Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2017

The Consolidated Financial Statements include the accounts of XO Group Inc. and all 100% and majority owned subsidiaries, prepared in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”). All intercompany transactions and balances are eliminated in consolidation. Investments in which the Company has at least a 20%, but not more than a 50% interest are generally accounted for under the equity method. Investment interests below 20% are generally accounted for under the cost method, except if the Company could exercise significant influence, the investment would be accounted for under the equity method.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported amounts of revenues and expenses during the reporting period.

Significant estimates and assumptions made by management include the determination of fair value of equity awards issued, fair value of the Company’s reporting unit, valuation of assets and liabilities acquired in purchase accounting, including intangible assets (and their related useful lives), certain components of the income tax provisions, including valuation allowances on the Company’s deferred tax assets, compensation accruals, allowances for bad debts, reserves for future returns, estimates used in software capitalization, and the determination of best estimated selling prices in multiple element arrangements. The Company bases its estimates and assumptions on historical experience and on various other factors that it believes to be reasonable under the circumstances. The Company evaluates its estimates and assumptions on an ongoing basis. The level of uncertainty in estimates and assumptions increases with the length of time until the underlying transactions are completed. Actual results could differ from estimates in amounts that may be material to the financial statements.

Comparative Data

Certain prior year financial statement line items have been reclassified to conform to the current year's presentation.

For the years ended December 31, 2016 and 2015, rent expense was reclassed from "Product and content development" and from "Sales and marketing" to "General and administrative" within "Operating expenses" on the Consolidated Statements of Operations.

For the years ended December 31, 2016 and 2015, "Asset impairment charges" have been reclassified into "Depreciation and amortization".

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity of three months or less at the date of purchase to be cash equivalents. Cash and cash equivalents consist of cash on deposit with banks and money market funds. The market value of the Company’s cash equivalents approximates their cost plus accrued interest.

Fair Value of Financial Instruments

The carrying amounts of the Company’s financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued expenses, approximate fair value as of December 31, 2017 and 2016 due to the short-term nature of these instruments.

Property and Equipment

Property and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets, which range from three to seven years. Leasehold improvements are depreciated over the shorter of their estimated useful lives or the remaining term of the related lease agreement. The Company capitalizes qualifying computer software costs incurred during the application development stage and amortizes these costs over the estimated useful life of the software, ranging from one to three years, on a straight-line basis, beginning when the software is ready for its intended use. Maintenance and repair costs are expensed as incurred while expenditures for major renewals and improvements are capitalized. Upon the disposition of property and equipment, the cost and related accumulated depreciation are removed from the accounts.

Goodwill and Other Intangibles

Goodwill and Other Intangible Assets

Goodwill is the excess purchase price remaining from an acquisition after an allocation of purchase price has been made to identifiable assets acquired and liabilities assumed based on estimated fair values. Goodwill and intangible assets deemed to have indefinite lives are not amortized but are subject to annual impairment tests. The Company tests goodwill for impairment annually as of October 1 and more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. The goodwill impairment analysis is a two-step test that is performed at the reporting unit level. The first step, used to identify potential impairment, involves comparing the reporting unit’s fair value to its carrying value including goodwill. If the fair value of a reporting unit exceeds its carrying value, the applicable goodwill is considered not to be impaired. If the carrying value exceeds fair value, there is an indication of a potential impairment and the second step of the test is performed to measure the amount of impairment. Should the carrying amount for a reporting unit exceed its fair value, then the first step of the quantitative impairment test is failed and the magnitude of any goodwill impairment is determined under the second step, which is a comparison of the implied fair value of a reporting unit’s goodwill to its carrying value. The implied fair value of goodwill is the excess of the fair value of the reporting unit over its carrying value, excluding goodwill. Impaired goodwill is written down to its implied fair value with a charge to expense in the period the impairment is identified. An impairment loss recognized cannot exceed the amount of goodwill assigned to a reporting unit, and the loss establishes a new basis in the goodwill. Subsequent reversal of goodwill impairment losses is not permitted.

In accordance with accounting guidance, the Company may first perform a qualitative goodwill assessment to determine whether events or circumstances lead to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. Factors such as macroeconomic conditions, industry and market considerations, cost and other factors are used to assess the validity of goodwill. If, after assessing the totality of events or circumstances, the Company determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step goodwill impairment test, as described above, is not necessary. If, however, the Company concludes otherwise, then the Company must perform the first step of the two-step impairment test by comparing the reporting unit’s fair value with its carrying value including goodwill. If the carrying value exceeds fair value, then the Company must perform the second step of the goodwill impairment test to measure the impairment loss, if any.

