| ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES | NOTE 1: ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization:
CEVA, Inc. (“CEVA” or the “Company”) was
incorporated in Delaware on November 22, 1999. The Company was
formed through the combination of Parthus Technologies plc
(“Parthus”) and the digital signal processor (DSP)
cores licensing business and operations of DSP Group, Inc. in
November 2002. The Company had no business or operations prior to
the combination.
CEVA licenses a family of signal processing platforms and
Artificial Intelligence (AI) processors. These IPs include
programmable DSP cores and application-specific platforms for
advanced imaging, computer vision, deep learning, sound, voice and
audio processing, as well as long range wireless technologies for
LTE/5G baseband processing in IoT, handsets and infrastructure,
short range wireless platforms for Wi-Fi
CEVA’s technologies are licensed to leading semiconductor and
original equipment manufacturer (OEM) companies in the form of
intellectual property (IP). These companies design, manufacture,
market and sell application-specific integrated circuits
(“ASICs”) and application-specific standard products
(“ASSPs”) based on CEVA’s technology to wireless,
consumer electronics and automotive companies for incorporation
into a wide variety of end products.
Basis of presentation:
The consolidated financial statements have been prepared according
to U.S Generally Accepted Accounting Principles (“U.S.
GAAP”).
Use of estimates:
The preparation of the consolidated financial statements in
conformity with U.S. GAAP requires management to make estimates,
judgments and assumptions. The Company’s management believes
that the estimates, judgments and assumptions used are reasonable
based upon information available at the time they are made. These
estimates, judgments and assumptions can affect the reported
amounts of assets and liabilities and disclosure of contingent
assets and liabilities as of the dates of the financial statements,
and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those
estimates.
Financial statements in U.S. dollars:
A majority of the revenues of the Company and its subsidiaries is
generated in U.S. dollars (“dollars”). In addition, a
portion of the Company and its subsidiaries’ costs are
incurred in dollars. The Company’s management has determined
that the dollar is the primary currency of the economic environment
in which the Company and its subsidiaries principally operate.
Thus, the functional and reporting currency of the Company and its
subsidiaries is the dollar.
Accordingly, monetary accounts maintained in currencies other than
the dollar are remeasured into dollars in accordance with Financial
Accounting Standards Board (“FASB”) Accounting
Standards Codification (“ASC”) No. 830,
“Foreign Currency Matters.” All transaction gains and
losses from remeasurement of monetary balance sheet items are
reflected in the consolidated statements of income as financial
income or expenses, as appropriate, which is included in
“financial income, net.” The foreign exchange losses
arose principally on the EURO and the NIS monetary balance sheet
items as a result of the currency fluctuations of the EURO and the
NIS against the dollar.
Principles of consolidation:
The consolidated financial statements incorporate the financial
statements of the Company and all of its subsidiaries. All
significant inter-company balances and transactions have been
eliminated on consolidation.
Cash equivalents:
Cash equivalents are short-term highly liquid investments that are
readily convertible to cash with original maturities of three
months or less from the date acquired.
Short-term bank deposits:
Short-term bank deposits are deposits with maturities of more than
three months but less than one year from the balance sheet date.
The deposits are presented at their cost, including accrued
interest. The deposits bear interest annually at an average rate of
1.51%, 1.76% and 1.85% during 2015, 2016 and 2017,
respectively.
Marketable securities:
Marketable securities consist mainly of corporate bonds. The
Company determines the appropriate classification of marketable
securities at the time of purchase
and re-evaluates available-for-sale. Available-for-sale
The Company recognizes an impairment charge when a decline in the
fair value of its investments in debt securities below the cost
basis of such securities is judged to be other-than-temporary.
Factors considered in making such a determination include the
duration and severity of the impairment, the reason for the decline
in value and the potential recovery period. For securities that are
deemed other-than-temporarily impaired (“OTTI”), the
amount of impairment is recognized in the statement of income and
is limited to the amount related to credit losses, while impairment
related to other factors is recognized in other comprehensive
income (loss). The Company did not recognize OTTI on its marketable
securities in 2015, 2016 and 2017.
Long-term bank deposits:
Long-term bank deposits are deposits with maturities of more than
one year as of the balance sheet date. The deposits presented at
their cost, including accrued interest. The deposits bear interest
annually at an average rate of 1.82%, 1.97% and 2.26% during 2015,
2016 and 2017, respectively.
