Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements include the accounts of Teledyne and all wholly-owned and majority-owned domestic and foreign subsidiaries. Intercompany accounts and transactions have been eliminated. Certain prior year amounts have been reclassified to conform to the current period presentation.

Fiscal Year

The Company operates on a 52- or 53-week fiscal year convention ending on the Sunday nearest to December 31. Fiscal year 2014 was a 52-week fiscal year and ended on December 28, 2014. Fiscal year 2013 was a 52-week fiscal year and ended on December 29, 2013. Fiscal year 2012 was a 52-week fiscal year and ended on December 30, 2012. References to the years 2014, 2013 and 2012 are intended to refer to the respective fiscal year unless otherwise noted.

Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent liabilities. On an ongoing basis, the Company evaluates its estimates, including those related to product returns and replacements, allowance for doubtful accounts, inventories, intangible assets, asset valuations, income taxes, warranty obligations, pension and other postretirement benefits, long-term contracts, environmental, workers’ compensation and general liability, employee benefits and other contingencies and litigation. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances at the time, the results of which form the basis for making its judgments. Actual results may differ materially from these estimates under different assumptions or conditions. Management believes that the estimates are reasonable.

Accumulated Other Comprehensive Income

The following table summarizes the changes in accumulated balances of other comprehensive income (loss) for the year ended December 28, 2014, and December 29, 2013:



	Foreign Currency Translation			Cash Flow Hedges and other			Pension and Postretirement Benefits			Total
Balances as of December 30, 2012	$	(17.2	)	$	(1.9	)	$	(254.3	)	$	(273.4	)

Other comprehensive loss before reclassifications	(15.2		)	(2.7		)	—			(17.9		)
Amounts reclassified from AOCI	—			1.3			124.5			125.8
Net other comprehensive loss	(15.2		)	(1.4		)	124.5			107.9
Balance as of December 29, 2013	(32.4		)	(3.3		)	(129.8		)	(165.5		)

Other comprehensive loss before reclassifications	(58.2		)	(4.7		)	—			(62.9		)
Amounts reclassified from AOCI	—			2.7			(97.5		)	(94.8		)
Net other comprehensive loss	(58.2		)	(2.0		)	(97.5		)	(157.7		)
Balance as of December 28, 2014	$	(90.6	)	$	(5.3	)	$	(227.3	)	$	(323.2	)

The reclassification out of AOCI for the year ended December 28, 2014, and December 29, 2013, are as follows:



	December 28, 2014			December 29, 2013
	Amount reclassified from AOCI			Amount reclassified from AOCI			Financial Statement Presentation
Loss on cash hedges:
Loss recognized in income on derivatives	$	3.6		$	1.7		Other expense
Income tax impact	(0.9		)	(0.4		)	Income tax benefit
Total	$	2.7		$	1.3

Amortization of defined benefit pension and postretirement plan items:
Amortization prior service cost	$	(4.6	)	$	(5.1	)	See Note 12
Amortization of net actuarial loss	24.6			40.4			See Note 12
Pension adjustments	(173.7		)	170.3			See Note 12
Total before tax	(153.7		)	205.6
Tax effect	56.2			(81.1		)
Net of tax	$	(97.5	)	$	124.5

Revenue Recognition

Revenue is recognized when the earnings process is substantially complete and all of the following criteria are met: 1) persuasive evidence of an arrangement exists; 2) delivery has occurred or services have been rendered; 3) our price to our customer is fixed or determinable; and 4) collectability is reasonably assured.

We determine the appropriate method by which we recognize revenue by analyzing the terms and conditions of our contracts or arrangements entered into with our customers. The majority of our revenue is recognized on certain product sales upon shipment to the customer, at fixed or determinable prices and with a reasonable assurance of collection, passage of title to the customer and fulfillment of all significant obligations. Revenue is recognized net of estimated sales returns and other allowances. The remaining revenue is generally associated with long-term contracts to design, develop and manufacture highly engineered products used in commercial or defense applications. Such contracts are generally accounted for using contract accounting, percentage-of-completion (“POC”) method.

