially recognized and
measured in the financial statements when it is more likely than
not that those tax positions will be sustained upon examination by
the relevant taxing authorities. The Company’s evaluation of
its tax bene-fits is based on the probability of the tax position
being upheld if challenged by the taxing authorities (including
through negotiation, appeals, settlement and litigation). Whenever
a tax position does not meet the initial recognition criteria, the
tax benefit is subsequently recognized and measured if there is a
substantive change in the facts and circumstances that cause a
change in judgment concerning the sustainability of the tax
position upon examination by the relevant taxing authorities. In
cases where tax benefits meet the initial recognition criterion,
the Company continues, in subsequent periods, to assess its ability
to sustain those positions. A previously recognized tax benefit is
derecognized when it is no longer more likely than not that the tax
position would be sustained upon examination. Liabilities for
unrecognized tax benefits are classified as non-current unless the
payment of the liability is expected to be made within the next 12
months.
EARNINGS PER SHARE The Company calculates basic earnings per share
(EPS) by dividing net income attributable to controlling interest
by the weighted-average number of common shares outstanding for the
period (net of treasury shares). When it would not be antidilutive
(such as during periods of net loss), the diluted EPS also reflects
the potential dilution that could occur if common stock were issued
for awards under the Stock Incentive Plan. For further details, see
Note 15.
CASH EQUIVALENTS The Company considers all highly liquid investment
instruments purchased with an original maturity of three months or
less to be cash equivalents.
RECEIVABLES The Company has guidelines for calculating the
allowance for bad debts. In determining the amount of a bad debt
allowance, management uses its judgment to consider factors such as
the age of the receivables, the Company’s prior experience
with the customer, the experience of other enterprises in the same
industry, the customer’s ability to pay, and/or an appraisal
of current economic conditions. Collateral is typically not
required. There can be no assurance that the amount ultimately
realized for receivables will not be materially different than that
assumed in the calculation of the allowance.
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES The Company uses derivative financial instruments,
primarily forwards, options and swaps to reduce the effects of
fluctuations in foreign exchange rates, interest rates and the
resulting variability of the Company’s operating results. On
the date that a derivative contract is entered into, the Company
designates the derivative as either (1) a hedge of the
exposure to changes in the fair value of a recognized asset or
liability or of an unrecognized firm commitment (a fair value
hedge), (2) a hedge of the exposure of a forecasted
transaction or of the variability in the cash flows of a recognized
asset or liability (a cash flow hedge) or (3) an economic
hedge not applying special hedge accounting pursuant to ASC
815. When a hedge is classified as a fair value hedge,
the change in the fair value of the hedge is recognized in the
Consolidated Statements of Net Income along with the offsetting
change in the fair value of the hedged item. When a hedge is
classified as a cash flow hedge, any change in the fair value of
the hedge is initially recorded in equity as a component of Other
Comprehensive Income (OCI) and reclassified into the Consolidated
Statements of Net Income when the hedge transaction affects net
earnings. All derivatives are recognized in the consolidated
financial statements at fair value. For certain other derivatives hedge accounting is
not applied either because non-hedge accounting treatment creates
the same accounting result or the hedge does not meet the hedge
accounting requirements, although entered into applying the same
rationale concerning mitigating market risk that occurs from
changes in interest and foreign exchange rates. For further details on the Company’s
financial instruments, see Notes 3 and 12.
INVENTORIES The cost of inventories is computed according to
the first-in, first-out method (FIFO). Cost includes the cost of
materials, direct labor and the applicable share of manufacturing
overhead. Inventories are evaluated based on individual or, in some
cases, groups of inventory items. Reserves are established to
reduce the value of inventories to the lower of cost or market,
with the market generally defined as net realizable value for
finished goods and replacement cost for raw materials and
work-in-process. Excess inventories are quantities of items that
exceed anticipated sales or usage for a reasonable period. The
Company has guidelines for calculating provisions for excess
inventories based on the number of months of inventories on hand
compared to anticipated sales or usage. Man-agement uses its
judgment to forecast sales or usage and to determine what
constitutes a reasonable period. There can be no assurance that the
amount ultimately realized for inventories will not be materially
different than that assumed in the calculation of the reserves.
