Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Jun. 30, 2014 |
Accounting Policies [Abstract] | ' |
Use of Estimates | ' |
Use of Estimates |
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The preparation of the accompanying consolidated financial statements and related disclosures in conformity with accounting principles generally accepted in the United States requires management to make judgments, assumptions and estimates that affect the amounts reported in the consolidated financial statements and accompanying notes. We base our estimates and judgments on historical experience and on various other assumptions that we believe are reasonable under the circumstances. Actual results could differ from those estimates. The reported amounts of assets, liabilities, revenues and expenses are affected by estimates and assumptions which are used for, but not limited to, the accounting for sales allowances, allowance for doubtful accounts, fair value of derivatives, valuation of goodwill and intangible assets, amortization of intangibles, restructurings, liabilities under defined benefit plans, share-based compensation, redeemable noncontrolling interests and income taxes. |
Cash and Cash Equivalents | ' |
Cash and Cash Equivalents |
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We consider all highly liquid investments with original maturities of 90 days or less at the time of purchase to be cash equivalents. Cash equivalents at June 30, 2014 and 2013 consisted primarily of money market funds and bank certificates of deposit. The carrying amounts approximate fair value due to the short maturities of these instruments. |
Accounts Receivable and Allowance for Doubtful Accounts | ' |
Accounts Receivable and Allowance for Doubtful Accounts |
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Accounts receivable are recorded according to contractual agreements. Credit terms for payment of products and services are extended to customers in the normal course of business and no collateral is required. The allowance for doubtful accounts is estimated based on our historical losses, the existing economic conditions, and the financial stability of our customers. Receivables are written-off in the period that they are deemed uncollectible. |
Property and Equipment | ' |
Property and Equipment |
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Property and equipment is stated at cost and depreciated over the estimated useful lives of the assets using the straight-line method. The estimated useful lives of assets are as follows: |
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Buildings | | 20 to 40 years | | | | | | | | | |
Building improvements | | 5 to 15 years | | | | | | | | | |
Leasehold improvements | | Lesser of 10 years or remaining lease term | | | | | | | | | |
Data processing equipment | | 3 years | | | | | | | | | |
Furniture and fixtures | | 4 to 7 years | | | | | | | | | |
Machinery and equipment | | 3 to 6 years | | | | | | | | | |
Software licenses | | 3 years | | | | | | | | | |
Internal Use Software | ' |
Internal Use Software |
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We capitalize the direct and incremental costs incurred in developing or obtaining internal use computer software as well as certain payroll and payroll-related costs of employees who are directly associated with internal use computer software projects. The amount of capitalized payroll costs with respect to these employees is limited to the time directly spent on such projects. The costs associated with preliminary project stage activities, training, maintenance and all other post-implementation stage activities are expensed as incurred. Additionally, we expense internal costs related to minor upgrades and enhancements, as it is impractical to separate these costs from normal maintenance activities. |
Contingent Purchase Consideration | ' |
Contingent Purchase Consideration |
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Contingent future cash payments related to acquisitions are recognized at fair value as of the acquisition date and included in the determination of the acquisition date purchase price. Subsequent changes in the fair value of the contingent future cash payments are recognized in earnings in the period that the change occurs. |
Goodwill and Intangible Assets | ' |
Goodwill and Intangible Assets |
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Goodwill and intangible assets with indefinite useful lives are not amortized, but instead are tested for impairment annually or more frequently if impairment indicators arise. We perform our annual goodwill and indefinite-lived intangible assets impairment assessment on April 1 of each fiscal year. Impairment indicators arise when events or changes in circumstances indicate that the carrying value of the asset may not be recoverable, such as a significant downturn in industry or economic trends with a direct impact on the business, an expectation that a reporting unit will be sold or otherwise disposed of for less than the carrying value, loss of key personnel, or a significant decline in the market price of an asset or asset group. |
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We test goodwill for impairment annually at a reporting unit level using a two-step process. The first step of the impairment test involves comparing the fair values of the applicable reporting units with their aggregate carrying |
values, including goodwill. If the carrying amount of a reporting unit exceeds the reporting unit’s fair value, we then perform the second step of the goodwill impairment test to determine the amount of the potential impairment loss. The second step of the goodwill impairment test involves comparing the implied fair value of the affected reporting unit’s goodwill with the carrying value of that goodwill. If the carrying amount of goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess. |
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In our annual goodwill impairment assessment for fiscal year 2014, we concluded that the fair values of the reporting units to which goodwill was assigned exceeded their respective carrying values and, accordingly, we did not identify any goodwill impairment. |
