SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION

In these notes, the terms "Hardinge," "the Company," "we," "us," "our," or similar references mean Hardinge Inc. and its predecessors together with its subsidiaries.

The Company operates through two reportable segments, Metalcutting Machine Solutions (“MMS”) and Aftermarket Tooling and Accessories (“ATA”). The MMS segment includes high precision computer controlled metalcutting turning machines, vertical machining centers, horizontal machining centers, grinding machines, and repair parts related to those machines. The ATA segment includes products, primarily collets and chucks, that are purchased by manufacturers throughout the lives of their Hardinge or other branded machines.

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements and, therefore, should be read in conjunction with the consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the timing and amount of assets, liabilities, equity, revenue, and expenses reported and disclosed. Actual amounts could differ from these estimates. All adjustments, consisting of normal recurring adjustments, which are, in the opinion of management, necessary for a fair statement of the results for the interim periods have been presented and recorded. Due to differing business conditions and some seasonality, operating results for the three months ended March 31, 2018 are not necessarily indicative of the results that may be expected in subsequent quarters or for the full year ended December 31, 2018.

Certain amounts in the March 31, 2017 consolidated financial statements have been reclassified to conform to the current presentation.

In January 2018, the Company adopted Accounting Standards Update ("ASU") No. 2017-07, Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. As a result, the Company reclassified $0.2 million from Cost of sales and $0.1 million from Selling, general and administrative expenses for the three months ended March 31, 2017, which represents the non-service component of the periodic net benefit cost, into Other non-operating expense on the Consolidated Statement of Operations. We recorded $0.1 million of income in Other non-operating income related to periodic benefit costs, other than service costs, for the three months ended March 31, 2018.

In January 2018, the Company adopted ASU No. 2014-09, Revenue from Contracts with Customers. Accordingly, we have updated the following significant accounting policy:

Revenue Recognition

Beginning January 1, 2018, the Company has implemented the provisions of Accounting Standards Codification ("ASC") Topic 606, Revenue from Contracts with Customers ("the new standard"), using the modified retrospective transition method applied to contracts not completed as of January 1, 2018.

The modified retrospective method allows for initial implementation of the revenue standard without restating prior years’ operational results. Our revenue accounting is similar under old and new standards, and consequently, we did not have any opening adjustment to Retained Earnings. See Note 16. "Revenue Recognition" to our unaudited financial statements included in this quarterly report.

We sell precision computer controlled metalcutting turning machines, grinding machines, machining centers, and repair parts and services related to those machines. We also supply high precision, standard and specialty workholding devices, and other machine tool accessories. We recognize revenue in a manner that depicts the transfer of promised goods and services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

Our sales revenue is recognized at a point in time, when control of products is transferred to our customers based on contract terms. Transfer of control depends on contract terms and may be upon shipment from our facility, from a port near our facility, or upon delivery to our customers.

Revenue is recognized when the performance obligation under the terms of a contract with our customer is satisfied; generally, this occurs with the transfer of control of our machines, workholding devices, parts, or completion of a service. We typically have one performance obligation associated with each contract. Contract terms may include down-payments at the time the order is placed, and at other times during fulfillment. However, these payments do not impact our basic recognition policy.

Revenue is measured as the amount of consideration we expect to receive in exchange for transferring goods or providing services. Any variable consideration is estimated and included in the amount we will be entitled to in exchange for transferring promised goods or services, and is typically constrained and/or insignificant.

We sell repair parts for machines we have manufactured. We also provide technical support and repair services, generally related to our own machines. Our service contracts are typically for a defined single service (e.g. replace a damaged machine part) and a given price.

Our warranties are a simple guarantee that we will repair or replace a defective product and do not typically extend beyond one year. Warranties are generally included as part of the machine or parts sale.

We have adopted a number of simplifying assumptions allowed by the new standard:


•	Sales, value add, and other taxes which we collect concurrent with revenue-producing activities are excluded from revenue.


•	There is no adjustment required for any revenues from performance obligations satisfied in prior reporting periods.


•	In cases of advance payments, interest on contract financing payments are not recorded as income or disclosed because contracts are satisfied with one year.