| Significant Accounting Policies | 2. Significant Accounting Policies Basis of Presentation and Earnings per Share The Transactions were accounted for as a reverse merger in accordance with accounting principles generally accepted in the United States of America (“GAAP”). This determination was primarily based on Cision comprising the ongoing operations of the combined entity, Cision’s senior management comprising the majority of the senior management of the combined company, and the prior shareholders of Cision having a majority of the voting power of the combined entity. Accordingly, the Transactions have been treated equivalent to Cision issuing stock for the net monetary assets of Capitol, accompanied by a recapitalization. The net assets of Capitol at the merger date have been stated at historical cost, with no goodwill or other intangible assets recorded. Operations prior to the Transactions in these financial statements are those of Cision. As a result, these financial statements represent the continuation of Cision Ltd. and the historical shareholders’ equity and earnings per share calculations of Cision prior to the Transactions have been retrospectively adjusted for the equivalent number of shares received by Cision’s Owner, where applicable, pursuant to the Transactions. The accumulated deficit of Cision has been carried forward after the Transactions. Cision Ltd., the parent company, has no independent operating activity or third-party assets and liabilities. Prior to the June 29, 2017 Transactions, earnings per share was calculated using the two-class method. On June 29, 2017, all outstanding classes of equity of Cision were contributed in exchange for 82,075,873 ordinary shares. Immediately after the Transactions, 120,512,402 ordinary shares were outstanding. Subsequent to the Merger, earnings per share are calculated based on the weighted number of ordinary shares then outstanding. As part of the Transactions, the historical number of outstanding common shares of Class B-1, Class C-1 and Class V, in aggregate, has been adjusted to 28,369,644 common shares, in order to retroactively reflect the Merger exchange ratio. Historical earnings per share also gives effect to this adjustment through June 29, 2017, the date of the Merger. This retroactive adjustment also eliminates the need for a two-class method earnings per share calculation. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptions. On an on-going basis, the Company evaluates its estimates, including, but not limited to, those related to the allowance for doubtful accounts, software development costs, useful lives of property, equipment and internal use software, intangible assets and goodwill, contingent liabilities, and fair value of equity-based awards and income taxes. The Company bases its estimates on various assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities as well as the reported amounts of revenues and expenses during the period. Actual results could differ from these estimates. Cash and Cash Equivalents and Investments The Company considers all highly liquid investments with original maturity dates of three months or less at the time of purchase to be cash equivalents. For all years reported the Company did not carry any investments with original maturity dates of longer than three months. Fair Value Measurements The Company measures certain financial assets and liabilities at fair value pursuant to a fair value hierarchy based on inputs to valuation techniques that are used to measure fair value that are either observable or unobservable. Observable inputs reflect assumptions market participants would use in pricing an asset or liability based on market data obtained from independent sources while unobservable inputs reflect a reporting entity’s pricing based upon its own market assumptions. The fair value hierarchy consists of the following three levels: Level 1 Inputs are quoted prices in active markets for identical assets or liabilities. Level 2 Inputs are quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable and market-corroborated inputs which are derived principally from or corroborated by observable market data. Level 3 Inputs are derived from valuation techniques in which one or more significant inputs or value drivers are unobservable. Accounts Receivable and Allowance for Doubtful Accounts Accounts receivable are recorded net of provisions for doubtful accounts. Estimates are used to determine the amount of the allowance for doubtful accounts necessary to reduce accounts receivable to the estimated net realizable value. These estimates are made by analyzing the status of significant past-due receivables and by establishing provisions for estimated losses by analyzing current and historical bad debt trends. Actual collection experience has not varied significantly from prior estimates. The allowance for doubtful accounts at December 31, 2018 and 2017 was $8.2 million and $5.3 million, respectively. Internal Use Software Development The Company incurs software development costs related to its internal use software. Qualifying costs incurred during the application development stage are capitalized. These costs primarily consist of internal labor and third-party development costs and are amortized using the straight-line method over the estimated useful life of the software, which is generally two years. All other research and development costs are expensed as incurred. Costs to maintain and update the information database are expensed within cost of revenues as these expenses are incurred. For the years ended December 31, 2018, 2017 and 2016, the Company recorded amortization expense related to internal use software of $15.2 million, $12.4 million and $12.6 million, respectively, within cost of revenue in the statements of net loss and total comprehensive loss. Property, Equipment and Purchased Software Property, equipment and purchased software are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets as follows: three to five years for software and computer and office equipment and five to seven years for furniture and fixtures. Assets acquired under capital leases and leasehold improvements are amortized using the straight-line method over the shorter of the estimated useful lives of the assets or the terms of the leases. Amortization of assets acquired under capital leases is included in depreciation and amortization expense. Repairs and maintenance costs are charged to expense as incurred. When assets are retired or otherwise disposed of, the asset and related accumulated depreciation are eliminated from the accounts and any resulting gain or loss is recorded in the results of operations. Long-Lived Assets Long-lived assets include property, equipment and software and intangible assets with finite lives. Intangible assets consist of customer relationships, trade names and purchased technology acquired in business combinations. Intangible assets are amortized using the straight-line method, which approximates the pattern of usage of the economic benefit of the asset, over their estimated useful lives ranging from two to fifteen years. Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. If an impairment indicator is present, the Company evaluates recoverability by a comparison of the carrying amount of the assets to future undiscounted net cash flows expected to be generated by the assets. If the assets are impaired, the impairment recognized is measured by the amount by which the carrying amount exceeds the estimated fair value of the assets. There were no impairment charges for long-lived assets for the years ended December 31, 2018, 2017 or 2016. The Company regularly revisits its estimate of useful economic lives of long-lived assets and makes adjustments to those lives where appropriate. Business Combinations The Company has completed a number of acquisitions of businesses that have resulted in the recording of goodwill and identifiable definite-lived intangible assets. The Company recognizes all of the assets acquired and liabilities assumed at their fair values on the acquisition date. The Company uses significant estimates and assumptions, including fair value estimates, as of the acquisition date using the income and cost approaches (or a combination thereof). Fair values are determined based on Level 3 inputs, including estimated future cash flows, discount rates, royalty rates, growth rates, sales projections, customer retention rates and terminal values, all of which require significant management judgment. The Company refines these estimates that are provisional, as necessary, during the measurement period. The measurement period is the period after the acquisition date, not to exceed one year, in which new information may be gathered about facts and circumstances that existed as of the acquisition date to adjust the provisional amounts recognized. Adjustments to assets and liabilities within the measurement period are recorded with a corresponding offset to goodwill. All other adjustments, including those after the conclusion of the measurement period, are recorded to the consolidated statements of net loss and, to date, have been immaterial. Acquisition-related costs are expensed as incurred separately from the acquisition and generally are included in general and administrative expenses in the statements of net loss and total comprehensive loss. Deferred Financing Costs and Debt Discounts The Company amortizes costs to obtain financing over the term of the underlying obligation using either the effective interest method or the straight-line method, as appropriate. Debt discounts and deferred financing costs are netted from the carrying value of the debt and amortized over the term of the debt using the effective interest method. Deferred financing fees related to the Company’s revolving debt facilities are included within other assets in the consolidated balance sheets. The amortization of deferred financing costs and debt discounts is included in interest expense in the accompanying consolidated statements of net loss and comprehensive loss. Goodwill Goodwill represents the excess of the cost of an acquired entity over the net fair value of the identifiable assets acquired and liabilities assumed. Goodwill is not amortized, but rather is assessed for impairment at least annually. The Company performs its annual impairment assessment on October 1, or whenever events or circumstances indicate impairment may have occurred. On October 1, 2018, 2017 and 2016, the Company performed its annual goodwill impairment assessment based on the fair value of each of the Company’s reporting units. In past years when assessing goodwill for impairment, the Company used an income approach based on discounted cash flows to determine the fair value of its reporting unit. The Company’s cash flow assumptions considered historical and forecasted revenue, operating costs and other relevant factors which were consistent with the plans used to manage the Company’s operations. In light of the evidence from 2017 and the lack of significant factors that currently exist that would change the circumstances, management has elected to perform a Step Zero test for the year ending December 31, 2018. Based on the positive qualitative analysis on each of its three reporting units as of October 1, 2018 the Company concluded that there were no significant adverse factors identified in Step Zero and so concluded it is more likely than not that each of its three reporting units’ fair values are greater than their respective carrying amounts. Foreign Currency The reporting currency for all periods presented is the U.S. dollar. The functional currency for the Company’s foreign operating subsidiaries is their local currency. The functional currency of the Company and substantially all of its non operating subsidiaries is the US dollar. The financial statements of these subsidiaries are translated into U.S. dollars using exchange rates in effect at each balance sheet date for assets and liabilities and average exchange rates during the period for revenues and expenses. The resulting translation adjustments are included in accumulated other comprehensive income (loss), a separate component of stockholders’ deficit. Gains or losses, whether realized or unrealized due to transactions in foreign currencies and the remeasurement of certain intercompany balances, are included in the consolidated statements of net loss and total comprehensive