The Company’s standard terms of sale are FOB shipping point. For a small percentage of sales where title and risk of loss passes at destination point, and assuming all other criteria for revenue recognition are met, the Company recognizes revenue after delivery to the customer. If any significant obligation to the customer with respect to a sales transaction remains following shipment, revenue recognition is deferred until such obligations have been fulfilled. In general, our revenue arrangements do not involve acceptance provisions based on customer specified acceptance criteria. In those circumstances when customer specified acceptance criteria exist, and if we cannot demonstrate that the product meets those specifications prior to the shipment, then revenue is deferred until customer acceptance is obtained. The Company does not offer substantial sales incentives and credits to customers.

We have a few contracts that require the Company to warehouse certain goods, for which revenue is recognized when all risks of loss is borne by the customer and all other criteria for revenue recognition are met.

We also have a small number of multiple elements arrangements (i.e., free product, training, installation, additional parts, etc.). If contract accounting does not apply, we allocate the contract price among the deliverables based on vendor-specific objective evidence of fair value to each element in the arrangement. If objective and reliable evidence of fair value of any element is not available, we use our best estimate of selling price for purposes of allocating the total arrangement consideration among the elements. Also, extended or non-customary warranties do not represent a significant portion of our revenue; however when our revenue arrangements include an extended or non-customary warranty provision the revenue is deferred and recognized ratably over the extended warranty period.

Contracts that require substantial performance over a long time period (generally one or more years), revenues are recorded under the POC method. We record net revenue and an estimated profit as work on our contracts progresses. The POC method for these contracts is dependent on the nature of the contract or products provided. Depending on the contract, we may measure the extent of progress toward completion using the units-of-delivery method, cost-to-cost method or upon attainment of scheduled performance contract milestones which could be time, event or expense driven. For example, for cost-reimbursable contracts we use the cost-to-cost method to measure progress toward completion. Under the cost-to-cost method of accounting, we recognize revenue and an estimated profit as allowable costs are incurred based on the proportion that the incurred costs bear to total estimated costs. Another example, for contracts that require us to provide a substantial number of similar items, we record revenue and an estimated profit on a POC basis using units-of-delivery as the basis to measure progress toward completing the contract. Occasionally, it is appropriate to combine individual customer orders and treat them as one arrangement when the underlying agreement was reached with the customer for a single large project.

The percentage of Company revenue recognized using the POC method was 28.7% in 2014, 32.1% in 2013 and 36.7% in 2012.

Accounting for contracts using the POC method requires management judgment relative to assessing risks, estimating contract revenue and cost, and making assumptions for schedule and technical issues. Contract revenue may include estimated amounts not contractually agreed to by the customer, including price redetermination, cost or performance incentives (such as award and incentives fees), un-priced change orders, claims and requests for equitable adjustment. The POC method requires management’s judgment to make reasonably dependable cost estimates generally over a long time period. Since certain contracts extend over a long period of time, the impact of revisions in cost and revenue estimates during the progress of work may adjust the current period earnings on a cumulative catch-up basis. This method recognizes, in the current period, the cumulative effect of the changes on current and prior quarters. Additionally, if the current contract estimate indicates a loss, a provision is made for the total anticipated loss in the period that it becomes evident. Contract cost and revenue estimates for significant contracts are generally reviewed and reassessed quarterly.

The net effect of the favorable and unfavorable changes in estimates were expense of $3.0 million in 2014, $1.8 million in 2013 and $1.2 million in 2012. The gross aggregate effects of these favorable and unfavorable changes in estimates in 2014, 2013 and 2012 were $22.9 million, $21.4 million and $18.0 million of favorable operating income and $25.9 million, $23.2 million and $19.2 million of unfavorable operating income, respectively. We do not believe that any discrete event or adjustment to an individual contract within the aggregate changes in contract estimates for 2014, 2013 or 2012 was material to the consolidated statements of income for such annual periods.

Shipping and Handling

Shipping and handling fees charged to customers are classified as revenue while shipping and handling costs retained by Teledyne are classified as cost of sales in the accompanying consolidated statements of income.

Product Warranty and Replacement Costs

Some of the Company’s products are subject to specified warranties and the Company reserves for the estimated cost of product warranties on a product-specific basis. Facts and circumstances related to a product warranty matter and cost estimates to return, repair and/or replace the product are considered when establishing a product warranty reserve. The adequacy of the preexisting warranty liabilities is assessed regularly and the reserve is adjusted as necessary based on a review of historic warranty experience with respect to the applicable business or products, as well as the length and actual terms of the warranties, which are typically one year. The product warranty reserve is included in current accrued liabilities and long-term liabilities on the balance sheet.