PROPERTY, PLANT AND EQUIPMENT Property, Plant and Equipment are recorded at
historical cost. Construction in progress generally involves
short-term projects for which capitalized interest is not
significant. The Company provides for depreciation of property,
plant and equipment computed under the straight-line method over
the assets’ estimated useful lives. Depreciation on capital
leases is recognized in the Consolidated Statements of Net Income
over the shorter of the assets’ expected life or the lease
contract terms. Repairs and maintenance are expensed as
incurred. The Company evaluates the carrying value of
long-lived assets other than goodwill when indications of
impairment are evident. Impairment testing is primarily done by
using the cash flow method based on undiscounted future cash flows.
Generally, the lowest level of cash flows for impairment assessment
is customer platform level.
GOODWILL AND INTANGIBLE ASSETS Goodwill represents the excess of the fair value of
consideration transferred over the fair value of net assets of
businesses acquired. Goodwill is not amortized, but is subject to
at least an annual review for impairment. Other intangible assets,
principally related to acquired technology and contractual
relationships, are amortized over their useful lives which range
from 3 to 25 years. The Company performs its annual impairment testing
in the fourth quarter of each year. Impairment testing is required
more often than annually if an event or circumstance indicates that
an impairment, or decline in value, may have occurred. In conducting its impairment testing, the Company
compares the estimated fair value of each of its reporting units to
the related carrying value of the reporting unit. If the estimated
fair value of a reporting unit exceeds its carrying value, goodwill
is considered not to be impaired. If the carrying value of a
reporting unit exceeds its estimated fair value, an impairment loss
is measured and recognized by the amount which the carrying amount
of the goodwill exceeds the implied fair value of the goodwill
determined by assigning the fair value of the reporting unit to all
of the assets and liabilities of that unit. The estimated fair value of the reporting unit is
determined by the discounted cash flow method taking into account
expected long-term operating cash-flow performance. The Company
discounts projected operating cash flows using its weighted average
cost of capital, including a risk premium to adjust for market
risk. The estimated fair value is based on automotive industry
volume projections which are based on third-party and internally
developed forecasts and discount rate assumptions. Significant
assumptions include terminal growth rates, terminal operating
margin rates, future capital expenditures and working capital
requirements. To supplement this analysis, the Company compares
the market value of its equity, calculated by reference to the
quoted market prices of its shares, to the book value of its
equity. There were no impairments of goodwill from 2014
through 2016.
WARRANTIES AND RECALLS The Company records liabilities for product recalls
when probable claims are identified and when it is possible to
reasonably estimate costs. Recall costs are costs incurred when the
customer decides to formally recall a product due to a known or
suspected safety concern. Product recall costs typically include
the cost of the product being replaced as well as the
customer’s cost of the recall, including labor to remove and
replace the defective part. Provisions for warranty claims are estimated based
on prior experience, likely changes in performance of newer
products and the mix and volume of products sold. The provisions
are recorded on an accrual basis.
RESTRUCTURING PROVISIONS The Company defines restructuring expense to
include costs directly associated with rightsizing, exit or
disposal activities. Estimates of restructuring charges are based on
information available at the time such charges are recorded. In
general, management anticipates that re-structuring activities will
be completed within a timeframe such that significant changes to
the exit plan are not likely. Due to inherent uncertainty involved
in estimating restructuring expenses, actual amounts paid for such
activities may differ from amounts initially estimated.
PENSION OBLIGATIONS The Company provides for both defined contribution
plans and defined benefit plans. A defined contribution plan
generally specifies the periodic amount that the employer must
contribute to the plan and how that amount will be allocated to the
eligible employees who perform services during the same period. A
defined benefit pension plan is one that contains pension benefit
formulas, which generally determine the amount of pension benefits
that each employee will receive for services performed during a
specified period of employment. The amount recognized as a defined benefit
liability is the net total of projected benefit obligation (PBO)
minus the fair value of plan assets (if any) (see Note 18). The
plan assets are measured at fair value. The inputs to the fair
value measurement of the plan assets are mainly level 2 inputs (see
Note 3).