loss. Defined Benefit Pension Plan Employees of CNW Group Ltd. (“CNW”) participate in a defined benefit pension plan whereby pension expense is determined based on a number of actuarial assumptions, which are reviewed on an annual basis. The defined benefit plan has been closed to new participants since 2006. The employees and accompanying pension plan were inherited with the acquisition of PRN Group (“PR Newswire”) on June 16, 2016. These actuarial assumptions include discount rate, expected rate of return on plan assets, rate of salary increases and other factors. The unfunded status of the plan is recognized as a long-term liability in the consolidated balance sheets at December 31, 2018 and 2017 and totals $3.3 million and $3.6 million at these dates, respectively. These dates are also the measurement date for the defined benefit pension plan. Investment in Unconsolidated Affiliate The Company’s investment in an unconsolidated affiliate over which the Company has significant influence was accounted for under the equity method of accounting. The investment was acquired with the PR Newswire acquisition and the purchase price of PR Newswire was allocated to the investee based on its fair value as of the acquisition date. The Company records its share of the undistributed income or loss from this investment, which, to date, have been immaterial. During the fourth quarter of 2018, the Company completed a review of the investment and determined that there was an other than temporary impairment as the current projected operating results did not support the carrying value of the Company’s investment. As such, the Company recognized an impairment charge of $1.1 million during the fourth quarter of 2018. At December 31, 2018 and 2017, the investment in unconsolidated affiliate is $3.0 million and $4.2 million, respectively, which is included within other long-term assets in the consolidated balance sheets. Comprehensive Income (Loss) Comprehensive income (loss) includes the Company’s net income (loss) and foreign currency translation adjustments. There are no other material components of comprehensive loss for the years ended December 31, 2018, 2017 and 2016. Revenue Recognition The Company accounts for revenue contracts with customers by applying the requirements of Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (Topic 606), which includes the following steps: • Identification of the contract, or contracts with a customer. • Identification of the performance obligations in the contract. • Determination of the transaction price. • Allocation of the transaction price to the performance obligations in the contract. • Recognition of the revenue when, or as, the Company satisfies a performance obligation. The Company derives its revenue from access to its cloud based technology platform and related media management and analysis services sold on a subscription basis. Revenue is also derived from the distribution of press releases on both a subscription basis and separately from non-subscription arrangements. Dependent on the nature of the distribution contract with the customer, the Company recognizes revenue on subscription basis over the contract term of the subscription, or on a per-transaction basis when the press releases are made available to the public. Subscription services include access to the Company’s software platform and associated hosting services, content and content updates, customer support and media management and analysis services. Subscription services are recognized ratably over the contractual period that the services are delivered, beginning on the date in which such service is made available to the customer. Subscription agreements are typically one year in length and are non-cancelable, though customers have the right to terminate their agreements if the Company materially breaches its obligations under the agreement. Software subscription agreements do not provide customers the right to take possession of the software at any time. The Company does not charge customers an upfront fee for use of the platform and implementation activities are insignificant and not subject to a separate fee. In certain cases, the Company charges annual membership fees which are recognized ratably over the one-year membership period. The Company accounts for a contract when both parties have approved the contract and are committed to perform their respective obligations, each party’s rights can be identified and payment terms can be identified, the contract has commercial substance and it is probable that the Company will collect substantially all of the consideration. Revenue is recognized when, or as, performance obligations are satisfied by transferring control of the promised service to a customer. The transaction price for subscription arrangements and services is generally fixed at contract inception. The Company’s standard payment terms are generally net 30 days. For transaction-based services, which predominantly comprise press release distributions, customers are invoiced in the month the release is made available to the public. In the event that a customer arrangement contains multiple services, the Company determines whether such goods or services are distinct performance obligations that should be accounted for separately in the arrangement. When arrangements contain multiple performance obligations, further evaluation is usually not required given such performance obligations are generally recognized over time using the same measure of progress and thus, are accounted for as a single performance obligation. Otherwise, when allocating the transaction price in the arrangement, the Company uses the estimated standalone selling price of each distinct performance obligation. In order to estimate the standalone selling prices, the Company relies on the price charged for stand-alone sales, expected cost plus margin and adjusted market assessment approaches. Revenue is then recognized over the pattern of performance as each obligation is satisfied as discussed above. The transaction price for the Company’s subscription arrangements and professional services is generally fixed at contract inception. Transaction price allocated to the remaining performance obligations