Recent Accounting Pronouncements

9 Months Ended

Mar. 31, 2017

Accounting Changes And Error Corrections [Abstract]

Recent Accounting Pronouncements

4. Recent Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In March 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-09, Compensation – Stock Compensation (“ASU 2016-09”) which identifies areas for simplification involving several aspects of accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, an option to recognize gross stock compensation expense with actual forfeitures recognized as they occur, as well as certain classifications on the statement of cash flows.  The Company early adopted this standard beginning with its fiscal year 2017. The impact of the adoption had the following impacts:

• In recording share-based compensation expense, the standard allows companies to make a policy election as to whether they will include an estimate of awards expected to be forfeited or whether they will account for forfeitures as they occur. The Company has elected to not include an estimated forfeiture rate in the computation of its share-based compensation expense. This election did not have a material impact on the Company’s condensed consolidated financial statements and accordingly no adjustment was made to beginning accumulated deficit to apply the modified retrospective method.

• The standard requires that employee taxes paid when an employer withholds shares for tax-withholding purposes be reported as financing activities in the consolidated statements of cash flows.  Previously, the Company included these cash flows in financing activities and therefore the adoption of this provision had no impact.

• The new standard requires that the tax effects of share-based compensation be recognized in the income tax provision. Previously, these amounts were recognized in additional paid-in capital.  Given the full valuation allowance against the US deferred tax assets, there will be no impact to the effective tax rate until such time as the valuation allowance may be reversed.

• The standard also requires previously unrecognized excess tax benefits to be recognized on a modified retrospective basis.  Unrecognized tax benefits result when a deduction for stock based compensation does not actually reduce taxes payable.  The Company has recorded $13.5 million and $0.9 million of previously unrecorded deferred tax assets for federal and state net operating losses, respectively, with a corresponding increase to the valuation allowance pursuant to the evidence discussed in Note 9.  The cumulative net impact to accumulated deficit of early adoption of this provision was therefore zero.

• ASU 2016-09 also requires excess tax benefits to be presented as an operating activity on the statement of cash flows rather than as a financing activity on either a retrospective or prospective basis.  The Company has elected to apply this provision of the standard on a prospective basis.

In April 2015, the FASB issued ASU No. 2015-03, Simplifying the Presentation of Debt Issuance Costs (“ASU 2015-03”),  which requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts.  ASU 2015-03 requires retrospective adoption and will be effective for annual and interim periods in fiscal years beginning after December 15, 2015.  This guidance became effective for the Company beginning with its fiscal year 2017.  

In connection with the Company’s adoption of ASU 2015-03 in fiscal 2017, all debt issuance costs have been presented, with the exception of those related to the revolving credit facility, as a reduction of the carrying amount of the related debt liability.  The previously reported balances in the Company’s June 30, 2016 Form 10-K for debt issuance costs listed in “Other assets” have been reclassified to “Current portion of long-term debt” in the amount of $0.2 million and “Long-term debt, less current portion” in the amount of $0.2 million to conform to the December 31, 2016 presentation.

Recently Issued Accounting Pronouncements

In May 2014, the FASB issued ASU 2014-09, Revenue Recognition - Revenue from Contracts with Customers (Topic 606), which will replace substantially all current revenue recognition guidance once it becomes effective. The new standard provides accounting guidance for all revenue arising from contracts with customers and affects all entities that enter into contracts to provide goods or services to their customers unless the contracts are in the scope of other standards. The new standard is less prescriptive and may require software entities to use more judgment and estimates in the revenue recognition process than are required under existing revenue guidance. Since ASU 2014-09 was issued, several additional ASUs have been issued and incorporated within ASC 606 to clarify various elements of the guidance.  In August 2015, the FASB issued ASU 2015-14 which amended the effective date of this ASU to fiscal years beginning after December 15, 2017, and early adoption is permitted only for fiscal years beginning after December 15, 2016.

The new revenue standard may be applied using either of the following transition methods: (1) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (2) 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 Company plans to adopt the standard in the first quarter of fiscal 2018 and preliminarily expects to use the full retrospective method.  However, the Company is continuing to evaluate the impact of the standard, and our adoption method is subject to change.  The Company expects that the adoption of this guidance will have a material impact on its financial statements, specifically related to the timing of revenue recognition for sales through our distributors.  The Company is continuing to assess all other potential impacts of the standard, including the pattern with which the Company recognizes revenue.