Significant Accounting Policies | Significant Accounting Policies Use of Estimates: The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and judgments. These estimates and judgments affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities (if any) at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Cash and Cash Equivalents: Cash and cash equivalents include cash in banks and highly liquid investments with original maturities of three months or less. Accounts Receivable, Net of Allowances: Allowances are maintained against accounts receivable for doubtful accounts. Allowances for doubtful accounts are maintained for estimated losses resulting from the inability of customers to make required payments. These allowances are based on both recent trends of certain customers estimated to be a greater credit risk as well as general trends of the entire customer pool. Accounts are written off against the allowance when it becomes evident collection will not occur. Self-insurance Liabilities: The Company is generally self-insured for product liability, environmental liability and medical and workers’ compensation claims. For product liability, catastrophic insurance coverage is retained for potentially significant individual claims. An estimated provision for claims reported and for claims incurred but not yet reported under the self-insurance programs is recorded and revised periodically based on industry trends, historical experience and management judgment. In addition, industry trends are considered within management judgment for valuing claims. Changes in assumptions for such matters as legal judgments and settlements, legal defense costs, inflation rates, medical costs and actual experience could cause estimates to change in the near term. Revenue Recognition: Revenues are recognized based upon the terms of contracts with customers, which is generally when title transfers and risk of loss passes as customer orders are completed and shipped. For National Account customers, revenue is recognized upon customer acceptance. Products generally are not sold with the right of return with the exception of a small percentage of aftermarket parts. Based on the Company’s historical experience, a portion of these aftermarket parts sold is estimated to be returned and, subject to certain terms and conditions, the Company will agree to accept. The Company records estimated reductions to revenues at the time of the sale based upon this historical experience and the limited right of return provided to the Company’s dealers. The Company also records estimated reductions to revenues for customer programs and incentive offerings, including special pricing agreements, price competition, promotions and other volume-based incentives. Lift truck sales revenue is recorded net of estimated discounts. The estimated discount amount is based upon historical trends for each lift truck model. In addition to standard discounts, dealers can also request additional discounts that allow them to offer price concessions to customers. From time to time, the Company offers special incentives to increase market share or dealer stock and offers certain customers volume rebates if a specified cumulative level of purchases is obtained. Additionally, the Company provides for the estimated cost of product warranties at the time revenues are recognized. Advertising Costs: Advertising costs are expensed as incurred. Total advertising expense was $10.8 million , $11.7 million and $11.9 million in 2016 , 2015 and 2014 , respectively. Product Development Costs: Expenses associated with the development of new products and changes to existing products are charged to expense as incurred. These costs amounted to $107.0 million , $88.3 million and $71.4 million in 2016 , 2015 and 2014 , respectively. Shipping and Handling Costs: Shipping and handling costs billed to customers are recognized as revenue and shipping and handling costs incurred by the Company are included on the line “Cost of sales” within the Consolidated Statements of Operations. Taxes Collected from Customers and Remitted to Governmental Authorities: The Company collects various taxes and fees as an agent in connection with the sale of products and remits these amounts to the respective taxing authorities. These taxes and fees have been presented on a net basis in the Consolidated Statements of Operations and are recorded as an asset or liability until received by or remitted to the respective taxing authority. Foreign Currency: Assets and liabilities of non-U.S. operations are translated into U.S. dollars at the fiscal year-end exchange rate. The related translation adjustments are recorded as a separate component of equity, except for the Company’s Mexican operations. The U.S. dollar is considered the functional currency for the Company’s Mexican operations and, therefore, the effect of translating assets and liabilities from the Mexican peso to the U.S. dollar is recorded in results of operations. Revenues and expenses of all non-U.S. operations are translated using average monthly exchange rates prevailing during the year. Reclassification: Certain amounts in the prior period’s audited consolidated financial statements have been reclassified to conform to the current period’s presentation. The following table includes other significant accounting policies that are described in other notes to the consolidated financial statements, including the footnote number: Significant Accounting Policy Note Reportable segments Business Segments (Note 3) Stock-based compensation Common Stock and Earnings per Share (Note 5) Income taxes Income Taxes (Note 6) Derivatives and hedging activities Financial Instruments and Derivative Financial Instruments (Note 8) Fair value of financial instruments Financial Instruments and Derivative Financial Instruments (Note 8) and Retirement Benefit Plans (Note 9) Pension Retirement Benefit Plans (Note 9) Inventories Inventories (Note 10) Property, plant and equipment Property, Plant and Equipment, Net (Note 11) Impairment or disposal of long-lived assets Property, Plant and Equipment, Net (Note 11) Goodwill and intangible assets Goodwill and Intangible Assets (Note 12) Contingencies Contingencies (Note 16) Recently Issued Accounting Standards The following table provides a brief description of recent accounting pronouncements adopted during 2016. The adoption of these standards did not have a material effect on the Company's financial position, results of operations, cash flows or related disclosures. Standard Description ASU No. 2015-03, Interest—Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs The guidance is intended to simplify the presentation of debt issuance costs. The guidance requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. ASU No. 2015-05, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer's Accounting for Fees Paid in a Cloud Computing Arrangement The guidance clarifies the accounting for cloud computing arrangements including a software license and cloud computing arrangements that do not include a software license that should be accounted for as a service contract. ASU No. 2015-16, Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments The guidance requires an acquirer to recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. The guidance requires the acquirer to record, in the same period’s financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. In addition, the guidance requires an entity to present separately on the face of the income statement or disclose in the notes the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition. ASU No. 2014-15, Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern The guidance requires management to evaluate whether there are conditions and events that raise substantial doubt about the entity's ability to continue as a going concern within one year after the financial statements are issued. The following table provides a brief description of recent accounting pronouncements not yet adopted: Standard Description Required Date of Adoption Effect on the financial statements or other significant matters ASU No. 