Transaction price allocated to remaining performance obligations represents contract revenue that has not yet been recognized. As of the Company’s remaining performance obligations were $140.8 million, approximately 99.2% of The Company has elected the practical expedient to not disclose the transaction price allocated to remaining performance obligations that are part of a contract that has an original expected duration of one year or less. Contract Balances The difference in the opening and closing balances of the Company’s accounts receivable and deferred revenue primarily results from the timing difference between the Company’s performance and the customer’s payment. Accounts receivable are recorded when the customer has been billed or the right to consideration is unconditional. Deferred revenue consists of payments received from or billings to customers in advance of revenue recognition. Deferred revenue to be recognized in the succeeding twelve-month period is included in current deferred revenue with the remaining amounts included in noncurrent deferred revenue. Invoices issued in advance of the fulfillment of a deliverable or the start of the customers’ subscription term are not material. Prior to the adoption of the new revenue guidance on January 1, 2018, the Company recognized revenue when persuasive evidence of an arrangement existed, the fees were fixed or determinable, the product or service had been delivered and collectability was assured. The Company considered the terms of each arrangement to determine the appropriate accounting treatment. Sales commission expense was expensed as incurred. Sales Commissions In accordance with ASC 340-40, the Company capitalizes incremental costs incurred to obtain a contract when such costs would have not been incurred if the contract had not been obtained. The Company has elected to expense costs incurred when the amortization period would be one year or less. Initial sales commissions for subscription contracts are deferred and amortized on a straight-line basis over a period of benefit that the Company estimates to be three years. The Company determines the period of benefit by taking into consideration the average technology life and average customer life. Amortization of deferred sales commissions is included as a component of sales and marketing expenses in the Company’s consolidated statements of net loss and total comprehensive loss. As of December 31, 2018, the ending asset balance for costs to obtain a contract was $7.1 million of which $4.5 million is expected to be Advertising Costs The Company expenses advertising costs as incurred. Advertising costs for the years ended December 31, 2018, 2017 and 2016 were approximately $6.6 million, $5.9 million and $7.0 million, respectively. Equity-Based Compensation The Company recognizes equity-based compensation costs on a straight-line basis over the requisite service period of the award, which is generally four years from the date of grant. As equity-based compensation expense recognized is based on awards ultimately expected to vest, such expense is reduced for estimated forfeitures. Compensation expense for these equity-based awards is recognized by the Company, with an equal offsetting charge to “Additional paid-in capital.” Such compensation expense is reflected in the Company’s consolidated statements of net loss and total comprehensive loss. Segments The Company has determined that its Chief Executive Officer is the Chief Operating Decision Maker. The Company’s Chief Executive Officer reviews financial information presented on both a consolidated basis and on a geographic regional basis. Since its inception, the Company has completed several significant acquisitions and has expended significant efforts in integrating these acquisitions into a single commercial software solution, available to all customers in all geographies. As a result of the long-term qualitative and quantitative similar economic characteristics exhibited by the sale of a single product suite in all the Company’s regions, the Company has determined that its three regional operating segments meet the criteria to be aggregated into one reportable segment. Net Loss per Share Prior to the June 29, 2017 Transactions, net loss per share was calculated using the two-class method. On June 29, 2017, all outstanding classes of equity of Cision were contributed in exchange for 82,075,873 ordinary shares. Immediately after the Transactions, 120,512,402 ordinary shares were outstanding. Subsequent to the Merger, basic net loss per share is computed by dividing net loss by the weighted-average number of shares outstanding during the period. Diluted net loss per share equals basic loss per share due to losses incurred during the years ended December 31, 2018, 2017 and 2016. Concentrations of Credit Risk Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents, investments and accounts receivable. The Company generally maintains its cash and cash equivalents with various nationally recognized financial institutions. Customers are granted credit on an unsecured basis. Management monitors the creditworthiness of its customers and believes that it has adequately provided for any exposure to potential credit losses. The Company provides cloud-based software, distribution services and related professional services to various customers across many industries. As of December 31, 2018 and 2017, no individual customer accounted for 10% or more of net accounts receivable. For the years ended December 31, 2018, 2017 and 2016, no individual customer accounted for 10% or more of revenue. Income Taxes Income taxes are determined utilizing the asset and liability method whereby deferred tax assets and liabilities are recognized for deductible temporary differences between the respective reported amounts and tax bases of assets and liabilities, as well as for operating loss and tax-credit carryforwards. Net deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company’s estimates related to liabilities for uncertain tax positions require it to make judgments regarding the sustainability of each uncertain tax position based on its technical merits. If it determines it is more likely than not that a tax position will