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We test indefinite-lived intangible assets at the unit of accounting level by making a determination of the fair value of the intangible asset. If the fair value of the intangible asset is less than its carrying value, an impairment loss is recognized in an amount equal to the difference. We also evaluate the remaining useful life of our intangible assets that are not subject to amortization on an annual basis to determine whether events and circumstances continue to support an indefinite useful life. If an intangible asset that is not being amortized is subsequently determined to have a finite useful life, that asset is tested for impairment. After recognition of the impairment, if any, the asset is amortized prospectively over its estimated remaining useful life and accounted for in the same manner as other intangible assets that are subject to amortization. |
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In our annual indefinite-lived intangible asset impairment assessment for fiscal year 2014, we concluded that the fair value of our indefinite-lived intangible assets exceeded their respective carrying value and, accordingly, we did not identify any impairment of indefinite-lived intangible assets. |
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Intangible assets with finite lives primarily consist of intangible assets acquired in business combinations and the costs associated with software developed for internal use. We amortize intangible assets with finite lives acquired in business combinations on an accelerated basis to reflect the pattern in which the economic benefits of the intangible asset are consumed. Costs associated with software developed for internal use are amortized over three- to five- years on a straight-line basis. |
Impairment of Long-Lived Assets | ' |
Impairment of Long-Lived Assets |
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We review long-lived assets, including intangible assets with finite lives and property and equipment, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Conditions that would necessitate an impairment assessment include a significant decline in the market price of an asset or asset group, a significant adverse change in the extent or manner in which an asset or asset group is being used, the loss of legal ownership or title to the asset, significant negative industry or economic trends or the presence of other factors that would indicate that the carrying amount of an asset or asset group is not recoverable. We consider a long-lived asset to be impaired if the estimated undiscounted future cash flows resulting from the use of the asset and its eventual disposition are not sufficient to recover the carrying value of the asset. If we deem an asset to be impaired, the amount of the impairment loss represents the excess of the asset’s carrying value compared to its estimated fair value. |
Net Income Attributable to Solera Holdings, Inc. Per Share | ' |
Net Income (Loss) Attributable to Solera Holdings, Inc. Per Share |
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Our restricted stock units have the right to receive non-forfeitable dividends on an equal basis with common stock and therefore are considered participating securities that must be included in the calculation of net income per share using the two-class method. Under the two-class method, basic and diluted net income per share is determined by calculating net income per share for common stock and participating securities based on the cash dividends paid and participation rights in undistributed earnings. Diluted net income per share also considers the dilutive effect of in-the-money stock options and unvested restricted stock units and performance share units that have the right to forfeitable dividends, calculated using the treasury stock method. Under the treasury stock method, the amount of assumed proceeds from unexercised stock options and unvested restricted stock units includes the amount of compensation cost attributable to future services not yet recognized, proceeds from the exercise of the options, and any excess income tax benefit or liability. |
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The computation of basic and diluted net income (loss) attributable to Solera Holdings, Inc. per common share using the two-class method is as follows (in thousands, except per share amounts): |
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| Fiscal Years Ended June 30, |
| 2014 | | 2013 | | 2012 |
Basic net income (loss) attributable to Solera Holdings, Inc. per common share | | | | | |
Net income (loss) attributable to Solera Holdings, Inc. | $ | (8,710 | ) | | $ | 93,884 | | | $ | 106,988 | |
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Less: Dividends paid and undistributed earnings allocated to participating securities | (289 | ) | | (756 | ) | | (548 | ) |
Net income (loss) attributable to common shares—basic | $ | (8,999 | ) | | $ | 93,128 | | | $ | 106,440 | |
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Weighted-average number of common shares used to compute basic net income (loss) attributable to Solera Holdings, Inc. per common share | 68,817 | | | 68,843 | | | 70,178 | |
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Basic net income (loss) attributable to Solera Holdings, Inc. per common share | $ | (0.13 | ) | | $ | 1.35 | | | $ | 1.52 | |
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Diluted net income (loss) attributable to Solera Holdings, Inc. per common share | | | | | |
Net income (loss) attributable to Solera Holdings, Inc. | $ | (8,710 | ) | | $ | 93,884 | | | $ | 106,988 | |
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Less: Dividends paid and undistributed earnings allocated to participating securities | (289 | ) | | (754 | ) | | (547 | ) |
Net income (loss) attributable to common shares—diluted | $ | (8,999 | ) | | $ | 93,130 | | | $ | 106,441 | |
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Weighted-average number of common shares used to compute basic net income (loss) attributable to Solera Holdings, Inc. per common share | 68,817 | | | 68,843 | | | 70,178 | |
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Diluted effect of options to purchase common stock, restricted stock units and performance share units | — | | | 296 | | | 349 | |
