Restatement of Previously Issued Consolidated Financial Statements |
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Accounting Changes and Error Corrections [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restatement of Previously Issued Consolidated Financial Statements | Restatement of Previously Issued Consolidated Financial Statements Restatement Background Subsequent to the issuance of the condensed consolidated financial statements as of September 30, 2017, the Audit Committee of our Board of Directors (the “Audit Committee”) commenced an investigation (the “Investigation”) with the assistance of outside counsel relating to certain accounting and internal control matters at the Company, principally focused on certain revenue recognition matters from the fourth quarter of 2015 through the fourth quarter of 2017 inclusive. The investigation was conducted with the assistance of outside counsel and independent counsel. Counsel retained forensic accountants to assist with their work. The investigation commenced following the identification of violations of the Company's Insider Trading Policy and Code of Conduct by a mid-level employee within the finance department, and as a result it was determined that further review and procedures relating to certain accounting and internal control matters should be undertaken. During the course of this Investigation, code of conduct breaches and accounting and financial reporting errors were identified. The matters primarily resulted in modification to the timing of the recognition of revenue in a limited number of sale transactions between the Company and its resellers and distributors. The Company determined the need to restate the consolidated financial statements as of and for the year ended December 31, 2016. The Company is also adjusting the consolidated financial statements as of and for the year ended December 31, 2015 to correct identified immaterial errors. Revenue Recognition Adjustments During the year ended December 31, 2016, revenue was recognized prematurely at the time, as it was determined that there was an oversight or misuse of facts which indicated that the reseller’s or distributor’s price was not fixed or determinable, or that collectability was not reasonably assured, because the reseller’s or distributor’s payment to the Company was contingent on resale of the product or the transaction included extended payment terms beyond the Company’s customary terms. During the year ended December 31, 2015, revenue on certain sale transactions was recognized prematurely, as it was determined that there was an oversight of facts that indicated collectability was not reasonably assured, because the reseller’s or distributor’s payment to the Company was contingent on resale of the product or the transaction included extended payment terms beyond the Company’s customary terms. To correct these errors, the related revenue and cost of revenue were reversed in the period in which the accounting errors took place and, except for one 2016 transaction, have been recognized in subsequent periods when all of the revenue recognition criteria were met. Additionally, certain adjustments to reverse accounts receivable, net of allowances, recognize inventory, and adjust deferred revenue, current, were made to the consolidated balance sheet at the end of the period in which the accounting errors occurred. Other Adjustments In addition to the restatement adjustments described above, we have identified other revenue and expense classification errors that are not material, individually or in the aggregate that have been corrected in connection with the restatement. Tax effect of restatement adjustments The Company recorded adjustments to its deferred taxes as a result of the restatement. The overall impact of the restatement is an increase to deferred taxes with the corresponding increase to the valuation allowance with no impact to the effective tax rate or income tax expense. Impact of the Restatement The following table presents the consolidated balance sheet as previously reported, restatement adjustments and the consolidated balance sheet as restated at December 31, 2016 and 2015 (in thousands):
The following tables present the consolidated statement of operations as previously reported, restatement adjustments and the consolidated statement of operations as restated for the years ended December 31, 2016 and 2015 (in thousands, except per share amounts):
The following tables present the consolidated statement of cash flows as previously reported, restatement adjustments, and the consolidated statement of cash flows as restated for the years ended December 31, 2016 and 2015 (in thousands):
The only change to the consolidated statement of comprehensive loss and the consolidated statement of stockholders’ equity for the years ended December 31, 2016 and 2015 as a result of the restatements is due to the changes in net loss. There was no cumulative effect of the errors as of January 1, 2015, the beginning of the earliest period presented. As such, no tables are presented relating to the restatement adjustments. Refer to the consolidated statement of comprehensive loss and the consolidated statement of stockholders’ equity as restated. |