The Company’s intangible assets deemed to have definite lives are amortized over their estimated useful lives, on a straight-line basis as follows:



Customer and advertiser relationships	5 to 7 years
Patents and developed technology	2 to 20 years
Media content	5 years
Trademarks and trade names	5 to 13 years
Service contracts and other	10 years

The Company’s long-lived assets include software, computer and office equipment, and furniture and fixtures, which are subject to depreciation over the useful life of the asset and leasehold improvements, which are subject to amortization over the shorter of the useful life of the asset or the lease term. Long-lived assets, including definite-lived intangible assets, are evaluated for recoverability whenever events or changes in circumstances indicate that the carrying value of the asset may be impaired. In evaluating an asset for recoverability, the Company estimates the future cash flow expected to result from the use of the asset and eventual disposition. If the expected future undiscounted cash flow is less than the carrying amount of the asset, an impairment loss, equal to the excess of the carrying amount over the fair value of the asset, is recognized.

The Company performs impairment evaluations annually as of October 1, or more often if events or changes in circumstances indicate that the carrying value may not be recoverable. See Note 7 for additional details on the impairments of certain intangible assets recorded during the year.

Revenue Recognition

The Company recognizes revenue primarily from the sale of online advertising programs, commissions earned in connection with the successful completion of a transaction, the publication of magazines and the sale of merchandise, provided that there is persuasive evidence of an arrangement, the product has been shipped or the service has been provided, selling price is fixed or determinable, collection is reasonably assured and the Company has no significant remaining obligation.

Online programs include (i) online listings, including preferred placement, (ii) digital and native banner advertising, (iii) direct e-mail marketing, (iv) sponsored and brand-integrated content, and (v) placement in our online search tools. Certain elements of online advertising contracts provide for the delivery of a minimum number of impressions. Impressions are the featuring of a customer’s advertisement, banner, link or other form of content on the Company’s sites. Performance is measured for advertising contracts that contain minimum guaranteed impressions or other performance criteria primarily through tracking delivery of impressions. Revenue is recognized as performance criteria are met, which is typically on a straight-line basis. To the extent that minimum guaranteed impressions are not met, the Company is often obligated to extend the period of the contract until the guaranteed impressions are achieved. If this occurs, the Company defers and recognizes the corresponding revenue over the extended period based on impressions delivered. The Company does not have any material open-ended subscriptions with its advertisers.

The Company’s transaction offerings provide opportunities for its audience to purchase products and services. The Company offers programs that enable vendors to sell through its online properties and their own branded websites and properties. The Company earns fixed fees, a percentage of sales, per-unit activity fees, or some combination thereof with respect to these transactions. Transactions revenue primarily represents commissions from retailers who participate in the Company’s registry aggregation service, which offers couples and their guests the opportunity to view multiple registries in one location and for guests to order gifts off of these registries. After the retail partners take a sales order or ship the sales order, depending on our contractual agreement with the registry partner, the related commissions are contractually earned by us and recognized as revenue. Product returns or exchanges do not materially impact the commissions earned by us. The Company only records net commissions, and not gross revenue and cost of revenue associated with these products, since the Company is not the primary obligor in these transactions, it is not subject to inventory risk and amounts earned are determined using a fixed percentage. Also included in Transactions revenue are commissions earned from marketplace bookings between party planners/hosts (customers) and providers of entertainment and event services (vendors) on our Gigmasters site. These commissions are generally recognized by the Company at a point in time when an event takes place and services are rendered by the vendor to the customer.

Publishing revenue primarily includes print advertising revenue derived from the publication of national and regional magazines and guides. Publishing revenue is recognized upon the publication of the related magazines, at which time all material services related to the magazine have been performed. Additionally, publishing revenue is derived from the sale of magazines on newsstands and in bookstores. Title and risk of loss passes to our customer at the time they are received by the retailers. Revenue from the sale of magazines is reduced by an allowance for estimated sales returns.

Merchandise revenue generally includes the selling price of wedding supplies through the Company’s websites, as well as related outbound shipping and handling charges since the Company is the primary party obligated in a transaction, is subject to inventory risk and establishes its own pricing and selection of suppliers. Title and risk of loss related to the Company’s merchandise operations passed to buyers generally upon shipment. The Company typically refunded customers or shipped replacement products in the event that there were damaged or lost products prior to delivery to the customer. Merchandise revenue is recognized when products are shipped, reduced by discounts as well as an allowance for estimated sales returns. Merchandise revenue excludes related sales taxes collected. There was no merchandise revenue for the years ended December 31, 2017 or 2016 as the Company exited its warehouse operations in Redding, California in the first quarter of 2015.

