Note 1 - Basis of Presentation

9 Months Ended

Sep. 30, 2018

Notes to Financial Statements

Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

1.

     Basis of Presentation

The unaudited, interim condensed consolidated financial statements of SPAR Group, Inc., a Delaware corporation ("SGRP"), and its subsidiaries (together with SGRP, collectively, the "Company" or the "SPAR Group"), accompanying this Quarterly Report on Form

10

-Q for the

third

quarter ended

September 30, 2018 (

this "Quarterly Report"), have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form

10

-Q and Article

10

of Regulation S-

X.

Accordingly, they do

not

include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. The consolidated balance sheet as of

December 31, 2017,

has been prepared from the Company's audited consolidated balance sheet as of such date.   In the opinion of management, all normal and recurring adjustments considered necessary for a fair presentation have been included in these interim financial statements. However, these interim financial statements should be read in conjunction with the annual consolidated financial statements and notes thereto for the Company as contained in the SGRP's Annual Report  on Form

10

-K for the year ended

December 31, 2017,

as filed with the Securities and Exchange Commission (the "SEC") on

April 2, 2018 (

the 

"2017

Annual Report"), SGRP's Proxy Statement for its

2018

Annual Meeting of Stockholders as filed with the SEC on

April 18, 2018 (

the

"2018

Proxy Statement").  Particular attention should be given to Items

1

and

1A

of the

2017

Annual Report respecting the Company's Business and Risk Factors, respectively, and the following parts of SGRP's

2018

Proxy Statement: (i)

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

, (ii)

CORPORATE GOVERNANCE

, (iii)

EXECUTIVE COMPENSATION, DIRECTORS AND OTHER INFORMATION

and (iv)

EXECUTIVE COMPENSATION, EQUITY AWARDS AND OPTIONS.

  The Company's results of operations for the interim period are

not

necessarily indicative of its operating results for the entire year. Except for the changes below, the Company has consistently applied the accounting policies to all periods presented in these condensed consolidated financial statements. The Company adopted ASU

2014

-

09

with a date of the initial application of

January 1, 2018.

As a result, the Company changed its accounting policy for revenue recognition as detailed below.

In

May 2014,

the FASB issued Accounting Standards Update

No.

2014

-

09

(Topic

606

) "Revenue from Contracts with Customers." Topic

606

supersedes the revenue recognition requirements in Topic

605

“Revenue Recognition” (Topic

605

) and requires entities to recognize revenue when control of the promised goods or services is transferred to customers at an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. The Company adopted Topic

606

as of

January 1, 2018

using the modified retrospective transition method with the impact upon adoption

not

significant.

The Company records revenue from contracts with it customers through the execution of Master Service Agreements (MSAs) that are effectuated through individual Statements of Work (SOW) (collectively, "Contracts"). The MSAs generally define the financial, service, and communication obligations between the client and SPAR while the SOWs state the project objective, scope of work, time frame, rate and driver in which SPAR will be paid. Only when the MSA and SOW are combined, can all

five

revenue standard criteria be met. The Company integrates a series of tasks promised within these Contracts into a bundle of services that represent the combined performance obligation of Merchandising Services. Such Merchandising Services are performed over the duration of the SOW. Most Merchandising Services are performed on a daily, weekly or monthly basis. Revenue from Merchandising Services are recognized as the services are performed based on a rate per driver basis (per hour, store visit or unit stocked) with services delivered as they are consumed.

All of the Company’s Contracts with customers have a duration of

one

year or less, with over

90%

being completed in less than

30

-days, and revenue is recognized as services are performed. Given the nature of the Company’s business, how the Contracts are structured and how the Company is compensated the Company has elected the right-to-invoice practical expedient allowed under the revenue standard.

On

December 22, 2017,

the U.S. Tax Cuts and Jobs Act (the “Tax Act”) was enacted into law. The Company is continuing to evaluate the Tax Act and its requirements, as well as its application to the business and its impact on the effective tax rate.

The Company is applying the guidance to address the accounting for income taxes under accounting standards in situations when a registrant does

not

have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Act. Accounting standards provide a reasonable “measurement period”

not

to exceed

twelve

months from the date of enactment to complete the accounting of these provisional estimates. As disclosed in the Company’s Annual report on Form

10

-K for the fiscal year ended

December 31, 2017,

two

material provisional estimates that impacted the Company were the U.S. statutory rate reduction and the

one

-time transition tax. These amounts are considered provisional because they use reasonable estimates of which tax returns have

not

been filed and because estimated amounts

may

be impacted by future regulatory and accounting guidance if and when issued.

For the

first

nine

months of

2018,

there were

no

significant changes to the Company’s provisional estimates of the income tax effects reflected in

2017

for the changes in tax law and tax rate from the enactment of the Tax Act. The impact of tax law changes on the Company’s financial statements could differ from its reasonable estimates due to further analysis of the new law, regulatory guidance, technical corrections, legislation, or guidance under U.S. generally accepted accounting principles. If significant changes occur, the Company will provide updated information in connection with future regulatory filings or the Company will adjust these provisional amounts as further information becomes available and as we refine our calculations.

For the

first

nine

months of

2018,

the Company’s effective tax rate was favorably impacted by the reduction in the U.S. statutory tax rate due to the enactment of the Tax Act. This favorable impact was partially offset by certain base broadening provisions of the Tax Act. In the

first

nine

months of

2018,

the Company's effective tax rate was

23.8%,

as compared to

35.8%

in the

first

nine

months of

2017.

Accounting standards require that all tax positions be analyzed using a

two

-step approach. The

first

step requires an entity to determine if a tax position is more-likely- than-

not

to be sustained upon examination. In the

second

step, the tax benefit is measured as the largest amount of benefit, determined on a cumulative probability basis, that is more-likely-than-

not

to be realized upon ultimate settlement. In the

first

nine

months of

2018,

the Company reduced its liability by

$9,000.

As of

September 30, 2018,

the Company had accrued approximately

$158,000

for unrecognized tax benefits. In accordance with applicable accounting standards, the Company’s deferred tax asset as of

September 30, 2018

reflects a reduction for

$40,000

of these unrecognized tax benefits.