Accounting Policies

6 Months Ended

Jun. 30, 2020

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information for commercial and industrial companies, the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, the accompanying unaudited condensed consolidated financial statements do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements (and notes thereto) included in our Annual Report on Form 10-K for the year ended December 31, 2019 (2019 Form 10-K). The condensed consolidated December 31, 2019 balance sheet presented is derived from the audited December 31, 2019 balance sheet included in the 2019 Form 10-K. In our opinion, all adjustments considered necessary for a fair presentation of the financial statements have been included, and all adjustments are of a normal and recurring nature. Certain items in the condensed consolidated financial statements of prior years have been reclassified to conform to the current year's presentation. These reclassifications had no effect on reported net income, comprehensive income, cash flows, total assets or total liabilities and stockholders' equity. Operating results for the three and six months ended June 30, 2020 are not necessarily indicative of the results that may be expected for any future period.

Changes in Accounting Policies

Our accounting policies are described in Note 2, “Accounting Policies,” in the 2019 Form 10-K. Summarized below is the accounting guidance adopted subsequent to December 31, 2019.

Credit losses: In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (ASU 2016-13), which modifies the measurement of expected credit losses of certain financial instruments. We adopted ASU 2016-13 on January 1, 2020 with no material impact to our condensed consolidated financial statements. Previous guidance required the allowance for doubtful accounts to be estimated based on an incurred loss model, which considered past and current conditions. ASU 2016-13 requires us to use an expected loss model that also considers reasonable and supportable forecasts of future conditions, referred to as the current expected credit loss (CECL) methodology.

Under ASU 2016-13, we make judgments as to our ability to collect outstanding receivables and provide allowances for a portion of receivables over the lifetime of the receivables. Provisions are made based upon a specific review of all significant outstanding invoices from both value and delinquency perspectives. For those invoices not specifically reviewed, provisions are estimated at differing rates based upon the age of the receivable. In determining these percentages, we consider our historical loss experience, current economic trends and future conditions.

The changes in the allowance for doubtful accounts during the six months ended June 30, 2020 were as follows:


(in thousands)	Six Months Ended June 30, 2020
Beginning balance – January 1	$	8,700
Additions: Charges to costs and expenses	5,672
Deductions: Returns and write-offs	(972)
Ending balance – June 30	$	13,400

The increase in the allowance for doubtful accounts was driven by expected losses related to COVID-19.

Accounting Guidance Issued and Not Yet Adopted

Income taxes: In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (ASU 2019-12), as part of its initiative to reduce complexity in the accounting standards. The amendments in ASU 2019-12 eliminate certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. ASU 2019-12 also clarifies and simplifies other aspects of the accounting for income taxes. ASU 2019-12 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Early adoption is permitted, including adoption in any interim period. We do not expect the adoption of this guidance to have a material impact on our financial position or results of operations.

Cash and Cash Equivalents

Cash and cash equivalents consist primarily of highly liquid investments such as deposits held at major banks and money market funds. Cash equivalents are carried at cost, which approximates fair value. Our cash and cash equivalents balances comprise the following:


	June 30, 2020					December 31, 2019
(in thousands, except percentages)	Amount		% of Total	Amount		% of Total
Cash accounts	$	518,734	69.7	$	549,639	63.0
Money market funds	225,812		30.3	322,455		37.0
Total	$	744,546		$	872,094

Our money market fund balances are held in various funds of two issuers. The decrease in money market funds during the six months ended June 30, 2020 was a result of redemptions for share repurchases and the Lumerical Inc. (Lumerical) acquisition. See Note 4, "Acquisitions", for additional disclosures regarding the Lumerical acquisition.