Changes in the Company’s product warranty reserve are as follows (in millions):



	2014			2013			2012
Balance at beginning of year	$	17.3		$	17.8		$	13.3
Accruals for product warranties charged to expense	6.6			4.4			9.6
Cost of product warranty claims	(5.9		)	(5.2		)	(6.9		)
Acquisitions	0.5			0.3			1.8
Balance at end of period	$	18.5		$	17.3		$	17.8

Research and Development

Selling, general and administrative expenses include company-funded research and development and bid and proposal costs which are expensed as incurred and were $166.9 million in 2014, $167.0 million in 2013 and $131.6 million in 2012. Costs related to customer-funded research and development contracts were $261.9 million in 2014, $221.2 million in 2013 and $232.6 million in 2012 and are charged to cost of sales as the related sales are recorded. A portion of the costs incurred for company-funded research and development is recoverable through overhead cost allocations on government contracts.

Income Taxes

Deferred income taxes arise from temporary differences between the tax basis of assets and liabilities and their reported amount in the financial statements, which will result in taxable or deductible amounts in the future. In evaluating our ability to recover our deferred tax assets within the jurisdiction from which they arise, we consider all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax-planning strategies, and results of recent operations. In projecting future taxable income, we begin with historical results adjusted for the results of discontinued operations and incorporate assumptions about the amount of future state, federal and foreign pretax operating income adjusted for items that do not have tax consequences. The assumptions about future taxable income require significant judgment and are consistent with the plans and estimates we are using to manage the underlying businesses. In evaluating the objective evidence that historical results provide, we consider three years of cumulative operating income. A valuation allowance is recorded when it is more likely than not that some of the deferred tax assets will not be realized.

Income tax positions must meet a more-likely-than-not recognition in order to be recognized in the financial statements. We recognize potential accrued interest and penalties related to unrecognized tax benefits within operations as income tax expense. As new information becomes available, the assessment of the recognition threshold and the measurement of the associated tax benefit of uncertain tax positions may result in financial statement recognition or derecognition.

Net Income Per Common Share

Basic and diluted earnings per share were computed based on net earnings. The weighted average number of common shares outstanding during the period was used in the calculation of basic earnings per share. This number of shares was increased by contingent shares that could be issued under various compensation plans as well as by the dilutive effect of stock options based on the treasury stock method in the calculation of diluted earnings per share.

The following table sets forth the computations of basic and diluted earnings per share (amounts in millions, except per share data):



	2014		2013		2012
Net income from continuing operations including noncontrolling interest	$	215.6	$	184.5	$	162.8
Noncontrolling interest	2.1		0.5		(1.0		)
Discontinued operations, net of income taxes	—		—		2.3
Net income attributable to Teledyne	$	217.7	$	185.0	$	164.1
Basic earnings per common share:
Weighted average common shares outstanding	37.1		37.3		36.7
Basic earnings per common share
Continuing operations	$	5.87	$	4.96	$	4.41
Discontinued operations	—		—		0.06
Basic earnings per common share	$	5.87	$	4.96	$	4.47
Diluted earnings per share:
Weighted average common shares outstanding	37.1		37.3		36.7
Effect of diluted securities	0.8		0.7		0.7
Weighted average diluted common shares outstanding	37.9		38.0		37.4
Diluted earnings per common share
Continuing operations	$	5.75	$	4.87	$	4.33
Discontinued operations	—		—		0.06
Diluted earnings per common share	$	5.75	$	4.87	$	4.39

For 2014 no stock options were excluded in the computation of diluted earnings per share In 2013 and 2012, 9,000 and 513,340 stock options were excluded in the computation of diluted earnings per share because they had exercise prices that were greater than the average market price of the Company’s common stock during the respective periods.

For 2014, 2013 and 2012, stock options to purchase 2.9 million, 2.7 million and 2.0 million shares of common stock, respectively, had exercise prices that were less than the average market price of the Company’s common stock during the respective periods and are included in the computation of diluted earnings per share.