Property and equipment, net:
Property and equipment are stated at cost, net of accumulated
depreciation. Depreciation is calculated using the straight-line
method over the estimated useful lives of the assets, at the
following annual rates:
%
Computers, software and equipment 10-33
Office furniture and equipment 7-33
Leasehold improvements 10-25
(the shorter of the expected
The Company’s long-lived assets are reviewed for impairment
in accordance with FASB ASC No. 360-10-35,
An asset to be disposed is reported at the lower of its carrying
amount or fair value less selling costs. No impairment was recorded
in 2015, 2016 and 2017.
Goodwill:
Goodwill is carried at cost and is not amortized but rather is
tested for impairment at least annually or between annual tests in
certain circumstances. The Company conducts its annual test of
impairment for goodwill on October 1st of each year.
The Company operates in one operating segment and this segment
comprises the only reporting unit.
There is a two-phase
Intangible assets, net:
Acquired intangible assets with definite lives are amortized over
their estimated useful lives. The Company amortizes intangible
assets on a straight-line basis with definite lives over periods
ranging from one and a half to five and a half years.
Intangible assets with definite lives are reviewed for impairment
whenever events or changes in circumstances indicate the carrying
amount of an asset may not be recoverable. Recoverability of these
assets is measured by comparison of their carrying amounts to
future undiscounted cash flows the assets are expected to generate.
If such assets are considered to be impaired, the impairment to be
recognized equals the amount by which the carrying value of the
assets exceeds its fair market value. The Company did not record
any impairments during the years ended December 31, 2015, 2016
and 2017.
Investments in other company:
The Company’s investment in a private company, in which it
holds minority equity interests, is presented at cost because the
Company does not have significant influence over the underlying
investee. The investment is reviewed periodically to determine if
its value has been impaired and adjustments are recorded as
necessary. During the years ended December 31, 2015, 2016 and
2017, no impairment loss was identified.
Revenue recognition:
The Company generates its revenues from (1) licensing
intellectual property, which in certain circumstances is modified
for customer-specific requirements, (2) royalty revenues, and
(3) other revenues, which include revenues from support,
training and sale of development systems.
The Company accounts for its IP license revenues and related
services in accordance with
FASB ASC No. 985-605,
Extended payment terms in a licensing arrangement may indicate that
the license fees are not deemed to be fixed or determinable. If the
fee is not fixed or determinable, revenue is recognized as payments
become due from the customer unless collection is not considered
reasonably assured, then revenue is recognized as payments are
collected from the customer, provided all other revenue recognition
criteria have been met.
Revenues from license fees that involve significant customization
of the Company’s IP to customer-specific specifications are
recognized in accordance with the principles set out in FASB
ASC No. 605-35-25,
Revenues that are derived from the sale of a licensee’s
products that incorporate the Company’s IP are classified as
royalty revenues. Royalty revenues are recognized during the
quarter in which the Company receives a report from the licensee
detailing the shipment of products that incorporate the
Company’s IP, which receipt is in the quarter following the
licensee’s sale of such products to its customers. Royalties
are calculated either as a percentage of the revenues received by
the Company’s licensees on sales of products incorporating
the Company’s IP or on a per unit basis, as specified in
the agreements with the licensees.
In addition to license fees, contracts with customers generally
contain an agreement to provide for post contract support and
training, which consists of telephone
or e-mail
Revenues from the sale of development systems are recognized when
title to the product passes to the customer and all other revenue
recognition criteria have been met.
The Company usually does not provide rights of return. When rights
of return are included in the license agreements, revenue is
deferred until rights of return expire.
Deferred revenues include unearned amounts received under license
agreements, unearned technical support and amounts paid by
customers not yet recognized as revenues.
Cost of revenue:
Cost of revenue includes the costs of products, services and
royalty expense payments to the Israeli Innovation Authority of the
Ministry of Economy and Industry in Israel (the “IIA“)
(refer to Note 13c for further details). Cost of product revenue
includes materials, subcontractors and the portion of development
costs associated with product development arrangements. Cost of
service revenue includes salary and related costs for personnel
engaged in services, training and customer support, and travel,
office expenses and other support costs.
Income taxes:
The Company recognizes income taxes under the liability method. It
recognizes deferred income tax assets and liabilities for the
expected future consequences of temporary differences between the
financial reporting and tax bases of assets and liabilities. These
differences are measured using the enacted statutory tax rates that
are expected to apply to taxable income for the years in which
differences are expected to reverse. The effect of a change in tax
rates on deferred income taxes is recognized in the statements of
income during the period that includes the enactment date.