The Company’s advertising arrangements often include multiple-element deliverables, primarily online and print advertising. The Company evaluates each element in a multiple-element arrangement to determine whether it represents a separate unit of accounting with standalone value. Each of the Company’s deliverables typically represents separate units of accounting and the arrangement consideration is allocated to the identified separate units of accounting based on their relative selling prices. The Company uses its best estimated selling price to determine the relative selling price as vendor specific objective evidence and third party objective evidence do not currently exist for any of the Company’s separate units of accounting. The Company evaluates its best estimated selling price by reviewing historical data related to sales of its deliverables. The Company's best estimate of selling price is intended to represent the price at which it would sell the item regularly on a stand-alone basis. The arrangement consideration allocated to online products and services is recognized as revenue based on delivery from the start date to the end date of the arrangement, which is typically on a straight-line basis, except for direct e-mails and social media posts which are recognized on the date of delivery. The arrangement consideration allocated to print products is recognized as revenue upon the publication of the related magazines. During the years ended December 31, 2017, 2016, and 2015, there were no material changes to the methods or assumptions used to determine the best estimated selling price for separate units of accounting that would have a material effect on the allocation of arrangement consideration. The Company evaluates multiple contracts entered into with the same advertiser as these contracts may need to be combined and accounted for as a single arrangement when the economics of the individual contracts cannot be understood without reference to the arrangement as a whole. Incremental costs incurred related to the acquisition of customer contracts is expensed as the related revenue is recognized.

The Company limits the amount that is allocable to delivered items in its multiple-deliverable arrangements to the amount that is not contingent upon the delivery of other items in the arrangement. The Company has concluded that its right to receive consideration from the customer for delivered items is not linked to the successful delivery of the remaining performance obligations in the multiple-deliverable arrangement; however, revenue recognized for the value of each deliverable is limited to the amount contracted.

Cost of Revenue

Cost of revenue consists of costs related to internet and hosting services, payroll and direct expenses for Company personnel and external vendors who are responsible for the production of online media, the production of national and regional magazines, and the cost of merchandise sold, which includes outbound shipping and personalization costs.

Deferred Revenue

Deferred revenue represents payments received or billings in excess of revenue recognized, which are primarily related to online and print advertising contracts.

Advertising Costs

Advertising costs are expensed as incurred. Advertising expense was consistent each year at $3.8 million for the years ended December 31, 2017, 2016, and $1.3 million in 2015.

Shipping and Handling Charges

There were no shipping and handling charges in 2017 or 2016 as a result of exiting our merchandise business in the first quarter of 2015. Merchandise revenues included outbound shipping and handling charges of $0.1 million for the year ended December 31, 2015.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash, cash equivalents and investments, and accounts receivable. Although the Company deposits its cash with more than one major financial institution, its deposits, at times, may exceed federally insured limits. The Company has not experienced any losses on cash and cash equivalent accounts to date and the Company believes it is not exposed to any significant credit risk related to cash.

For the years ended December 31, 2017, 2016 and 2015, no individual customer represented more than 10% of net revenue. At December 31, 2017 and 2016, no individual customer accounted for more than 10% of accounts receivable. The Company’s customers are concentrated in the United States. The Company performs ongoing credit evaluations, generally does not require collateral, and establishes an allowance for doubtful accounts based upon factors surrounding the credit risk of customers, historical trends and other information.

Stock-Based Compensation

The Company measures the cost of employee services received in exchange for an award of equity instruments based on the measurement-date fair value of the award. The fair value of restricted stock awarded under the 2017 Stock Incentive Plan is determined using the intrinsic value of the stock at the time of grant.

