Change in Accounting Method

3 Months Ended

Mar. 31, 2023

Change in Accounting Method [Abstract]

Change in Accounting Method

9.  Change in Accounting Method

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 estimate of inventory cost as we do not typically perform intensive manufacturing of our finished products, which are therefore better measured under average cost.  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 (dollars in thousands).

The effect of the changes made to the Company’s Condensed Consolidated Statements of Operations for the periods presented are as follows:

	Three months ended March 31, 2022
	Under FIFO Cost			Under Average Cost			Effect of Change
Cost of sales	$	6,708		$	7,136		$	428
Gross profit		2,994			2,566			(428	)
Operating loss		(5,176	)		(5,604	)		(428	)
Loss before income taxes		(5,275	)		(5,703	)		(428	)
Income tax benefit		1,262			1,355			93
Net loss		(4,013	)		(4,348	)		(335	)
Net loss per common share:
Basic	$	(0.41	)	$	(0.44	)	$	(0.03	)
Diluted	$	(0.41	)	$	(0.44	)	$	(0.03	)
Shares used in per-share calculation:
Basic		9,886			9,886
Diluted		9,886			9,886

The effect of the changes made to the Company’s Condensed Consolidated Statements of Comprehensive Income (Loss) for the periods presented are as follows:

	Three months ended March 31, 2022
	Under FIFO Cost			Under Average Cost			Effect of Change
Net loss	$	(4,013	)	$	(4,348	)	$	(335	)
Comprehensive loss		(4,055	)		(4,390	)		(335	)

The effect of the changes made to the Company’s Condensed Consolidated Statements of Cash Flows for the periods presented are as follows:

	Three months ended March 31, 2022
	Under FIFO Cost			Under Average Cost			Effect of Change
Net loss	$	(4,013	)	$	(4,348	)	$	(335	)
Deferred income taxes		(1,262	)		(1,355	)		(93	)
Inventories		(1,344	)		(916	)		428

The effect of the changes made to the Company’s Condensed Consolidated Statements of Changes in Shareholders’ Equity for the periods presented are as follows:

	Three months ended March 31, 2022
	Under FIFO Cost			Under Average Cost			Effect of Change
Equity beginning balance	$	38,991		$	38,984		$	(7	)
Retained earnings -- beginning of period		15,573			15,566			(7	)
Net loss		(4,013	)		(4,348	)		(335	)
Retained earnings -- end of period		11,560			11,218			(342	)
Equity ending balance		35,113			34,771			(342	)