Valuation allowance is recorded to reduce the deferred tax assets
to the net amount that the Company believes is more likely than not
to be realized. The Company considers all available evidence, both
positive and negative, including historical levels of income,
expectations and risks associated with estimates of future taxable
income and ongoing tax planning strategies, in assessing the need
for a valuation allowance.
The Company accounts for uncertain tax positions in accordance with
ASC 740. ASC 740-10 two-step
Research and development:
Research and development costs are charged to the consolidated
statements of income as incurred.
Government grants and tax credits:
Government grants received by the Company relating to categories of
operating expenditures are credited to the consolidated statements
of income during the period in which the expenditure to which they
relate is charged. Royalty and non-royalty-bearing
The Company recorded grants in the amounts of $4,997, $6,410 and
$4,417 for the years ended December 31, 2015, 2016 and 2017,
respectively. The Company’s Israeli subsidiary is obligated
to pay royalties amounting to 3%-3.5%
The French Research Tax Credit, Crédit d’Impôt
Recherche (“CIR”), is a French tax incentive to
stimulate research and development (“R&D”) which is
relevant for the Company’s French subsidiaries (RivieraWaves
and CEVA France). Generally, the CIR offsets the income tax to be
paid and the remaining portion (if any) can be refunded. The CIR is
calculated based on the claimed volume of eligible R&D
expenditures by the Company. As a result, the CIR is presented as a
deduction to “Research and development expenses” in the
consolidated statements of income. During the year ended
December 31, 2015, 2016 and 2017, the Company recorded CIR
benefits in the amount of $1,414, $1,485 and $1,555,
respectively.
Employee benefit plan:
Certain of the Company’s employees are eligible to
participate in a defined contribution pension plan (the
“Plan”). Participants in the Plan may elect to defer a
portion of their pre-tax
The Company’s U.S. operations maintain a retirement plan (the
“U.S. Plan”) that qualifies as a deferred salary
arrangement under Section 401(k) of the Internal Revenue Code.
Participants in the U.S. Plan may elect to defer a portion of
their pre-tax
Total contributions for the years ended December 31, 2015,
2016 and 2017 were $733, $1,020 and $988, respectively.
Accrued severance pay:
The liability of CEVA’s Israeli subsidiary for severance pay
for employees hired prior to August 1, 2016 is calculated
pursuant to Israeli severance pay law based on the most recent
salary of each employee multiplied by the number of years of
employment for that employee as of the balance sheet date. The
Israeli subsidiary’s liability is fully provided for by
monthly deposits with severance pay funds, insurance policies and
an accrual. The deposited funds include profits and losses
accumulated up to the balance sheet date. The deposited funds may
be withdrawn only upon the fulfillment of the obligation pursuant
to Israeli severance pay law or labor agreements. The value of
these policies is recorded as an asset on the Company’s
consolidated balance sheets.
Effective August 1, 2016, the Israeli subsidiary’s
agreements with new employees in Israel are under Section 14
of the Severance Pay Law, 1963. The Israeli subsidiary’s
contributions for severance pay have extinguished its severance
obligation. Upon contribution of the full amount based on the
employee’s monthly salary for each year of service, no
additional obligation exists regarding the matter of severance pay,
and no additional payments is made by the Israeli subsidiary to the
employee. Furthermore, the related obligation and amounts deposited
on behalf of the employee for such obligation are not stated on the
balance sheet, as the Israeli subsidiary is legally released from
any obligation to employees once the required deposit amounts have
been paid.
Severance pay expenses, net of related income, for the years ended
December 31, 2015, 2016 and 2017, were $1,285, $1,348 and
$1,413, respectively.
Equity-based compensation:
The Company accounts for equity-based compensation in accordance
with FASB ASC No. 718, “Stock Compensation” which
requires the recognition of compensation expenses based on
estimated fair values for all equity-based awards made to employees
and non-employee directors.
In March 2016, the FASB issued ASU 2016-09, 2016-09”). 2016-09 2016-09 ASU 2016-09 paid-in ASU 2016-09
The Company estimates the fair value of options and stock
appreciation right (“SAR”) awards on the date of grant
using an option-pricing model. The value of the portion of an award
that is ultimately expected to vest is recognized as an expense
over the requisite service period in the Company’s
consolidated statements of income. The Company recognizes
compensation expenses for the value of its options and SARs, which
have graded vesting based on the accelerated attribution method
over the requisite service period of each of the awards. Prior to
January 1, 2017, the Company recognized compensation expenses
for the value of its options and SARs, net of estimated
forfeitures. Estimated forfeitures were based on actual
historical pre-vesting
The Company recognizes compensation expenses for the value of its
restricted stock unit (“RSU”) awards, based on the
straight-line method over the requisite service period of each of
the awards. The fair value of each RSU is the market value as
determined by the closing price of the common stock on the day of
grant.