The fair value of the stock options granted in 2017, 2016, and 2015 from the 2017 Stock Incentive Plan was determined using the Black-Scholes option pricing model (see Note 4 for further details). Using this model, fair value was calculated based on assumptions with respect to (i) expected volatility of the Company's stock price, (ii) the expected term of the award, (iii) expected dividend yield on the Company's stock, and (iv) a risk-free interest rate, which is based on quoted U.S. Treasury rates for securities with maturities approximating the expected term. Specifically, the expected term of the options granted during 2017, 2016, and 2015 was determined using the "simplified method" as prescribed by Staff Accounting Bulletin ("SAB") Topic 14D.2, which is presumed to be the midpoint between the vesting date and the end of the contractual term. The simplified method was used to determine the expected term of the options, due to the infrequency in which the Company grants options, as well as differences in the contractual terms of the option awards compared to options granted in prior periods, such that the Company's historical share option experience does not provide a reasonable basis to estimate the expected term. The Company intends to continue to consistently apply the simplified method until a sufficient amount of historical information regarding exercise data becomes available. Expected volatility is calculated using historical prices for the Company's stock. The expected dividend yield is zero, as the Company has never paid dividends and currently intends to retain future earnings, if any, to finance the expansion of the business.

The fair value of the Employee Stock Purchase Plan (“ESPP”) rights granted from the amended and restated 2009 Employee Stock Purchase Plan is estimated on the date of grant using the Black-Scholes option-pricing model (see Note 4 for further details). Using this model, fair value is calculated based on assumptions with respect to (i) expected volatility of the Company's stock price, (ii) the expected life of the award, which for ESPP rights is the period of time between the offering date and the exercise date (as defined in Note 4), (iii) expected dividend yield on the Company's stock, and (iv) a risk-free interest rate, which is based on quoted U.S. Treasury rates for securities with maturities approximating the expected term.

For grants of restricted stock and stock options, the Company records compensation expense based on the fair value of the shares on the grant date over the requisite service period, less estimated forfeitures. Compensation expense for ESPP rights is recorded in line with each respective offering period.

In 2017, forfeitures of equity awards have been recorded as they occur based on the adoption of ASU 2016-09 rather than estimated at the grant date. Refer to "Recently Issued Accounting Pronouncements" in Note 2 for further detail.

Income Taxes

The Company accounts for income taxes using the asset and liability method, as required by the accounting standard for income taxes. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, as well as net operating loss and tax credit carryforwards. Deferred taxes are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred taxes of a change in tax rates is recognized in results of operations in the period that includes the enactment date. The effects of any future changes in tax laws or rates have not been considered. The Company regularly reviews deferred tax assets to assess their potential realization and establish a valuation allowance for portions of such assets to reduce the carrying value if the Company does not consider it to be more likely than not that the deferred tax assets will be realized. The review includes evaluating both positive (e.g., sources of taxable income) and negative (e.g., recent historical losses) evidence that could impact the realizability of our deferred tax assets.

The Company records interest and penalties related to income taxes as a component of income tax expense.

The Company recognizes the impact of an uncertain tax position in its financial statements if, in management's judgment, the position is more-likely-than-not sustainable upon audit based on the position's technical merits. This involves the identification of potential uncertain tax positions, the evaluation of applicable tax laws and an assessment of whether a liability for an uncertain tax position is necessary. We operate and are subject to audit in multiple taxing jurisdictions.

A 1% change to our effective tax rate would have changed our annual net income by approximately $0.1 million during each of the years ended December 31, 2017, and 2015, and for 2016, $0.2 million.

Earnings per Share

Basic earnings per share is computed by dividing the net income for the period by the weighted average number of common shares outstanding during the period. Diluted earnings per share adjusts basic earnings per share for the effects of stock options, restricted stock, and the “ESPP”, only in the periods in which the effects are dilutive. The accounting standard pertaining to earnings per share precludes the calculation of diluted earnings per share when a net loss is presented. Common equivalent shares are excluded from the diluted computation if their effect is antidilutive.

The following table sets forth the number of weighted average stock options, restricted stock, and ESPP shares excluded from the calculation of diluted earnings per share for the years ended December 31, 2017, 2016, and 2015 because to include them in the calculation would be antidilutive.



	2017	2016	2015
Stock options	174,829	624,479	184,142
Restricted stock	301	15,431	1,467
ESPP shares	427	1,055	—

Segments and Geographic Areas

Segments and Geographical Areas

The Company operates in one reportable segment, as it is organized around its online and offline media service lines. The Company has defined its Chief Operating Decision Maker ("CODM") to be its Chief Executive Officer. The Company's CODM receives monthly financial results, which contain revenues, cost of revenues, and gross margin of the three components of the Company's business: (i) Local (ii) National and (iii) Transactions. In addition, there is a substantial amount of costs that benefit all service lines, but are not allocated to individual cost of revenue categories. Revenue information at the product or service level is not captured in the Company’s financial reporting systems and is not included in internal management reporting. The Company does not currently disclose revenue from products and services as it is currently impractical to obtain the necessary data.

