Change in accounting principle

6 Months Ended

Jun. 30, 2022

Change in accounting principle [Abstract]

Change in accounting principle

9.  Change in accounting principle

Effective April 1, 2022, TransAct changed its method of inventory valuation from standard costing which approximates FIFO to the average costing methodology.  We believe this methodology is preferable because it reflects a better measurement estimate of inventory cost as we do not typically perform intensive manufacturing of our finished products which are therefore better measured under average cost.  In addition, our business is projected to include an increasing sales volume of software going forward, which better aligns with average costing.  Comparative financial statements of prior periods have been adjusted to apply the new method retrospectively.  Tax effects are calculated at the Company’s marginal tax rate, or the tax impact of incremental income changes rather than the average tax rate applied to our total net loss before income taxes.  The following financial statement line items for the periods presented were impacted by the change in accounting principle.

The effect of the changes made to the Company’s Condensed Consolidated Balance Sheets follows:

	December 31, 2021
	Under FIFO Cost		Under Average Cost		Effect of Change
Inventories	$	7,720	$	7,711	$	(9	)
Deferred tax assets		5,141		5,143		2
Retained earnings		15,573		15,566		(7	)

The ending balance in retained earnings as of December 31, 2020 was adjusted from $19,718 to $19,607.

The effect of the changes made to the Company’s Condensed Consolidated Statements of Operations follows:

	Three months ended March 31, 2022									Three months ended June 30, 2021
	Under FIFO Cost			Under Average Cost			Effect of Change			Under FIFO Cost			Under Average Cost			Effect of Change
Cost of sales	$	6,708		$	7,136		$	428		$	6,000		$	5,893		$	(107	)
Gross profit		2,994			2,566			(428	)		3,325			3,432			107
Operating loss		(5,176	)		(5,604	)		(428	)		(2,755	)		(2,648	)		107
Loss before income taxes		(5,275	)		(5,703	)		(428	)		(2,801	)		(2,694	)		107
Income tax benefit		1,262			1,355			93			687			664			(23	)
Net loss		(4,013	)		(4,348	)		(335	)		(2,114	)		(2,030	)		84
Net loss per common share:
Basic	$	(0.41	)	$	(0.44	)	$	(0.03	)	$	(0.24	)	$	(0.23	)	$	0.01
Diluted	$	(0.41	)	$	(0.44	)	$	(0.03	)	$	(0.24	)	$	(0.23	)	$	0.01
Shares used in per-share calculation:
Basic		9,886			9,886						8,976			8,976
Diluted		9,886			9,886						8,976			8,976

	Six months ended June 30, 2021
	Under FIFO Cost			Under Average Cost			Effect of Change
Cost of sales	$	11,112		$	10,855		$	(257	)
Gross profit		6,514			6,771			257
Operating loss		(5,421	)		(5,164	)		257
Loss before income taxes		(5,563	)		(5,306	)		257
Income tax benefit		1,243			1,187			(56	)
Net loss		(4,320	)		(4,119	)		201
Net loss per common share:
Basic	$	(0.48	)	$	(0.46	)	$	0.02
Diluted	$	(0.48	)	$	(0.46	)	$	0.02
Shares used in per-share calculation:
Basic		8,962			8,962
Diluted		8,962			8,962

The effect of the changes made to the Company’s Condensed Consolidated Statements of Comprehensive Loss follows:

	Three months ended March 31, 2022									Three months ended June 30, 2021
	Under FIFO Cost			Under Average Cost			Effect of Change			Under FIFO Cost			Under Average Cost			Effect of Change
Net loss	$	(4,013	)	$	(4,348	)	$	(335	)	$	(2,114	)	$	(2,030	)	$	84
Comprehensive loss		(4,055	)		(4,390	)		(335	)		(2,082	)		(1,998	)		84

	Six months ended June 30, 2021
	Under FIFO Cost			Under Average Cost			Effect of Change
Net loss	$	(4,320	)	$	(4,119	)	$	201
Comprehensive loss		(4,235	)		(4,034	)		201

The effect of the changes made to the Company’s Condensed Consolidated Statements of Cash Flows follows:

	Three months ended March 31, 2022									Six months ended June 30, 2021
	Under FIFO Cost			Under Average Cost			Effect of Change			Under FIFO Cost			Under Average Cost			Effect of Change
Net loss	$	(4,013	)	$	(4,348	)	$	(335	)	$	(4,320	)	$	(4,119	)	$	201
Deferred income taxes		(1,262	)		(1,355	)		(93	)		(1,209	)		(1,153	)		56
Inventories		(1,344	)		(916	)		428			2,591			2,334			(257	)

The effect of the changes made to the Company’s Condensed Consolidated Statements of Changes in Shareholders’ Equity follows:

	Three months ended March 31, 2022									Three months ended June 30, 2021
	Under FIFO Cost			Under Average Cost			Effect of Change			Under FIFO Cost			Under Average Cost			Effect of Change
Equity beginning balance	$	38,991		$	38,984		$	(7	)	$	28,363		$	28,369		$	6
Retained earnings -- beginning of period		15,573			15,566			(7	)		17,512			17,518			6
Net loss		(4,013	)		(4,348	)		(335	)		(2,114	)		(2,030	)		84
Retained earnings -- end of period		11,560			11,218			(342	)		15,398			15,488			90
Equity ending balance		35,113			34,771			(342	)		26,873			26,963			90

	Six months ended June 30, 2021
	Under FIFO Cost			Under Average Cost			Effect of Change
Equity beginning balance	$	30,236		$	30,125		$	(111	)
Retained earnings -- beginning of period		19,718			19,607			(111	)
Net loss		(4,320	)		(4,119	)		201
Retained earnings -- end of period		15,398			15,488			90
Equity ending balance		26,873			26,963			90