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Weighted-average number of common shares used to compute diluted net income (loss) attributable to Solera Holdings, Inc. per common share | 68,817 | | | 69,139 | | | 70,527 | |
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Diluted net income (loss) attributable to Solera Holdings, Inc. per common share | $ | (0.13 | ) | | $ | 1.35 | | | $ | 1.51 | |
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The following securities that could potentially dilute earnings per share in the future are not included in the determination of diluted net income (loss) attributable to Solera Holdings, Inc. per common share (in thousands): |
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| Fiscal Years Ended June 30, | | | |
| 2014 | | 2013 | | 2012 | | | |
Antidilutive options to purchase common stock and restricted stock units | 17 | | | 224 | | | 761 | | | | |
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Revenue Recognition | ' |
Revenue Recognition |
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Revenues are recognized only after services are provided, when persuasive evidence of an arrangement exists, the fee is fixed and determinable, and when collectability is probable. Our multiple element arrangements primarily include a combination of software licenses, hosted database and other services, installation and set-up services, hardware, maintenance services and transaction-based deliverables. |
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We generate a significant majority of our revenue from subscription-based contracts (where a monthly fee is charged), transaction-based contracts (where a fee per transaction is charged) and subscription-based contracts with additional transaction-based fees (where a monthly fee and a fee per transaction are charged). |
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Subscription-based and transaction-based contracts generally include the delivery of software, access to our database through a hosted service, upfront fees for the implementation and set-up activities necessary for the client to use/access the software and maintenance. Under a subscription arrangement, we consider delivery of software, access to the hosted database and maintenance to be a combined unit of accounting and recognize related revenues at the end of each month upon the completion of the monthly service. A transaction-based fee represents a payment for the right to use the software, access to the hosted database and maintenance. We consider the fee to be fixed and determinable only at the time actual usage occurs, and, accordingly, we recognize revenue at the time of actual usage. |
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Implementation services and set-up activities are necessary for the client to receive services/software. We defer up-front fees billed during the implementation/set-up phase and recognize such revenues on a straight-line basis over the estimated customer life. Recognition of this deferred revenue will commence upon the start of the monthly service. Implementation and set-up costs that are direct and incremental to the contract are capitalized and amortized on a straight-line basis over the estimated customer life. |
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Revenues are reflected net of customer sales allowances, which are based on both specific identification of certain accounts and a predetermined percentage of revenue based on historical experience. |
Sales and Related Taxes Collected | ' |
Sales and Related Taxes Collected |
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Sales and related taxes collected from customers and remitted to various governmental agencies are excluded from reported revenues in our consolidated statements of income. |
Cost of Revenues (Excluding Depreciation and Amortization) | ' |
Cost of Revenues (Excluding Depreciation and Amortization) |
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Our costs and expenses applicable to revenues represent the total of operating expenses and systems development and programming costs as presented on our consolidated statements of income. Operating expenses include compensation and benefits costs for operations, database development and customer service personnel, other costs related to operations, database development and customer support functions, as well as third-party data and royalty costs, the cost of computer software and hardware used directly in the delivery of our products and services and the costs of purchased data from state departments of motor vehicles. Systems development and programming costs include compensation and benefit costs for our product development and product management personnel, other costs related to our product development and product management functions and costs related to external software consultants involved in systems development and programming activities. |
Software Development Costs | ' |
Software Development Costs |
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Costs for the development of new software products and substantial enhancements to existing software products are expensed as incurred until technological feasibility has been established, at which time any additional costs would be capitalized. The costs to develop such software have not been capitalized as we believe our current software development process is essentially completed concurrent with the establishment of technological feasibility. |
Acquisition and Related Costs | ' |
Acquisition and Related Costs |
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Acquisition and related costs include legal and other professional fees and other transaction costs associated with completed and contemplated business combinations and asset acquisitions, costs associated with integrating acquired businesses, including costs incurred to eliminate workforce redundancies and for product rebranding, and other charges incurred as a direct result of our acquisition efforts. These other charges include changes to the fair value of contingent purchase consideration, acquired assets, and assumed liabilities subsequent to the completion of the purchase price allocation, purchase consideration that is deemed to be compensatory in nature, and incentive compensation arrangements with continuing employees of acquired companies. Acquisition and related costs also include the legal and other professional fees associated with the Federal Trade Commission's investigation of our acquisition of Actual Systems of America, Inc. (“ASA”) and the subsequent divestiture of ASA in August 2013. |
