Changes in Accounting Policies

Except for the changes described below, the Company has consistently applied the accounting policies to all periods presented in these consolidated financial statements.

The Company adopted ASC 606 with a date of the initial application of January 1, 2018. As a result, the Company has changed its accounting policy for revenue recognition as detailed below.

The Company applied ASC 606 using the modified retrospective method only to contracts that are not completed contracts as of January 1, 2018, and the cumulative effect of initially applying ASC 606 is recognized as an adjustment to the beginning retained earnings. Therefore, the comparative information has not been adjusted and continues to be reported under ASC 605. The details of the significant changes and quantitative impact of the changes are disclosed below.

A. Sales of software subscriptions or sales of licenses and maintenance in bundled arrangements

The Company previously recognized revenue from software licenses sold together with maintenance and/or consulting services upon shipment using the residual method, provided that the undelivered items in the arrangement have value to the customer on a stand-alone basis and vendor-specific objective evidence ("VSOE") of fair value can be determined. If VSOE of fair value for the undelivered elements cannot be established, the Company deferred all revenue from the arrangement until the earlier of the point at which such sufficient VSOE does exist or all elements of the arrangement have been delivered, or if the undelivered element is maintenance, then the Company recognized the entire fee ratably over the maintenance period. Under ASC 606, the total consideration in the contract is allocated to all products and services based on their stand-alone selling prices. The stand-alone selling prices are determined based on the list prices at which the Company sells the software license, software subscription, maintenance and/or consulting services. Accordingly, the Company now recognizes higher license revenue upfront and less service revenue over time.

B. Sales of instruments

The Company previously recognized revenue from sale of instruments when persuasive evidence of an arrangement existed, delivery had occurred, the price to the buyer was fixed or determinable, and collectability was reasonably assured. For certain sales of instruments that included customer-specified acceptance criteria, the Company previously recognized revenue after the acceptance criteria had been met. Under ASC 606, revenue is recognized when the Company satisfies a performance obligation by transferring control of the product to a customer. Accordingly, the Company now recognizes product revenue upon delivery or when title has transferred to the customer, as the Company believes acceptance is perfunctory.

C. Sales commissions

The Company previously recognized commission fees related to sales of products and services as selling expenses when they were incurred. Under ASC 606, the Company capitalizes those commission fees as costs of obtaining a contract, when they are incremental and, if they are expected to be recovered, the Company amortizes them consistently with the pattern of transfer of the product or service to which the asset relates. If the expected amortization period is one year or less, the commission fee is expensed when incurred.

D. Impacts on financial statements

The following tables summarize the impacts of ASC 606 adoption on the Company's consolidated financial statements for the fiscal year ended December 30, 2018.

Consolidated Balance Sheet



	As reported			Adjustments			Balances without adoption of ASC 606
	(In thousands)
Cash and cash equivalents	$	163,111		$	—		$	163,111
Accounts receivable, net	632,669			(16,264		)	616,405
Inventories	338,347			9,773			348,120
Other current assets	100,507			(363		)	100,144
Property, plant and equipment, net	318,590			—			318,590
Intangible assets, net	1,199,667			—			1,199,667
Goodwill	2,952,608			—			2,952,608
Other assets, net	270,023			—			270,023
Total assets	$	5,975,522		$	(6,854	)	$	5,968,668
Current portion of long-term debt	$	14,856		$	—		$	14,856
Accounts payable	220,949			—			220,949
Accrued restructuring and contract termination charges	4,834			—			4,834
Accrued expenses and other current liabilities	528,827			19,173			548,000
Current liabilities of discontinued operations	2,165			—			2,165
Long-term debt	1,876,624			—			1,876,624
Long-term liabilities	742,312			—			742,312
Total liabilities	3,390,567			19,173			3,409,740
Commitments and contingencies
Preferred stock	—			—			—
Common stock	110,597			—			110,597
Capital in excess of par value	48,772			—			48,772
Retained earnings	2,602,067			(26,027		)	2,576,040
Accumulated other comprehensive loss	(176,481		)	—			(176,481		)
Total stockholders’ equity	2,584,955			(26,027		)	2,558,928
Total liabilities and stockholders’ equity	$	5,975,522		$	(6,854	)	$	5,968,668

Consolidated Statement of Operations



	As reported			Adjustments			Balances without adoption of ASC 606
	(In thousands)
Product revenue	$	1,935,493		$	(31,441	)	$	1,904,052
Service revenue	842,503			—			842,503
Total revenue	2,777,996			(31,441		)	2,746,555
Cost of product revenue	908,228			(10,290		)	897,938
Cost of service revenue	528,829			—			528,829
Total cost of revenue	1,437,057			(10,290		)	1,426,767
Selling, general and administrative expenses	811,913			329			812,242
Research and development expenses	193,998			—			193,998
Restructuring and contract termination charges, net	11,144			—			11,144
Operating income from continuing operations	323,884			(21,480		)	302,404
Interest and other expense, net	66,201			—			66,201
Income from continuing operations before income taxes	257,683			(21,480		)	236,203
Provision for income taxes	20,208			(5,662		)	14,546
Income from continuing operations	237,475			(15,818		)	221,657
Income from discontinued operations before income taxes	—			—			—
Loss on disposition of discontinued operations before income taxes	(859		)	—			(859		)
Benefit from income taxes on discontinued operations and dispositions	(1,311		)	—			(1,311		)
Gain from discontinued operations and dispositions	452			—			452
Net income	$	237,927		$	(15,818	)	$	222,109

The adoption of ASC 606 increased comprehensive income by $15.8 million in the Company's consolidated statement of comprehensive income for the fiscal year ended December 30, 2018. The adoption of ASC 606 had no impact on cash from or used in operating, investing, or financing activities in the Company's consolidated statement of cash flows as of and for the fiscal year ended December 30, 2018.