CONTINGENT LIABILITIES Various claims, lawsuits and proceedings are
pending or threatened against the Company or its subsidiaries,
covering a range of matters that arise in the ordinary course of
its business activities with respect to commercial, product
liability or other matters (see Note 16). The Company diligently defends itself in such
matters and, in addition, carries insurance coverage to the extent
reasonably available against insurable risks. The Company records liabilities for claims,
lawsuits and proceedings when they are probable and it is possible
to reasonably estimate the cost of such liabilities. Legal costs
expected to be incurred in connection with a loss contingency are
expensed as such costs are incurred. The Company believes, based on currently available
information, that the resolution of outstanding matters, other than
the antitrust matters described in Note 16, after taking into
account recorded liabilities and available insurance coverage,
should not have a material effect on the Company’s financial
position or results of operations. However, due to the inherent uncertainty associated
with such matters, there can be no assurance that the final
outcomes of these matters will not be materially different than
currently estimated.
TRANSLATION OF NON-U.S. SUBSIDIARIES The balance sheets of subsidiaries with functional
currency other than U.S. dollars are translated into U.S. dollars
using year-end exchange rates. The statement of operations of these subsidiaries
is translated into U.S. dollars using the average exchange rates
for the year. Translation differences are reflected in equity as a
component of OCI.
RECEIVABLES AND LIABILITIES IN NON-FUNCTIONAL CURRENCIES Receivables and liabilities not denominated in
functional currencies are converted at year-end exchange rates. Net
transaction gains/(losses), reflected in the Consolidated
Statements of Net Income amounted to $(3.0) million in 2016,
$(11.0) million in 2015 and $(3.8) million in 2014, and are
recorded in operating income if they relate to operational
receivables and liabilities or are recorded in other non-operating
items, net if they relate to financial receivables and
liabilities.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS In January 2017, the FASB issued Accounting
Standards Update (ASU) 2017-04, Intangibles – Goodwill
and Other (Topic 350) – Simplifying the Test for
Goodwill Impairment, which simplifies how an entity is required to
test goodwill for impairment by eliminating step 2 from the
goodwill impairment test, which measures a goodwill impairment loss
by comparing the implied fair value of a reporting unit’s
goodwill with the carrying amount. Instead, entities should perform
annual or interim goodwill impairment tests by comparing the fair
value of a reporting unit with its carrying amount and recognize an
impairment charge for the excess of carrying amount over the fair
value of the respective reporting unit. The amendments in ASU
2017-04 are effective for public business entities for annual or
interim goodwill impairment tests in annual periods beginning after
December 15, 2019. Early adoption is permitted for interim or
annual goodwill impairment tests performed on testing dates after
January 1, 2017. The Company plans to early adopt ASU 2017-04
effective January 1, 2017. As this standard is prospective in
nature, the impact to our financial statements by not performing
step 2 to measure the amount of any potential goodwill impairment
will depend on various factors. However, the elimination of step 2
will reduce the complexity and cost of the subsequent measurement
of goodwill. In January 2017, the FASB issued ASU 2017-01,
Business Combinations (Topic 805) – Clarifying the
Definition of a Business, which provides a screen to determine when
an integrated set of assets and activities is not a business. The
screen requires that when substantially all of the fair value of
the gross assets acquired (or disposed of) is concentrated in a
single identifiable asset or a group of similar identifiable
assets, the set is not a business. The amendments in ASU 2017-01
are effective for public business entities for annual periods
beginning after December 15, 2017, and interim periods within
those periods. ASU 2017-01 should be applied prospectively. Early
adoption is allowed. The Company plans to early adopt ASU 2017-01
effective January 1, 2017 for new transactions that have not