Foreign Currency Translation | ' |
Foreign Currency Translation |
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We translate our local currency financial results into U.S. dollars based on average exchange rates prevailing during the reporting period for our consolidated statement of income and certain components of stockholders’ equity, and the exchange rate at the end of that period for our consolidated balance sheet. For each of our foreign subsidiaries, the local currency is its functional currency. These translations resulted in net foreign currency translation adjustments of $39.1 million and $8.4 million in fiscal years 2014 and 2013, respectively, which are recorded as a component of accumulated other comprehensive income (loss) in stockholders’ equity. The foreign currency translation adjustment in fiscal year 2014 was caused by a weakening in the value of the U.S. dollar versus certain foreign currencies, including the Euro, during the period. Generally, this weakening of the U.S. dollar resulted in increases to the U.S. dollar value of certain of our assets and liabilities from June 30, 2013 to June 30, 2014, as presented in the accompanying consolidated balance sheets, although the corresponding local currency balances may have increased only slightly, decreased or remain unchanged. |
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During the fiscal years ended June 30, 2014, 2013, and 2012, we recognized net foreign currency transaction gains (losses) in other expense, net in our consolidated statements of income (loss) of $11.0 million, $(5.5) million, and $(8.0) million, respectively. Functional currencies of significant foreign subsidiaries include Euros, British Pounds, Swiss francs, Canadian dollars, Brazilian reals, and Mexican pesos. |
Income Taxes | ' |
Income Taxes |
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The provision for income taxes, income taxes payable and deferred income taxes are determined using the asset and liability method. Deferred tax assets and liabilities are determined based on differences between the financial reporting and tax basis of assets and liabilities and are measured by applying enacted tax rates and laws to taxable years in which such differences are expected to reverse. |
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As part of the process of preparing consolidated financial statements, we are required to estimate our income taxes and tax contingencies in each of the jurisdictions in which we operate prior to the completion and filing for tax returns for such periods. This process involves estimating actual current tax expense together with assessing temporary differences, or reversing book-tax differences, resulting from differing treatment of items, such as deferred revenue, for tax and accounting purposes. These differences result in net deferred tax assets and liabilities. |
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We regularly assess the likelihood that our deferred tax assets will be realizable using the more-likely-than-not standard. In our assessment, we consider all available evidence, both positive and negative, including historical levels of income, expectations and risks associated with estimates of future taxable income and ongoing prudent and feasible tax planning strategies. If we determine that our deferred tax assets do not meet the more-likely-than-not standard, we establish a valuation allowance. We exercise significant judgment relating to the projection of future taxable income. If judgments regarding recoverability of deferred tax assets change in future periods, we may need to adjust our valuation allowances, which could impact our results of operations in the period in which such determination is made. |
Derivative Financial Instruments | ' |
Derivative Financial Instruments |
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We utilize derivative financial instruments to manage interest rate and foreign currency exposures. Derivative financial instruments are recorded in the consolidated balance sheets at fair value. If the derivative is designated as a fair value hedge, the changes in the fair value of the derivative and of the hedged item attributable to the hedged risk are recognized as a charge or credit to earnings. If the derivative is designated as a cash flow hedge, the effective portions of the changes in the fair value of the derivative are initially recorded in accumulated other comprehensive income (loss) and are subsequently reclassified into earnings when the hedged transactions occur and affect earnings. Ineffective portions of changes in the fair value of cash flow hedges are recognized as a charge or credit to earnings. Derivative instruments not designated as hedges are marked-to-market at the end of each period with changes in fair value recognized in earnings. |
Advertising Costs | ' |
Advertising Costs |
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Advertising costs are expensed when incurred and are included in selling, general and administrative expenses. Total advertising costs were $11.2 million, $9.1 million and $7.2 million for the fiscal years ended June 30, 2014, 2013 and 2012, respectively. |
Share-Based Compensation | ' |
Share-Based Compensation |
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We expense share-based payment awards in the period to which the services rendered for these awards relate. These awards include stock options, restricted stock units and performance share units. We estimate the grant date fair value of stock options with vesting contingent upon the achievement of service conditions using the Black-Scholes option pricing model. The grant date fair value of restricted stock units with vesting contingent upon the achievement of service conditions and performance share units with vesting contingent upon the achievement of performance conditions equals the intrinsic value on the grant date. We estimate the grant date fair value of performance share units and stock options with vesting contingent upon the achievement of market conditions using the Monte-Carlo model, a generally accepted statistical technique used to simulate a range of possible future stock prices. |