No individual foreign country accounted for more than 10% of the Company's revenue during the years ended December 31, 2017, 2016, or 2015. No individual foreign country accounted for more than 10% of the Company's accounts receivable during the years ended December 31, 2017 or 2016. The Company holds fixed assets in the United States and China. The Company does not hold greater than 10% of the Company's fixed assets outside of the United States.

Recently Adopted Accounting Pronouncements

Recently Issued Accounting Pronouncements

In May 2014, FASB and the International Accounting Standards Board jointly issued a new revenue recognition standard that is designed to improve financial reporting by creating common recognition guidance for U.S. GAAP and International Financial Reporting Standards. The new guidance issued under ASU 2014-09, Revenue from Contracts with Customers (“Topic 606”) provides a more robust framework for addressing revenue issues, improves the comparability of revenue recognition practices across industries, provides more useful information to users of financial statements through improved disclosure requirements and simplifies the presentation of financial statements. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This guidance permits the use of either of the following transition methods: (i) a full retrospective method reflecting the application of the standard in each prior reporting period with the option to elect certain practical expediencies, or (ii) a modified retrospective approach with the cumulative effect of initially adopting the standard recognized at the date of adoption (which includes additional footnote disclosures). The original effective date of the new standard was for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. In August 2015, the FASB issued an ASU that defers by one year the effective date of this new revenue recognition standard. As a result, the new standard will be effective for annual reporting periods beginning after December 15, 2017, although companies may adopt the standard as early as the original effective date. Early application prior to the original effective date is not permitted.

The Company will adopt the standard as of January 1, 2018 utilizing the full retrospective adoption method in order to provide for comparative results in all periods presented. Using the full retrospective method, the Company will recast its 2017 and 2016 consolidated financial statements beginning in the first quarter of 2018. The Company has completed the majority of its assessment of the impact of adopting this new standard and expects that the overall impact will be immaterial. The Company is in the process of completing its analysis of accounting for modifications, however, also expects that the impact of accounting for modifications will be immaterial to its consolidated financial statements. The Company does not believe there are any remaining significant implementation topics associated with the adoption of ASC 606 that have not yet been addressed.

Under ASC 606, entities are required to disaggregate revenue into categories that depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. The Company expects to disaggregate our revenues consistently with the disaggregation presented in these consolidated financial statements. The Company is evaluating the disclosure requirements beyond the requirement to disaggregate revenue as well as assessing the impact of ASC 606 on its internal controls over financial reporting.

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments-Overall: Recognition and Measurement of Financial Assets and Financial Liabilities guidance requiring equity securities to be measured at fair value with changes in fair value recognized through net income and will eliminate the cost method for equity securities without readily determinable fair values. The guidance is effective for annual reporting periods beginning after December 15, 2017, and interim periods within those annual periods. The Company is currently evaluating the impact this guidance will have on its consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases, an accounting standards update that replaces existing lease accounting standards. The new standard requires lessees to recognize on the balance sheet a right-of use asset, representing its right to use the underlying asset for the lease term, and a lease liability for all leases with terms greater than 12 months. The guidance also requires qualitative and quantitative disclosures designed to assess the amount, timing, and uncertainty of cash flows arising from leases. Treatment of lease payments in the statement of earnings and statement of cash flows is relatively unchanged from previous guidance. The new standard is required to be applied with a modified retrospective approach to each prior reporting period presented with various optional practical expedients. The standard is effective for annual reporting periods beginning after December 15, 2018, with early adoption permitted. The Company is currently in the process of evaluating its existing leases. As such, the Company is currently evaluating the effect the guidance will have on its consolidated financial statements.

In March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-09, Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”) intended to simplify several areas of accounting for share-based compensation arrangements. ASU 2016-09 requires all tax effects related to share-based payments at settlement or expiration to be recorded through the statement of operations and be reported as operating activities on the statement of cash flows. Further, under the new guidance, entities are permitted to make an accounting policy election for the impact of forfeitures on the recognition of expense for share-based payment awards; forfeitures can either be estimated (as required under the previous guidance) or recognized when they occur. The guidance also provides that cash paid to a tax authority when shares are withheld from employees to satisfy a company's statutory income tax withholding obligation be classified as financing activities on the statement of cash flows.