been reported in financial statements that have been issued or made
available for issuance. As this standard is prospective in nature,
the impact to our financial statements will depend on the nature of
our future acquisitions. In August 2016, the FASB issued ASU 2016-15,
Statement of Cash Flows (Topic 230) – Classification of
Certain Cash Receipts and Cash Payments, which provides guidance on
reducing the diversity in practice on eight cash flow
classification issues and how certain cash receipts and cash
payments are presented and classified in the statement of cash
flows. The amendments in ASU 2016-15 are effective for public
business entities for annual periods beginning after
December 15, 2017, and interim periods within those annual
periods. Early adoption is permitted, including adoption in an
interim period. If an entity early adopts the amendments in an
interim period, any adjustments should be reflected as of the
beginning of the annual year that includes that interim period. The
amendments in ASU 2016-15 should be applied using a retrospective
transition method to each period presented. The Company plans to
early adopt ASU 2016-15 effective January 1, 2017. The
adoption of ASU 2016-15 is not expected to have a material impact
for any period presented. In June 2016, the FASB issued ASU 2016-13,
Financial Instruments – Credit Losses (Topic 326),
Measurement of Credit Losses on Financial Instruments, which
requires measurement and recognition of expected credit losses for
financial assets held and requires enhanced disclosures regarding
significant estimates and judgments used in estimating credit
losses. ASU 2016-13 is effective for public business entities for
annual periods beginning after December 15, 2019, and earlier
adoption is permitted for annual periods beginning after
December 15, 2018. We are currently evaluating the impact of
our pending adoption of ASU 2016-13 on our consolidated financial
statements. In March 2016, the FASB issued ASU 2016-09,
Compensation – Stock Compensation (Topic 718), which
simplifies the accounting for share-based payment transactions,
including the income tax consequences, classification of awards as
either equity or liabilities, and classification on the statement
of cash flows. For public business entities, the amendments in ASU
2016-09 are effective for annual periods beginning after
December 15, 2016, and interim periods within those annual
periods. Amendments related to the timing of when excess tax
benefits are recognized, minimum statutory withholding
requirements, forfeitures, and intrinsic value should be applied
using a modified retrospective transition method by means of a
cumulative-effect adjustment to equity as of the beginning of the
period in which the guidance is adopted. Amendments related to the
presentation of employee taxes paid on the statement of cash flows
when an employer withholds shares to meet the minimum statutory
withholding requirement should be applied retrospectively.
Amendments requiring recognition of excess tax benefits and tax
deficiencies in the income statement and the practical expedient
for estimating expected term should be applied prospectively. An
entity may elect to apply the amendments related to the
presentation of excess tax benefits on the statement of cash flows
using either a prospective transition method or a retrospective
transition method. The Company adopted ASU 2016-09 effective
January 1, 2017 and has elected to recognize forfeitures as
they occur. The adoption of ASU 2016-09 is not expected to have a
material impact on the consolidated financial statements for any
period presented. In February 2016, the FASB issued ASU 2016-02,
Leases (Topic 842), to increase transparency and comparability
among organizations by recognizing lease liabilities on the balance
sheet and disclosing key information about leasing arrangements.
ASU 2016-02 affects any entity that enters into a lease, with some
specified scope exceptions. For public business entities, the
amendments in ASU 2016-02 are effective for annual periods
beginning after December 15, 2018, and interim periods within
those annual periods. Early application is permitted for all
entities. The Company is currently evaluating the impact of
adopting ASU 2016-02 on its consolidated financial statements,
which will require right of use assets and lease liabilities be
recorded in the consolidated balance sheet for operating
leases.