be sustained based on its technical merits, the Company records the impact of the position in its consolidated financial statements at the largest amount that is greater than fifty percent likely of being realized upon ultimate settlement. The estimates are updated at each reporting date based on the facts, circumstances and information available. The Company is also required to assess at each reporting date whether it is reasonably possible that any significant increases or decreases to its unrecognized tax benefits will occur during the next twelve months. The Company files income tax returns in the U.S. federal jurisdictions and various state and foreign jurisdictions and is subject to U.S. federal, state, and foreign tax examinations for years ranging from 2013 to 2018. On December 22, 2017, the U.S. government enacted comprehensive tax legislation (the “Tax Act”), which contains several key tax provisions that affected the Company including a reduction of the federal corporate income tax rate to 21% effective January 1, 2018, among others. The Company accounted for the tax effects in the 2017 financial statements on a provisional basis. The Company finalized the accounting for the Tax Act in the fourth quarter of 2018. Recent Accounting Pronouncements As of December 31, 2018, the Company is no longer classified as an Emerging Growth Company and has adopted new accounting standards in accordance with the effective dates set for public companies as listed below. New Accounting Pronouncements Adopted in 2018 In March 2016, the FASB issued ASU 2016-09, Stock Compensation (Topic 718), Improvements to Employee Share-Based Payment Accounting. ASU 2016- 09, which amends several aspects of accounting for employee share-based payment transactions including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. The Company has elected to early adopt this guidance on a prospective basis beginning January 1, 2018. The Company has also elected to continue its historical accounting practice of estimating forfeitures in determining the amount of stock-based compensation expense to recognize, rather than accounting for forfeitures as they occur. The adoption of ASU 2016-09 did not have an impact on the Company’s consolidated financial statements. In October 2016, the FASB issued ASU No. 2016-16, Income Taxes (Topic 740), Intra-Entity Transfers of Assets Other Than Inventory. The amendments of ASU No. 2016-16 were issued to improve the accounting for the income tax consequences of intra-entity transfers of assets other than inventory. Current GAAP prohibits the recognition of current and deferred income taxes for an intra-entity asset transfer until the asset has been sold to an outside party which has resulted in diversity in practice and increased complexity within financial reporting. The amendments of this ASU would require an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs and do not require new disclosure requirements. The Company elected to early adopt ASU 2016-16 in the first quarter of fiscal 2018 and applied the guidance on a modified retrospective basis and recorded a cumulative-effect adjustment to accumulated deficit in the amount of $1.1 million. In January 2017, the FASB issued ASU 2017-04, Intangibles—Goodwill and Other (Topic 350). The ASU eliminates Step 2 of the goodwill impairment test, which requires determining the fair value of assets acquired or liabilities assumed in a business combination. Under the amendments in this update, a goodwill impairment test is performed by comparing the fair value of the reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The Company elected to early adopt ASU 2017-04 in the first quarter of fiscal 2018 and it did not have an impact on its consolidated financial statements. In March 2017, the FASB issued ASU 2017-07, “Compensation-Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost” (ASU 2017-07) which changes the way employers that sponsor defined benefit pension and/or postretirement benefit plans reflect net periodic benefit costs in the income statement. The new standard requires a company to present the service cost component of net periodic benefit cost in the same income statement line as other employee compensation costs with the remaining components of net periodic benefit cost presented separately from the service cost component and outside of any subtotal of operating income, if one is presented. ASU 2017-07 is effective for fiscal years beginning after December 15, 2017 with early adoption permitted as of the beginning of an annual period. The Company adopted ASU 2017-07 in the fourth quarter of 2018 and it did not have an impact on the Company’s consolidated financial statements. In May 2017, the FASB issued ASU 2017-09, Compensation—Stock Compensation: Scope of Modification Accounting, which provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. An entity will account for the effects of a modification unless the fair value of the modified award is the same as the original award, the vesting conditions of the modified award are the same as the original award and the classification of the modified award as an equity instrument or liability instrument is the same as the original award. The Company adopted ASU 2017-09 in the first quarter of fiscal 2018 and it did not have an impact on its consolidated financial statements. In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers by $5.8 million. This approach applies to all contracts as of January 1, 2018. The adjustment was the result of capitalizing commission costs contracts. The impact of the adoption of the new revenue standard on the Company’s consolidated statements of net loss and total comprehensive loss was as follows (in thousands): December 31, 2018 As Reported Balances without adoption of ASC 606 Effect of Change Operating costs and expenses: Sales and marketing $ 116,095 $ 116,394 $ (299 ) Operating income $ 69,616 $ 69,915 $ (299 ) Net loss $ (24,394 ) $ (24,095 ) $ (299 ) Comprehensive loss $ (57,238 ) $ (56,939 ) $ (299 ) The cumulative effect of the changes made to the Company’s December 31, 2018 consolidated balance sheet from the adoption of the new accounting standard was as follows (in thousands): December 31, 2018 As Repor |
