The Company adopted the standard beginning January 1, 2018 using the “modified retrospective” approach, meaning the standard was applied only to the most current period presented in the financial statements, with a cumulative adjustment to retained earnings. Under this transition method, the Company elected to apply ASC Topic 606 only to contracts that were not complete at the initial adoption date.

The new standard impacts how the Company recognizes revenue on its commercial license and material supply agreements with customers. Previously, the Company recognized license fees on a straight-line basis or as received from the customer, and royalty revenue one quarter in arrears based on sales information received from its customers typically received after disclosing that quarter’s results. Under the new standard, total contract consideration is estimated and recognized over the contract term based on material units sold at its estimated per unit fee. Total contract consideration includes fixed amounts designated in contracts with customers as license fees as well as estimates of material fees and royalties to be earned.

Adoption of the new standard resulted in an increase in deferred revenue of $21.3 million offset by a reduction of retained earnings of $17.1 million, net of tax of $3.9 million, and unbilled receivables of $0.3 million as of January 1, 2018. The impact of the new standard to revenue for the year ended December 31, 2018 was a decrease of $78.9 million from the amount that would have been reported under the prior accounting standard. The following tables summarize the impacts of adopting Topic 606 on the Company’s consolidated financial statements for the year ended December 31, 2018.

	Impact of changes in accounting policies
December 31, 2018	As reported		Adjustment			Balances without adoption of Topic 606
ASSETS
Other assets (current and non-current)	$	70,892	$	—		$	70,892
Deferred income taxes		24,377		(11,153	)		13,224
TOTAL ASSETS		933,424		(11,153	)		922,271

LIABILITIES AND SHAREHOLDERS' EQUITY
Deferred revenue (current and non-current)		122,567		(99,885	)		22,682
Retained earnings		129,552		88,732			218,284
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY		933,424		(11,153	)		922,271

ii. Consolidated Statements of Income (in thousands)

	Impact of changes in accounting policies
Year Ended December 31, 2018	As reported			Adjustment			Balances without adoption of Topic 606
REVENUE	$	247,414		$	78,885		$	326,299
Gross margin		193,873			78,885			272,758
OPERATING INCOME		56,735			78,885			135,620
INCOME BEFORE INCOME TAXES		64,311			78,885			143,196
INCOME TAX EXPENSE		(5,471	)		(7,252	)		(12,723	)
NET INCOME		58,840			71,633			130,473

iii. Consolidated Statement of Cash Flows (in thousands)

	Impact of changes in accounting policies
Year Ended December 31, 2018	As reported			Adjustment			Balances without adoption of Topic 606
Net income	$	58,840		$	71,633		$	130,473
Amortization of deferred revenue and recognition of unbilled receivables		(68,905	)		(81,991	)		(150,896	)
Deferred income tax expense		(12,814	)		10,358			(2,456	)
Other assets (current and non-current)		(59,062	)		—			(59,062	)
CASH FLOW FROM OPERATING ACTIVITIES		121,796			—			121,796

For the years ended December 31, 2018, 2017 and 2016, the Company recorded 95%, 97% and 98% of its revenue from sales of materials and 5%, 3% and 2% from the providing of services through Adesis, respectively.

The rights and benefits to the Company’s OLED technology are conveyed to the customer through technology license agreements and material supply agreements. The Company believes that the licenses and materials sold under these combined agreements are not distinct from each other for financial reporting purposes and as such, are accounted for as a single performance obligation. Accordingly, total contract consideration, including material, license and royalty fees, is estimated and recognized over the contract term based on material units sold at the estimated per unit fee over the life of the contract.

Various estimates are relied upon to recognize revenue. The Company estimates total material units to be purchased by its customers over the contract term based on historical trends, industry estimates and its forecast process. Additionally, management estimates the total sales-based royalties based on the estimated net sales revenue of its customers over the contract term. Management is using the expected value method to estimate the material per unit fee.

The following table provides information about assets and liabilities associated with our contracts from customers (in thousands):

Short-term and long-term unbilled receivables are classified as other current assets and other assets, respectively, on the Consolidated Balance Sheet. The deferred revenue balance at December 31, 2018 will be recognized as materials are shipped to customers over the remaining contract periods. The significant customer contracts (individually representing greater than 10% of revenue) expire in 2022. As of December 31, 2018, the Company had $13.1 million of backlog associated with committed purchase orders from its customers for phosphorescent emitter material. These orders are anticipated to be fulfilled within the next 90 days.

Significant changes in the unbilled receivables and deferred liabilities balances during the period are as follows (in thousands):

	Year Ended December 31, 2018
	Unbilled Receivables Increase (Decrease)			Deferred Revenue (Increase) Decrease
Balance at December 31, 2017	$	70		$	(38,883	)
Adoption of revenue standard on January 1, 2018		307			(21,307	)
Adjusted balance on January 1, 2018		377			(60,190	)
Revenue recognized that was previously included in deferred revenue		—			64,562
Increases due to cash received		—			(130,639	)
Cumulative catch-up adjustment arising from changes in estimates of transaction price		—			3,700
Unbilled receivables recognized		2,024			—
Transferred to receivables from unbilled receivables		(1,381	)		—
Net change		643			(62,377	)
Balance at December 31, 2018	$	1,020		$	(122,567	)