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory The guidance requires inventory to be measured at the lower of cost or net realizable value. The guidance defines net realizable value as the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. January 1, 2017 The Company does not expect the adoption of the guidance to have a material effect on its financial position, results of operations, cash flows or related disclosures. ASU No. 2016-07, Investments - Equity Method and Joint Ventures (Topic 323) The guidance eliminates the requirement that an entity retroactively adopt the equity method of accounting if an investment qualifies for use of the equity method as a result of an increase in the level of ownership or degree of influence. In addition, the guidance requires that the equity method investor add the cost of acquiring the additional interest in the investee to the current basis of the investor’s previously held interest and adopt the equity method of accounting as of the date the investment becomes qualified for equity method accounting. January 1, 2017 The Company does not expect the adoption of the guidance to have a material effect on its financial position, results of operations, cash flows or related disclosures. ASU No. 2016-09, Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting The guidance simplifies several aspects of the accounting for employee 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. January 1, 2017 The Company does not expect the adoption of the guidance to have a material effect on its financial position, results of operations, cash flows or related disclosures. ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (Subsequent ASUs have been issued in 2015 and 2016 to update or clarify this guidance) The new guidance is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new guidance also requires additional disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. January 1, 2018 The Company is currently evaluating the impact of the new standard and subsequently issued clarifications. As part of the assessment work, the Company has formed an implementation work team, completed training of the new ASU's revenue recognition model and begun contract review and documentation. The Company's evaluation process includes, but is not limited to, identifying contracts within the scope of the guidance, reviewing and documenting the accounting for these contracts and identifying and determining the accounting for any related contract costs. The Company has substantially completed the review of a sample of contracts within the scope of the guidance and is currently evaluating the impact of the new standard on its financial statements, business processes and internal controls over financial reporting. At this time, the Company has not identified its method of adoption. ASU No. 2016-01, Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities The guidance requires equity investments previously accounted for under the cost method of accounting to be measured at fair value and recognized in net income. In addition, the guidance defines measurement and presentation of financial instruments. January 1, 2018 The Company is currently evaluating the adoption and the effect on its financial position, results of operations, cash flows and related disclosures. ASU No. 2016-05, Derivatives and Hedging (Topic 815): Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships The guidance clarifies that a change in the counterparty to a derivative instrument that has been designated as the hedging instrument does not, in and of itself, require dedesignation of that hedging relationship, provided that all other hedge accounting criteria continue to be met. January 1, 2018 The Company is currently evaluating the adoption and the effect on its financial position, results of operations, cash flows and related disclosures. Standard Description Required Date of Adoption Effect on the financial statements or other significant matters ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments The guidance clarifies the classification of certain types of cash receipts and cash payments. In addition, the guidance provides for the application of the predominance principle when certain cash receipts and payments have aspects of more than one class of cash flows. January 1, 2018 The Company is currently evaluating the adoption and the effect on its financial position, results of operations, cash flows and related disclosures. ASU No. 2016-16, Income Taxes (Topic 740) The guidance allows for recognition of current and deferred income taxes for an intra-entity transfer of an asset other than inventory. The guidance allows for more accurate representation of the economics of an intra-entity asset transfer which will require income tax consequences of the transfer, including income taxes payable or paid. January 1, 2018 The Company is currently evaluating the adoption and the effect on its financial position, results of operations, cash flows and related disclosures. ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash The guidance requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. January 1, 2018 The Company is currently evaluating the adoption and the effect on its financial position, results of operations, cash flows and related disclosures. ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business The guidance clarifies the definition of a business to assist entities in evaluating whether transactions should be accounted for as acquisitions or disposals of businesses. January 1, 2018 The Company is currently evaluating the adoption and the effect on its financial position, results of operations, cash flows and related disclosures. ASU No. 2016-02, Leases (Topic 842) The guidance requires lessees (with the exception of short-term leases) to recognize, at the commencement date, a lease liability, which is a lessee's obligation to make lease payments arising from a lease, measured on a discounted basis; and a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. January 1, 2019 The Company is currently evaluating the alternative methods of adoption and the effect on its financial position, results of operations, cash flows and related disclosures. ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326) The guidance eliminates the probable initial recognition threshold and requires an entity to reflect its current estimate of all expected credit losses. The guidance also requires additional disclosures in certain circumstances. January 1, 2020 The Company is currently evaluating the alternative methods of adoption and the effect on its financial position, results of operations, cash flows and related disclosures. ASU No. 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment The guidance removes the second step of the two-step test for the measurement of goodwill impairment. The guidance allows for early adoption for impairment testing dates after January 1, 2017. January 1, 2020 The Company is currently evaluating the timing of adoption and the effect on its current impairment testing process. |