The Company uses the Monte-Carlo simulation model for options and
SARs granted. The Monte-Carlo simulation model uses the assumptions
noted below. Expected volatility was calculated based upon actual
historical stock price movements over the most recent periods
ending on the grant date, equal to the expected option and SAR
term. The Company has historically not paid dividends and has no
foreseeable plans to pay dividends. The risk-free interest rate is
based on the yield from U.S.
Treasury zero-coupon
The fair value for the Company’s stock options and SARs
(other than share issuances in connection with the employee stock
purchase plan, as detailed below) granted to employees
and non-employees
2015 2016 (*
Expected dividend yield 0% 0%
Expected volatility 33%-49% 38%-49%
Risk-free interest rate 0.2%-2.4% 0.5%-2.4%
Expected forfeiture (employees) 10% —
Expected forfeiture (executives) 5% 5%
Contractual term of up to
10 years
10 years
Suboptimal exercise multiple (employees) 2.1 —
Suboptimal exercise multiple (executives) 2.4 2.4
(* During 2016, the Company granted
stock options only to its non-employee
The fair value for rights to purchase shares of common stock under
the Company’s employee stock purchase plan was estimated on
the date of grant using the following assumptions:
2015 2016 2017
Expected dividend yield 0% 0% 0%
Expected volatility 35%-36% 29%-57% 28%-46%
Risk-free interest rate 0.1%-0.3% 0.3%-0.5% 0.5%-1.1%
Expected forfeiture 0% 0% 0%
Contractual term of up to 24 months 24 months 24 months
During the years ended December 31, 2015, 2016 and 2017, the
Company recognized equity-based compensation expense related to
stock options, SARs, RSUs and employee stock purchase plan as
follows:
Year ended
December 31,
2015 2016 2017
Cost of revenue $ 155 $ 246 $ 459
Research and development, net 1,838 2,860 3,839
Sales and marketing 568 922 1,428
General and administrative 1,454 2,208 2,967
Total equity-based compensation expense $ 4,015 $ 6,236 $ 8,693
As of December 31, 2017, there was $620 of unrecognized
compensation expense related to unvested stock options, SARs and
employee stock purchase plan . This amount is expected to be
recognized over a weighted-average period of 1.3 years. As of
December 31, 2017, there was $10,894 of unrecognized compensation
expense related to unvested RSUs. This amount is expected to be
recognized over a weighted-average period of 1.4 years.
Fair value of financial instruments:
The carrying amount of cash, cash equivalents, short term bank
deposits, trade receivables, other accounts receivable, trade
payables and other accounts payable approximates fair value due to
the short-term maturities of these instruments. Marketable
securities and derivative instruments are carried at fair value.
See Note 3 for more information.
Comprehensive income (loss):
The Company accounts for comprehensive income (loss) in accordance
with FASB ASC No. 220, “Comprehensive Income.”
This statement establishes standards for the reporting and display
of comprehensive income (loss) and its components in a full set of
general purpose financial statements. Comprehensive income (loss)
generally represents all changes in stockholders’ equity
during the period except those resulting from investments by, or
distributions to, stockholders. The Company determined that its
items of other comprehensive income (loss) relate to unrealized
gains and losses, net of tax, on hedging derivative instruments and
marketable securities.
Concentration of credit risk:
Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of cash, cash
equivalents, bank deposits, marketable securities, foreign exchange
contracts and trade receivables. The Company invests its surplus
cash in cash deposits and marketable securities in financial
institutions and has established guidelines relating to
diversification and maturities to maintain safety and liquidity of
the investments.
The majority of the Company’s cash and cash equivalents are
invested in high grade certificates of deposits with major U.S.,
European and Israeli banks. Generally, cash and cash equivalents
and bank deposits may be redeemed on demand and therefore minimal
credit risk exists with respect to them. Nonetheless, deposits with
these banks exceed the Federal Deposit Insurance Corporation
(“FDIC”) insurance limits or similar limits in foreign
jurisdictions, to the extent such deposits are even insured in such
foreign jurisdictions. While the Company monitors on a systematic
basis the cash and cash equivalent balances in the operating
accounts and adjust the balances as appropriate, these balances
could be impacted if one or more of the financial institutions with
which the Company deposit its funds fails or is subject to other
adverse conditions in the financial or credit markets. To date the
Company has experienced no loss of principal or lack of access to
its invested cash or cash equivalents; however, the Company can
provide no assurance that access to its invested cash and cash
equivalents will not be affected if the financial institutions in
which the Company holds its cash and cash equivalents fail.