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Share-based compensation expense associated with stock options and restricted stock units with vesting contingent upon the achievement of service conditions is recognized on a straight-line basis over the requisite service period of the award, which generally equals the vesting period. Share-based compensation expense associated with performance share units with vesting contingent upon the achievement of performance conditions and performance share units and stock options with vesting contingent upon the achievement of market conditions is recognized on an accelerated basis over the derived service period. Share-based compensation expense associated with our employee stock purchase plan is recognized over the applicable offering period on a straight-line basis. The amount of share-based compensation expense recognized for share-based awards is net of estimated forfeitures of unvested awards. No compensation cost is recorded for awards that do not vest, other than performance share units and stock options with vesting contingent upon the achievement of market conditions. |
Accumulated Other Comprehensive Income (Loss) | ' |
Accumulated Other Comprehensive Income (Loss) |
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Accumulated other comprehensive income (loss) includes foreign currency translation adjustments, unrealized gains and losses on derivative instruments related to the effective portion of cash flow hedges, net of the related income tax effect, and changes in the funded status of defined benefit pension plans, net of the related income tax effect, that are excluded from the consolidated statements of income (loss) and are reported as a separate component in stockholders’ equity. |
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Accumulated other comprehensive income (loss) consists of the following (in thousands): |
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| Fiscal Year Ended June 30, | | | | |
| 2014 | | 2013 | | | | |
Cumulative foreign currency translation adjustments | $ | 11,154 | | | $ | (27,978 | ) | | | | |
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Unrealized losses on derivative financial instruments, net of tax | (6,954 | ) | | (3,754 | ) | | | | |
Change in funded status of defined benefit pension plans, net of tax | (16,888 | ) | | (11,415 | ) | | | | |
Accumulated other comprehensive loss | $ | (12,688 | ) | | $ | (43,147 | ) | | | | |
Guarantees | ' |
Guarantees |
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We recognize, at the inception of a guarantee, a liability for the fair value of any guarantees. |
Reclassifications | ' |
Reclassifications |
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Share-based compensation expense for the previously reported periods has been reclassified from selling, general and administrative expenses to a separate line item in the accompanying consolidated statement of income (loss) to conform with the current period presentation. |
Recently Adopted Accounting Pronouncements | ' |
Recently Adopted Accounting Pronouncements |
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In February 2013, the Financial Accounting Standards Board ("FASB") issued ASU Topic No. 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, which requires entities to report the effect of significant reclassifications out of accumulated other comprehensive income on the respective line items in net income if the amount being reclassified is required to be reclassified in its entirety to net income. For other amounts that are not required to be reclassified in their entirety from accumulated other comprehensive income to net income in the same reporting period, an entity is required to cross-reference other disclosures required that provide additional detail about those amounts. We adopted ASU Topic No. 2013-02 in the first quarter of our fiscal year 2014. Please refer to Note 7 for disclosure of reclassifications out of accumulated other comprehensive income (loss). |
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In July 2012, the FASB issued ASU Topic No. 2012-02, Intangibles-Goodwill and Other (Topic 350), which amends the guidance on testing indefinite-lived intangible assets, other than goodwill, for impairment to provide entities with the option of performing a qualitative assessment before calculating the fair value of the asset. If it is determined that the fair value of the asset is more likely than not less than the carrying amount based on qualitative factors, the two-step impairment test would be required. We adopted ASU Topic No. 2012-02 in the first quarter of our fiscal year 2014. The adoption of ASU Topic No. 2012-02 did not impact our financial condition, results of operations or cash flows. |
New Accounting Pronouncements Not Yet Adopted | ' |
New Accounting Pronouncements Not Yet Adopted |
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In July 2013, the FASB issued ASU Topic No. 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists, which requires an entity to present certain unrecognized tax benefits as reductions to deferred tax assets rather than as liabilities in balance sheets when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. ASU Topic No. 2013-11 does not affect the recognition or measurement of uncertain tax positions under ASC 740. ASU Topic No. 2013-11 is effective for our fiscal year 2015, although early adoption is permitted. |
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In May 2014, the FASB issued ASU Topic No. 2014-09, Revenue from Contracts with Customers, which supersedes the revenue recognition requirements in ASC Topic No. 605, Revenue Recognition, and most industry-specific guidance. This guidance primarily requires an entity to recognize revenue to depict the transfer of promised 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. ASU 2014-09 is effective for our fiscal year 2017. |