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Recent Accounting Pronouncements
6 Months Ended
Nov. 24, 2018
Recent Accounting Pronouncements [Abstract]  
Recent Accounting Pronouncements

12. Recent Accounting Pronouncements



Accounting Pronouncements Adopted During Current Fiscal Year

Revenue from Contracts with Customers (Topic 606):  In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, a comprehensive new revenue recognition standard that supersedes current revenue recognition guidance and is intended to improve and converge revenue recognition and related financial reporting requirements.  The core principle of this 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.  Effective the beginning of fiscal year 2019 (May 27, 2018), the Company adopted ASC 606,  Revenue from Contracts with Customers, using the modified retrospective method, which allows companies to apply the new revenue standard to reporting periods beginning in the year the standard is first implemented, while prior periods continue to be reported in accordance with previous accounting guidance.  The adoption of ASC 606 did not have a significant impact on revenue recognition; therefore, the Company did not have an opening retained earnings adjustment. See Note 2 - Summary of Significant Accounting Policies for additional information. 

Intangibles — Goodwill and Other — Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract.  In August 2018, the FASB issued ASU 2018-15, which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license).  An entity in a hosting arrangement that is a service contract must determine which implementation costs to capitalize as an asset related to the service contract and which costs to expense.  Costs that cannot be capitalized include training costs, certain data conversion costs, costs incurred during preliminary project and post implementation stages.  Costs that are subject to evaluation for potential capitalization are incurred during the application development stage.  The guidance also specifies factors to consider when developing the period over which to amortize the capitalized costs once the arrangement is deployed for usage by the entity and elements to consider in analyzing potential impairment of the asset.

The guidance is effective for financial statements for annual periods beginning after December 15, 2019 (for the Company, fiscal 2021) and for interim periods within those fiscal years.  However, early adoption is permitted.  The Company adopted this guidance prospectively in the first quarter of fiscal 2019 as the Company has an initiative involving a cloud computing arrangement that is a service contract for its processing of payroll.  The initiative is now complete and the amount capitalized during fiscal 2019 was approximately $0.8 million and is accounted for in Other Assets in the Company’s Consolidated Balance Sheet.

Compensation — Stock Compensation (Topic 718): Scope of Modification Accounting.  In May 2017, the FASB issued ASU 2017-09, which clarifies when changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting.  Under the new guidance, modification accounting is only required if the fair value, vesting conditions or classification (equity or liability) of the new award are different from the original award immediately before the original award is modified.  The new standard is effective for financial statements for annual periods beginning after December 15, 2017 and was adopted by the Company effective May 27, 2018.  The guidance must be applied prospectively to awards modified on or after the adoption date. The future impact of ASU 2017-09 will be dependent on the nature of future stock award modifications.

Accounting Pronouncements Pending Adoption



Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement.  In August 2018, the FASB issued ASU 2018-13, which eliminates, adds and modifies certain fair value measurement disclosures.  The ASU is effective for annual reporting periods beginning after December 15, 2019 (for the Company, fiscal 2021), including interim reporting periods within those annual periods, with early adoption permitted.  We do not expect the adoption of this standard to have a material impact to our consolidated financial statements and related disclosures.

Intangibles — Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment.  In January 2017, the FASB issued ASU 2017-04, which provides guidance regarding the goodwill impairment testing process.  The new standard eliminates Step 2 of the goodwill impairment test.  If a company determines in Step 1 of the goodwill impairment test that the carrying value of goodwill is greater than the fair value, an impairment for that difference must be recorded in the income statement, rather than proceeding to Step 2.  The new standard is effective for financial statements for annual periods beginning after December 15, 2019 (for the Company, fiscal 2021).  Early adoption is permitted.  Based on the Company’s most recent annual goodwill impairment test completed in fiscal 2018, the Company expects no initial impact on adoption.

Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.  In June 2016, the FASB issued ASU 2016-13, which provides guidance on accounting for credit losses, including trade receivables.  The guidance requires the application of a current expected credit loss model, which measure credit losses based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts.  The guidance is effective for annual periods beginning after December 15, 2019 (for the Company, fiscal 2021).  The guidance requires companies to apply the requirements using a modified retrospective approach.  The Company is currently evaluating the potential impact on the Consolidated Financial Statements and required disclosures.

Leases (Topic 842): Leases.  In February 2016, the FASB issued ASU 2016-02, which amends the existing guidance to require lessees to recognize operating lease obligations on their balance sheets by recording the rights and obligations created by those leases.  The requirements are effective for financial statements for annual periods and interim periods within those annual periods beginning after December 15, 2018 (for the Company, fiscal 2020).  The FASB has also subsequently issued certain additional ASUs with clarifications and improvements of ASU 2016-02 which the Company will consider during its implementation process.  The Company is currently evaluating the impact ASU 2016-02 will have on its consolidated financial statements and believes it will have a significant impact on the Company’s Consolidated Balance Sheet assets and liabilities.  Although the Company is still completing its assessment of the effect on the Consolidated Statements of Operations, the Company does not currently believe the adoption will have a material impact.  The Company has completed a preliminary qualitative assessment of its lease portfolio and is in the process of implementing a new lease software system and designing revised processes and controls to use such software to account for its leases in accordance with the new guidance.  Under current accounting guidelines, the Company’s office leases are operating lease arrangements, in which rental payments are treated as operating expenses and there is no recognition of the arrangement on the balance sheet as an asset with the related obligation to the lessor as a liability.

Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the American Institute of Certified Public Accountants and the SEC did not, or are not expected to, have a material effect on the Company’s results of operations, financial position or cash flows.