Recently Issued Accounting Pronouncements

12 Months Ended

Jul. 02, 2022

Accounting Changes and Error Corrections [Abstract]

Recently Issued Accounting Pronouncements

Note 2. Recently Issued Accounting Pronouncements

Accounting Pronouncements Recently Adopted

In December 2019, the Financial Accounting Standard Board (“FASB”) issued Accounting Standards Update (“ASU”) 2019-12, Simplifying the Accounting for Income Taxes (Topic 740), which is intended to simplify various aspects related to accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and which also clarifies and amends existing guidance to improve consistent application. ASU 2019-12 was effective for us at the beginning of fiscal year 2022, including interim periods within that reporting period. We adopted ASU 2019-12 in our first quarter of fiscal year 2022 on a prospective basis with no material impact to our consolidated financial statements.

Accounting Pronouncements Not Yet Effective

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805)—Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. This ASU clarifies that an acquirer of a business should recognize and measure contract assets and contract liabilities in a business combination in accordance with Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers. This ASU is expected to improve comparability for both the recognition and measurement of acquired revenue contracts with customers at the date of and after a business combination. The new guidance is effective for fiscal years beginning after December 15, 2022, with early adoption permitted. ASU 2021-08 is effective for us in our first quarter of fiscal year 2024. The impact of the adoption of ASU 2021-08 will depend on the contract assets and liabilities acquired in a business combination after that date, unless early adopted. We plan to early adopt the new standard in the first quarter of fiscal year 2023.

In August 2020, FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies the accounting for convertible instruments by removing the separation models for (i) convertible debt with a cash conversion feature and (ii) convertible instruments with a beneficial conversion feature. As a result, a convertible debt instrument will be accounted for as a single liability measured at its amortized cost. ASU 2020-06 also requires the application of the if-converted method for calculating diluted earnings per share and the treasury stock method will no longer be available. The new guidance is effective for fiscal years beginning after December 15, 2021, with early adoption permitted no earlier than fiscal years beginning after December 15, 2020. ASU 2020-06 is effective for us in the first quarter of fiscal year 2023. We plan to adopt ASU 2020-06 using the modified retrospective approach as of July 3, 2022. Upon adoption, our 2026 Note and 2028 Notes will be accounted for as a single liability measured at amortized cost, resulting in an increase to "Convertible notes, non-current" by approximately $436 million, to reflect the full principal amount of the Notes outstanding, net of issuance costs; a reduction to additional paid-in capital, net of estimated income tax effects, by approximately $426 million, to remove the equity component separately recorded for the conversion features associated with the Notes; an increase to deferred tax assets, net of approximately $92 million; and a cumulative-effect adjustment of approximately $82 million, net of estimated income tax effects. The adoption of this new guidance is anticipated to reduce interest expense by approximately $75 million during the fiscal year ended July 1, 2023. In addition, the adoption requires the use of the if-converted method for all convertible notes in the diluted net income (loss) per share calculation and the inclusion of the effect of potential share settlement of the convertible notes, if the effect is more dilutive.