In addition, no contingent shares of the Company’s common stock under the restricted stock or performance share compensation plans were excluded from fully diluted shares outstanding for 2014, 2013 or 2012.

Accounts Receivable

Receivables are presented net of a reserve for doubtful accounts of $7.8 million at December 28, 2014, and $5.2 million at December 29, 2013. Expense recorded for the reserve for doubtful accounts was $3.6 million, $0.9 million and $0.7 million for 2014, 2013 and 2012, respectively. An allowance for doubtful accounts is established for losses expected to be incurred on accounts receivable balances. Judgment is required in the estimation of the allowance and is based upon specific identification, collection history and creditworthiness of the debtor. The Company markets its products and services principally throughout the United States, Europe, Japan and Canada to commercial customers and agencies of, and prime contractors to, the U.S. Government. Trade credit is extended based upon evaluations of each customer’s ability to perform its obligations, which are updated periodically.

Cash and Cash Equivalents

Cash and cash equivalents totaled $141.4 million at December 28, 2014, of which $118.7 million was held by foreign subsidiaries of Teledyne. Cash equivalents consist of highly liquid money-market mutual funds and bank deposits with maturities of three months or less when purchased. There were no cash equivalents at December 28, 2014, and $0.3 million in cash equivalents at December 29, 2013.

Inventories

Inventories are stated at the lower of cost or market, less progress payments. The majority of inventory values are principally valued on an average cost, or first-in, first-out method, while the remainder are stated at cost based on the last-in, first-out method. Costs include direct material, direct labor, applicable manufacturing and engineering overhead, and other direct costs. Additionally, certain inventory costs are also reflective of the estimates used in applying the percentage-of-completion revenue recognition method. Judgment is required when establishing reserves to reduce the carrying amount of inventory to market or net realizable value. Inventory reserves are recorded when inventory is considered to be excess or obsolete based upon an analysis of actual on-hand quantities on a part-level basis to forecasted product demand and historical usage.

Property, Plant and Equipment

Property, plant and equipment is capitalized at cost. Property, plant and equipment is stated at cost less accumulated depreciation and amortization. Depreciation and amortization are determined using a combination of accelerated and straight-line methods over the estimated useful lives of the various asset classes. Buildings and building improvements are depreciated over periods not exceeding 45 years, equipment over 5 to 18 years, computer hardware and software over 3 to 7 years and leasehold improvements over the shorter of the estimated remaining lives or lease terms. Significant improvements are capitalized while maintenance and repairs are charged to expense as incurred. Depreciation expense on property, plant and equipment, including assets under capital leases, was $62.3 million in 2014, $59.6 million in 2013 and $48.9 million in 2012.

Goodwill and Other Intangible Assets

Goodwill and intangible assets with indefinite lives are not amortized, but tested at least annually for impairment. The Company performs an annual impairment test for goodwill and other intangible assets in the fourth quarter of each year, or more often as circumstances require. The two-step impairment test is used to first identify potential goodwill impairment and then measure the amount of goodwill impairment loss, if any. When it is determined that an impairment has occurred, an appropriate charge to operations is recorded. Based on the quarterly impairment test completed in 2014, the Company recorded a $0.7 million asset impairment related to acquired intangible assets. Based on the annual impairment test completed in the fourth quarter of 2013, the Company recorded a $1.2 million asset impairment related to acquired intangible assets. No impairment of goodwill was indicated in 2014 or 2013, based on the annual impairment test completed in the fourth quarter of each year.

Business acquisitions are accounted for under the purchase method by assigning the purchase price to tangible and intangible assets acquired and liabilities assumed. Assets acquired and liabilities assumed are recorded at their fair values and the excess of the purchase price over the amounts assigned is recorded as goodwill. Purchased intangible assets with finite lives are amortized over their estimated useful lives.

Other Long-Lived Assets

The carrying value of long-lived assets is periodically evaluated in relation to the operating performance and sum of undiscounted future cash flows of the underlying businesses. An impairment loss is recognized when the sum of expected undiscounted future net cash flows is less than book value.