Furthermore, the Company holds an investment portfolio consisting
principally of corporate bonds. The Company has the ability to hold
such investments until recovery of temporary declines in market
value or maturity; accordingly, as of December 31, 2017, the
Company believes the losses associated with its investments are
temporary and no impairment loss was recognized during 2017.
However, the Company can provide no assurance that it will recover
declines in the market value of its investments.
The Company is exposed primarily to fluctuations in the level of
U.S. interest rates. To the extent that interest rates rise, fixed
interest investments may be adversely impacted, whereas a decline
in interest rates may decrease the anticipated interest income for
variable rate investments.
The Company is exposed to financial market risks, including changes
in interest rates. The Company typically does not attempt to reduce
or eliminate its market exposures on its investment securities
because the majority of its investments are short-term.
The Company’s trade receivables are geographically diverse,
mainly in the Asia Pacific, and also in the United States and
Europe. Concentration of credit risk with respect to trade
receivables is limited by credit limits, ongoing credit evaluation
and account monitoring procedures. The Company performs ongoing
credit evaluations of its customers and to date has not experienced
any material losses. The Company makes judgments on its ability to
collect outstanding receivables and provides allowances for the
portion of receivables for which collection becomes doubtful.
Provisions are made based upon a specific review of all significant
outstanding receivables. In determining the provision, the Company
considers the expected collectability of receivables.
The Company has no off-balance-sheet
Derivative and hedging activities:
The Company follows the requirements of FASB ASC
No. 815,” Derivatives and Hedging” which requires
companies to recognize all of their derivative instruments as
either assets or liabilities in the statement of financial position
at fair value. The accounting for changes in fair value (i.e.,
gains or losses) of a derivative instrument depends on whether it
has been designated and qualifies as part of a hedging transaction
and further, on the type of hedging transaction. For those
derivative instruments that are designated and qualify as hedging
instruments, a company must designate the hedging instrument, based
upon the exposure being hedged, as a fair value hedge, cash flow
hedge, or a hedge of a net investment in a foreign operation. Due
to the Company’s global operations, it is exposed to foreign
currency exchange rate fluctuations in the normal course of its
business. The Company’s treasury policy allows it to offset
the risks associated with the effects of certain foreign currency
exposures through the purchase of foreign exchange forward or
option contracts (“Hedging Contracts”). The policy,
however, prohibits the Company from speculating on such Hedging
Contracts for profit. To protect against the increase in value of
forecasted foreign currency cash flow resulting from salaries paid
in currencies other than the U.S. dollar during the year, the
Company instituted a foreign currency cash flow hedging program.
The Company hedges portions of the anticipated payroll of
its non-U.S.
For derivative instruments that are designated and qualify as a
cash flow hedge (i.e., hedging the exposure to variability in
expected future cash flows that is attributable to a particular
risk), the effective portion of the gain or loss on the derivative
instrument is reported as a component of other comprehensive income
(loss) and reclassified into earnings in the same period or periods
during which the hedged transaction affects earnings. Any gain or
loss on a derivative instrument in excess of the cumulative change
in the present value of future cash flows of the hedged item is
recognized in current earnings during the period of change. As of
December 31, 2016 and 2017, the notional principal amount of
the Hedging Contracts to sell U.S. dollars held by the Company was
$3,300 and $0, respectively.
Advertising expenses:
Advertising expenses are charged to consolidated statements of
income as incurred. Advertising expenses for the years ended
December 31, 2015, 2016 and 2017 were $928, $1,033 and $1,118,
respectively.
Treasury stock:
The Company repurchases its common stock from time to time pursuant
to a board-authorized share repurchase program through open market
purchases and repurchase plans.
The repurchases of common stock are accounted for as treasury
stock, and result in a reduction of stockholders’ equity.
When treasury shares are reissued, the Company accounts for the
reissuance in accordance with FASB
ASC No. 505-30, paid-in
Net income (loss) per share of common stock:
Basic net income per share is computed based on the weighted
average number of shares of common stock outstanding during each
year. Diluted net income per share is computed based on the
weighted average number of shares of common stock outstanding
during each year, plus dilutive potential shares of common stock
considered outstanding during the year, in accordance with FASB ASC
No. 260, “Earnings Per Share.”