In November 2015, the FASB issued ASU 2015-17,
Balance Sheet Classification of Deferred Taxes (Topic 740), which
simplifies the presentation of deferred income taxes. The
amendments in ASU 2015-17 require that deferred tax liabilities and
assets be classified as noncurrent in a classified statement of
financial position and apply to all entities that present a
classified statement of financial position. The current requirement
that deferred tax liabilities and assets of a tax-paying component
of an entity be offset and presented as a single amount is not
affected by the amendments in ASU 2015-17. For public business
entities, the amendments in ASU 2015-17 are effective for annual
periods beginning after December 15, 2016, and interim periods
within those annual periods. Earlier application is permitted for
all entities as of the beginning of an interim or annual reporting
period. The amendments in ASU 2015-17 may be applied either
prospectively to all deferred tax liabilities and assets or
retrospectively to all periods presented. The Company early adopted
ASU 2015-17 prospectively in its interim reporting for
March 31, 2016. The impact of the change on the consolidated
balance sheet was approximately $70 million reclassified from
current deferred tax assets to non-current deferred tax assets and
approximately $20 million reclassified from current deferred tax
liabilities to non-current deferred tax liabilities. In July 2015, the FASB issued ASU 2015-11,
Inventory (Topic 330), which requires an entity to measure
inventory at the lower of cost and net realizable value. Net
realizable value is the estimated selling prices in the ordinary
course of business, less reasonably predictable costs of
completion, disposal, and transportation. Subsequent measurement is
unchanged for inventory measured using LIFO or the retail inventory
method. For public business entities, ASU 2015-11 is effective for
interim and annual periods beginning after December 15, 2016
and should be applied prospectively. The adoption of ASU 2015-11 is
not expected to have a material impact for any periods
presented. In April 2015, the FASB issued ASU 2015-03,
Interest – Imputation of Interest (Subtopic 835-30),
Simplifying the Presentation of Debt Issuance Costs, which requires
debt issuance costs related to a recognized debt liability to be
presented in the balance sheet as a direct deduction from the
carrying amount of that debt liability, consistent with debt
discounts. The recognition and measurement guidance for debt
issuance costs are not affected by the amendments in ASU 2015-03.
For public business entities, the amendments in ASU 2015-03 were
effective for interim and annual periods beginning after
December 15, 2015, and is to be applied retrospectively. The
Company adopted ASU 2015-03 in its interim reporting for
March 31, 2016. The effect of the change on the consolidated
balance sheet as of March 31, 2016 was $1.7 million
reclassified from debt issuance cost asset to the debt liability.
Prior period information was not retrospectively adjusted as the
effects of the adoption of ASU 2015-03 were not material to those
periods. In May 2014, the FASB issued ASU 2014-09, Revenue
from Contracts with Customers (Topic 606), which outlines a single,
comprehensive model for entities to use in accounting for revenue
arising from contracts with customers and supersedes most current
revenue recognition guidance issued by the FASB, including industry
specific guidance. In 2016 the FASB issued accounting standard
updates to address implementation issues and to clarify guidance on
identifying performance obligations, licenses and determining if a
company is a principal or an agent. The core principle of the
guidance is that an entity should recognize revenue when it
transfers promised goods or services to customers in an amount that
reflects the consideration to which the Company expects to be
receive in exchange for those goods or services. In addition, ASU
2014-09 requires certain additional disclosure around the nature,
amount, timing, and uncertainty of revenue and cash flows arising
from contracts with customers. The Company intends to adopt ASU
2014-09 in the annual period beginning January 1, 2018. The
standard permits the use of either the retrospective or modified
retrospective (cumulative effect) transition method. The Company
intends to apply the modified retrospective transition method. The
Company is currently evaluating the impact of this standard on its
operations, consolidated financial statements and footnote
disclosures. The Company’s implementation process has
included the identification of a dedicated lead project manager as
well as a cross-functional project steering committee responsible
for assessing the impact that the new standard will have on the
Company’s accounting, financial statement presentation and
disclosure for contracts with customers. The implementation team is
finalizing its assessment phase of the project. This phase of the
project has included the identification of the key revenue streams
and the comparison of historical accounting policies and practices
to the requirements of the new standard by revenue stream. The
assessment has resulted in the identification of potential
accounting differences that may arise from the application of the
new standard. The implementation team has also made substantial
progress in the contract review phase of the project which includes
identifying the population of contracts for a deeper analysis of
the potential accounting impacts due to the new standard for
individual contracts. The implementation team has also begun the
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