Environmental

Costs that mitigate or prevent future environmental contamination or extend the life, increase the capacity or improve the safety or efficiency of property utilized in current operations are capitalized. Other costs that relate to current operations or an existing condition caused by past operations are expensed. Environmental liabilities are recorded when the Company’s liability is probable and the costs are reasonably estimable, but generally not later than the completion of the feasibility study or the Company’s recommendation of a remedy or commitment to an appropriate plan of action. The accruals are reviewed periodically and, as investigations and remediations proceed, adjustments are made as necessary. Accruals for losses from environmental remediation obligations do not consider the effects of inflation, and anticipated expenditures are not discounted to their present value. The accruals are not reduced by possible recoveries from insurance carriers or other third parties, but do reflect anticipated allocations among potentially responsible parties at federal Superfund sites or similar state-managed sites and an assessment of the likelihood that such parties will fulfill their obligations at such sites. The measurement of environmental liabilities by the Company is based on currently available facts, present laws and regulations, and current technology. Such estimates take into consideration the Company’s prior experience in site investigation and remediation, the data concerning cleanup costs available from other companies and regulatory authorities, and the professional judgment of the Company’s environmental personnel in consultation with outside environmental specialists, when necessary.

Foreign Currency Translation

The Company’s foreign entities’ accounts are generally measured using local currency as the functional currency. Assets and liabilities of these entities are translated at the exchange rate in effect at year-end. Revenues and expenses are translated at average month end rates of exchange prevailing during the year. Unrealized translation gains and losses arising from differences in exchange rates from period to period are included as a component of accumulated other comprehensive loss in stockholders’ equity. A majority of the Company’s sales are denominated in U.S. dollars which mitigates the effect of exchange rate changes.

Hedging Activities/Derivative Instruments

Teledyne transacts business in various foreign currencies and has international sales and expenses denominated in foreign currencies, subjecting the Company to foreign currency risk. The Company’s primary objective is to protect the United States dollar value of future cash flows and minimize the volatility of reported earnings. Following the acquisition of DALSA, the Company began to utilize foreign currency forward contracts to reduce the volatility of cash flows primarily related to forecasted revenue and expenses denominated in Canadian dollars. These contracts are designated and qualify as cash flow hedges.

The effectiveness of the cash flow hedge contracts, excluding time value, is assessed prospectively and retrospectively on a monthly basis using regression analysis, as well as using other timing and probability criteria. To receive hedge accounting treatment, all hedging relationships are formally documented at the inception of the hedges and must be highly effective in offsetting changes to future cash flows on hedged transactions. The effective portion of the cash flow hedge contracts’ gains or losses resulting from changes in the fair value of these hedges is initially reported, net of tax, as a component of accumulated other comprehensive income (“AOCI”) in stockholders’ equity until the underlying hedged item is reflected in our consolidated statements of income, at which time the effective amount in AOCI is reclassified to cost of sales in our consolidated statements of income. Net deferred losses recorded in AOCI, net of tax, for contracts that will mature in the next 12 months total $2.9 million. These losses are expected to be offset by anticipated gains in the value of the forecasted underlying hedged item.

In the event that the gains or losses in AOCI are deemed to be ineffective, the ineffective portion of gains or losses resulting from changes in fair value, if any, is reclassified to other income and expense. In the event that the underlying forecasted transactions do not occur, or it becomes remote that they will occur, within the defined hedge period, the gains or losses on the related cash flow hedges will be reclassified from AOCI to other income and expense. During the current reporting period, all forecasted transactions occurred and, therefore, there were no such gains or losses reclassified to other income and expense. As of December 28, 2014, Teledyne had foreign currency forward contracts designated as cash flow hedges to buy Canadian dollars and to sell U.S. dollars totaling $76.3 million and these contracts had a negative fair value of $3.9 million. These foreign currency forward contracts have maturities ranging from March 2015 to June 2016.

In addition, the Company utilizes foreign currency forward contracts to mitigate foreign exchange rate risk associated with foreign currency denominated monetary assets and liabilities, including intercompany receivables and payables. As of December 28, 2014, Teledyne had foreign currency contracts of this type in the following pairs (in millions):