Year ended
December 31,
2015 2016 2017
Numerator:
Net income $ 6,267 $ 13,100 $ 17,028
Denominator (in thousands):
Basic weighted-average common stock outstanding 20,480 20,850 21,771
Effect of stock options, stock appreciation rights and restricted
stock units 509 715 790
Diluted weighted-average common stock outstanding 20,989 21,565 22,561
Basic net income per share $ 0.31 $ 0.63 $ 0.78
Diluted net income per share $ 0.30 $ 0.61 $ 0.75
The weighted-average number of shares related to outstanding
options, SARs and RSUs excluded from the calculation of diluted net
income per share, since their effect was anti-dilutive, were
820,631, 282,696 and 29,892 shares for the years ended
December 31, 2015, 2016 and 2017, respectively.
Recently Issued Accounting Pronouncement:
(a) Revenue recognition
In May 2014, the FASB issued new guidance related to revenue
recognition, which outlines a comprehensive revenue recognition
model and supersedes most current revenue recognition guidance. The
new guidance requires a company to recognize revenue as control of
goods or services transfers to a customer at an amount that
reflects the expected consideration to be received in exchange for
those goods or services. It defines a five-step approach for
recognizing revenue, which may require a company to use more
judgment and make more estimates than under the current guidance.
The Company adopted the new guidance during the first quarter of
2018 and applies the standard using modified retrospective
approach, with the cumulative effect of applying the new guidance
recognized as an adjustment to the opening retained earnings
balance. Given the scope of work required to implement the new
revenue recognition rules and disclosure requirements under the new
guidance, the Company has made progress in the identification of
changes to policy, processes and controls, and the Company
continues to assess data availability and presentation necessary to
meet the additional disclosure requirements of the guidance in the
notes to the consolidated financial statements for the adoption
period and onwards.
The Company finished analyzing the potential impact of the new
guidance. The Company currently expects the adoption of this new
guidance to most significantly impact its royalty business.
Specifically, the Company expects a change in the timing of
revenues recognized from sales-based royalties. The Company
currently recognizes sales-based royalties as revenues during the
quarter during which such royalties are reported by licensees,
which is after the conclusion of the quarter in which the
licensees’ sales occur and when all other revenue recognition
criteria are met. Under the new guidance, the Company will be
required to estimate and recognize sales-based royalties during the
period during which the associated sales occur, resulting in an
acceleration of revenue recognition compared to the current method.
In addition, the Company expects an increase in trade receivables,
due to royalty revenues now being recorded as accrued revenues in
the statement of financial position, along with the Company’s
current trade receivables.
Furthermore, based on its current analysis, another effect on the
Company’s revenue recognition relates to certain deliverables
that may be considered as distinct performance obligations separate
from other performance obligations, and are measured using the
relative standalone selling price basis.
Under the new standard, an entity recognizes revenue when or as it
satisfies a performance obligation by transferring IP license or
services to the customer, either at a point in time or over time.
The Company expects to continue to recognize most of its revenues
at a point in time upon delivery of its products. The Company
expects to recognize revenue over time on significant license
customization contracts that are covered by contract accounting
standards using cost inputs to measure progress toward completion
of its performance obligations, which is similar to the current
method.
In addition, incremental costs that are related to sales from
contracts signed during the period will require capitalization. If
the amortization period of those costs are one year or less, the
costs are expensed as incurred, which is a practical expedient
manner permitted under the new guidance. The Company currently does
not expect that this change will have a material impact on its
consolidated financial statements.
The Company currently estimates the cumulative adjustment to
increase the Company’s retained earnings by $8,055, while
increasing the Company’s assets by $9,117. The most
significant impact of the standard on the Company’s financial
statements relates to the timing of revenues recognized from
sales-based royalties (amounted to $8,765). The Company will also
record a provision for income taxes, which will increase the
Company’s current liabilities, in an amount currently
estimated at $1,062.
Other than specified above, the Company does not otherwise expect
the adoption of the new guidance will have a material impact on its
businesses.
(b) Other accounting standards
In January 2016, the FASB issued ASU
No. 2016-01, “Financial (Subtopic 825-10):
In February 2016, the FASB issued
ASU 2016-02,
The FASB issued ASU 2016-13 available-for-sale 2016-13
In January 2017, the FASB issued ASU No. 2017-01,
In January 2017, the FASB issued ASU No. 2017-04, |