The Company adopted ASU 2016-09 as of January 1, 2017, which had the following impact during the twelve months ended December 31, 2017:


•	Using the modified retrospective approach, the cumulative effect recognized upon adoption was an adjustment to increase the Company's accumulated deficit by $0.7 million and increase its deferred tax assets by $0.4 million, with a corresponding increase to additional paid-in capital of $1.1 million, all within the Consolidated Balance sheet.


•	The Company recorded a $1.3 million benefit to its provision for income taxes, within the Consolidated Statement of operations, which impacted the Company’s effective tax rate for the twelve months ended December 31, 2017, due to the recognition of excess tax benefits for options exercised and the vesting of equity awards.


•	Using the prospective approach for the presentation on the Consolidated Statements of cash flows, the $1.3 million of excess tax benefits during the twelve months ended December 31, 2017 was a component of operating activity, while $0.5 million of excess tax benefits from stock-based compensation during the twelve months ended December 31, 2016 was presented as financing activity.


•	The Company elected to change from estimating forfeiture rates to accounting for forfeitures in each period they occur.


•	The presentation requirements for cash flows related to taxes paid to satisfy statutory income tax withholding obligations had no impact on our consolidated statements of cash flows for any of the periods presented because such cash flows have historically been presented as a financing activity.

In March 2016, FASB issued ASU 2016-07, Investments - Equity Method and Joint Ventures (Topic 323): Simplifying the Transition to the Equity Method of Accounting (“ASU 2016-07”), which eliminated the requirement to restate historical financial statements, as if the equity method had been used during all previous periods, when an existing cost method investment qualifies for use of the equity method. Under the new guidance, at the point an investment qualifies for the equity method, any unrealized gain or loss in accumulated other comprehensive loss may be recognized through earnings. The Company adopted ASU 2016-07 as of January 1, 2017 with no impact on its consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments guidance for the accounting for credit losses on instruments within its scope. Given the breadth of that scope, this guidance will impact both financial services and non-financial services entities. The standard is effective for fiscal years beginning after December 15, 2020. The Company is currently evaluating the effect the guidance will have on its consolidated financial statements.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, guidance on statement of cash flows presentation for eight specific cash flow issues where diversity in practice exists. This guidance is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The Company is currently evaluating the effect the guidance will have on its consolidated financial statements.

In October 2016, FASB issued ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory, guidance intended to reduce the complexity of U.S. GAAP and diversity in practice related to the tax consequences of certain types of intra-entity asset transfers, particularly those involving intellectual property. This guidance is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The Company is currently evaluating the effect the guidance will have on its consolidated financial statements.

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash guidance amending the presentation of restricted cash within the statement of cash flows. The new guidance requires that restricted cash be included within cash and cash equivalents on the statement of cash flows. The guidance is effective retrospectively for reporting periods beginning after December 15, 2017, with early adoption permitted. The Company is currently evaluating the effect the guidance will have on its consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-01, Clarifying the Definition of a Business (“ASU 2017-01”). ASU 2017-01 clarifies the definition of a business in ASC 805, Business Combinations. The amendments in ASU 2017-01 are intended to make application of the guidance more consistent and cost-efficient.

ASU 2017-01 is effective for annual and interim periods beginning after December 15, 2017, with early adoption permitted for transactions that occurred before the issuance date or effective date of the standard if the transactions were not reported in financial statements that have been issued or made available for issuance. The Company adopted ASU 2017-01 as of September 30, 2017. The adoption did not have a material impact on the Company’s consolidated financial statements.

In May 2017, the FASB issued ASU No. 2017-09, Compensation – Stock Compensation: Scope of Modification Accounting (“ASU 2017-09”). ASU 2017-09 provides guidance on the types of changes to the terms or conditions of share-based payment awards to which an entity would be required to apply modification accounting under ASC 718, Compensation – Stock Compensation. Specifically, an entity would not apply modification accounting if the fair value, vesting conditions, and classification of the awards are the same immediately before and after the modification.

ASU 2017-09 is effective for annual and interim periods beginning after December 15, 2017, and early adoption is permitted. The Company does not expect the adoption of ASU 2017-09 to have a material impact on the Company’s consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment guidance that would eliminate Step 2 from the goodwill impairment test. This guidance is effective for the fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. The Company adopted this guidance effective with its October 1, 2017 annual goodwill impairment analysis. The adoption did not have a material impact on the Company's consolidated financial statements.

Depreciation, Depletion, and Amortization [Policy Text Block]

Other

Product and content development, sales and marketing expenses, and general and administrative expenses are all presented exclusive of depreciation and amortization, which are shown separately within "Operating expenses.