Contracts to Buy			Contracts to Sell
Currency	Amount		Currency	Amount
Canadian Dollar	C$	44.2	U.S. Dollars	US$	39.5
Euros	€	1.0	Canadian Dollar	C$	1.4
Euros	€	11.0	U.S. Dollars	US$	14.0
Great Britain Pounds	£	1.0	Australian Dollars	A$	1.8
Great Britain Pounds	£	20.9	U.S. Dollars	US$	34.0
U.S. Dollars	US$	16.3	Euros	€	13.0
U.S. Dollars	US$	12.0	Great Britain Pounds	£	7.7
U.S. Dollars	US$	2.7	Japanese Yen	¥	305.0
Singapore Dollar	S$	1.0	U.S. Dollar	US$	0.8

The gains and losses on these derivatives which are not designated as hedging instruments under ASC 815, Derivatives and Hedging (“ASC 815”), are intended to, at a minimum, partially offset the transaction gains and losses recognized in earnings. All derivatives are recorded on the balance sheet at fair value. As discussed below, the accounting for gains and losses resulting from changes in fair value depends on the use of the derivative and whether it is designated and qualifies for hedge accounting. Teledyne does not use foreign currency forward contracts for speculative or trading purposes.

The effect of derivative instruments designated as cash flow hedges for 2014 and 2013 was as follows (in millions):



	2014			2013
Net loss recognized in AOCI (a)	$	(6.4	)	$	(3.7	)
Net loss reclassified from AOCI into cost of sales (a)	$	(3.6	)	$	(1.8	)
Net foreign exchange gain recognized in other income and expense (b)	$	0.6		$	0.5

(a)Effective portion

(b)Amount excluded from effectiveness testing

The effect of derivative instruments not designated as cash flow hedges recognized in other income and expense for 2014 and 2013 was a loss of $3.8 million and $1.1 million, respectively.

The fair values of the Company’s derivative financial instruments are presented below. All fair values for these derivatives were measured using Level 2 information as defined by the accounting standard hierarchy (in millions):



Asset/(Liability) Derivatives	Balance sheet location	December 28, 2014			December 29, 2013
Derivatives designated as hedging instruments:
Cash flow forward contracts	Accrued liabilities	$	(3.9	)	$	(1.2	)
Total derivatives designated as hedging instruments		(3.9		)	(1.2		)
Derivatives not designated as hedging instruments:
Non-designated forward contracts	Other current assets	0.3			0.2
Non-designated forward contracts	Accrued liabilities	(4.8		)	(0.9		)
Total derivatives not designated as hedging instruments		(4.5		)	(0.7		)
Total asset/(liability) derivatives		$	(8.4	)	$	(1.9	)

Supplemental Cash Flow Information

Cash payments for federal, foreign and state income taxes were $75.0 million for 2014. Tax refunds received in 2014 totaled $2.3 million. Cash payments for federal, foreign and state income taxes were $32.8 million for 2013. Tax refunds received in 2013 totaled $3.3 million. Cash payments for federal, foreign and state income taxes were $15.0 million for 2012. Tax refunds received in 2012 totaled $1.9 million. Cash payments for interest and credit facility fees totaled $17.6 million, $19.7 million and $16.2 million for 2014, 2013 and 2012, respectively.

Fair Value Measurements

When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance. The Company uses the following three levels of inputs in determining the fair value of the Company’s assets and liabilities, focusing on the most observable inputs when available:


•	Level 1-Quoted prices in active markets for identical assets or liabilities.

•

Level 2-Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities.


•	Level 3-Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities.

To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is disclosed is determined based on the lowest level input that is significant to the fair value measurement.

Recent Accounting Pronouncements

Effective December 30, 2013, the first day of our 2014 fiscal year, the Company adopted accounting guidance related to the presentation of an unrecognized tax benefit when a net operating loss carryforward (“NOL”), a similar tax loss or a tax credit carryforward exists. Under the guidance, an entity will be required to present an unrecognized tax benefit as a reduction of a deferred tax asset for a NOL or tax credit carryforward whenever the NOL or tax credit carryforward would be available to reduce the additional taxable income or tax due if the tax position is disallowed. The Company’s adoption of the guidance did not have a material impact on its consolidated financial statements.

In May 2014, the Financial Accounting Standards Board issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers, which provides a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and will supersede most current revenue recognition guidance. This new guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016, and can be adopted either retrospectively to each prior reporting period presented or as a cumulative-effect adjustment as of the date of adoption, with early application not permitted. The Company is currently in the process of determining its implementation approach and assessing the impact on the consolidated financial statements and footnote disclosures.