Description of Business and Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2024

Accounting Policies [Abstract]

Basis of Presentation

The Condensed Consolidated Financial Statements include the accounts of Energy Recovery, Inc. and its wholly-owned subsidiaries. 

All intercompany accounts and transactions have been eliminated in consolidation.

The accompanying Condensed Consolidated Financial Statements have been prepared pursuant to the rules and regulations of the

Securities and Exchange Commission (the “SEC”).  Certain information and footnote disclosures normally included in the financial statements

prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to such rules

and regulations.The results of operations for the interim periods are not necessarily indicative of the operating results for the full fiscal year or any

future periods.

Reclassifications

Certain prior period amounts have been reclassified in the Condensed Consolidated Statement of Cash Flows and certain notes to

the Condensed Consolidated Financial Statements to conform to the current period presentation.

Use of Estimates

The preparation of Condensed Consolidated Financial Statements, in conformity with GAAP, requires the Company’s management to

make judgments, assumptions and estimates that affect the amounts reported in the Condensed Consolidated Financial Statements and

accompanying notes.

The accounting policies that reflect the Company’s significant estimates and judgments and that the Company believes are the most

critical to aid in fully understanding and evaluating its reported financial results are revenue recognition; granted equity award valuations;

equipment useful life and valuation; goodwill valuation and impairment; deferred taxes and valuation allowances on deferred tax assets; and

evaluation and measurement of contingencies. Those estimates could change, and as a result, actual results could differ materially from

those estimates.

The Company is not aware of any specific event or circumstance that would require an update to its estimates or judgments or a

revision of the carrying value of its assets or liabilities as of July 31, 2024, the date of issuance of this Quarterly Report on Form 10-Q.  These

estimates may change, as new events occur and additional information is obtained.  Actual results could differ materially from these

estimates under different assumptions or conditions.  The Company undertakes no obligation to publicly update these estimates for any

reason after the date of this Quarterly Report on Form 10-Q, except as required by law.

Litigation

The Company considers all claims, if any, on a quarterly basis and, based on known facts, assesses whether potential losses

are considered reasonably possible, probable and estimable.  Based upon this assessment, the Company then evaluates disclosure

requirements and whether to accrue for such claims in its consolidated financial statements.  The Company records a provision for a liability

when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated.  These provisions are

reviewed at least quarterly and are adjusted to reflect the impacts of negotiations, settlements, rulings, advice of legal counsel and other

information and events pertaining to a particular case.

Income Taxes

The Company’s interim period tax provision for and (benefit from) income taxes, respectively, is determined using an estimate of its

annual effective tax rate, adjusted for discrete items, if any, that arise during the period.  Each quarter, the Company updates its estimate of

the annual effective tax rate, and if the estimated annual effective tax rate changes, the Company makes a cumulative adjustment in such

period.  The Company’s quarterly tax provision and estimate of its annual effective tax rate are subject to variation due to several factors,

including variability in accurately predicting its pre-tax income or loss and the mix of jurisdictions to which they relate, the applicability of

special tax regimes, and changes in how the Company does business.