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Basis of Presentation and Summary of Significant Accounting Policies (Policies)
6 Months Ended
Jun. 30, 2022
Accounting Policies [Abstract]  
Basis of Presentation
Basis of Presentation
The accompanying condensed consolidated financial statements have been prepared in accordance with GAAP. The accompanying condensed consolidated financial statements include the accounts of PubMatic, Inc. and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.
Use of Estimates
Use of Estimates
The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts of assets and liabilities reported, disclosures about contingent assets and liabilities, and reported amounts of revenue and expenses.
The Company evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors and adjusts those estimates and assumptions when facts and circumstances dictate. Actual results could materially differ from those estimates and assumptions. Due to the inherent uncertainty involved in making assumptions and estimates, events and changes in circumstances arising after June 30, 2022, including those resulting from the impacts of the COVID-19 pandemic, may result in actual outcomes that differ from those contemplated by the Company’s assumptions and estimates.
Stock-based Compensation
Stock-based Compensation
The Company recognizes and measures compensation expense for all stock-based payment awards granted to employees, directors, and nonemployees, including stock options, restricted stock units (“RSUs”), and the employee stock purchase plan (the “ESPP”) based on the fair value of the awards on the date of grant. The fair value of stock options and shares of common stock to be issued under the ESPP is estimated using the Black Scholes option pricing model. The grant date fair value of RSUs is based on the closing market price of the Company’s Class A common stock on the date of grant. The Black Scholes option pricing model is impacted by the fair value of the Company’s common stock, as well as changes in assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to, the expected common stock price volatility over the term of the stock options, the expected term of the stock options, risk-free interest rates, and the expected dividend yield.
For additional information regarding stock-based compensation and the assumptions used for determining the fair value of stock options and ESPP awards, refer to Note 8 — “Stockholders’ Equity and Stock Option Plans.”
Adoption of ASC 842
Adoption of ASC 842
In February 2016, the FASB issued Accounting Standards Update (ASU) 2016-02, Leases (Topic ASC 842) which, along with other ASU's containing minor amendments and technical corrections, provides for a comprehensive overhaul of the lease accounting model and changes the definition of a lease within US GAAP. Topic 842 supersedes the legacy ASC Topic 840 accounting guidance and is intended to increase transparency and comparability among organizations by recognizing right-of-use (ROU) lease assets and lease liabilities on the balance sheet and requiring disclosure of key information about leasing arrangements. Lease expense continues to be recognized in a manner similar to legacy GAAP.
The effect of adopting Topic 842 resulted in the recognition of operating ROU assets and corresponding lease liabilities on the Company’s consolidated balance sheet. The Company adopted Topic 842 in the fourth quarter of our fiscal 2021 reflecting an initial application date of January 1, 2021 using the modified retrospective transition approach under which the adoption date of ASC 842 became the application date, with the comparative periods presented and disclosed under the ASC 840 requirements.
Interim financial data for the comparable prior-year quarter ended June 30, 2021 has been revised to reflect the adoption of Topic 842 and differs from what was disclosed in the prior year Form 10-Q filed on August 11, 2021. The standard did not affect the Company’s consolidated statements of operations, comprehensive income, and stockholders’ equity for the three and six months ended June 30, 2021. Though net cash provided by operating, investing, and financing activities were unchanged, the standard did affect certain operating cash flow line items within the Company’s consolidated statements of cash flows for the six months ended June 30, 2021.