Correction of Previously Issued Consolidated Financial Statements

3 Months Ended

Mar. 31, 2019

Accounting Changes and Error Corrections [Abstract]

Correction of Previously Issued Consolidated Financial Statements

As previously disclosed in the Company’s 2018 Form 10-K, subsequent to the issuance of the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2018, management determined adjustments were needed to correct the presentation of certain immaterial accounting errors in the Company’s previously reported consolidated financial statements for the years ended December 31, 2017 and 2016. Accordingly, the consolidated financial statements as of and for the years ended December 31, 2017 and 2016, and the related notes (including the Company’s quarterly results disclosed in Note 15, Quarterly Results), were revised to correct these immaterial accounting errors (the “Revision”) in the Company’s 2018 Form 10-K. A summary of these immaterial accounting errors, and their impact on the accompanying consolidated statement of cash flows for the three months ended March 31, 2018 are, as follows:

(1) The Company pays wholesalers certain fees associated with the sale of the Company's product. The payment of these fees had been historically classified by the Company as cost of revenues and accrued expenses prior to the adoption of ASC 606, Revenue from Contracts with Customers ("ASC 606"). As disclosed in Note 7, Revenues, Recognition and Allowances, of the 2018 Form 10-K, the Company adopted ASC 606 on January 1, 2018 using the modified retrospective method, at which time the Company began classifying the payment of wholesaler fees as a reduction of revenue and accounts receivable. Upon further analysis, however, management determined that these fees should have always been classified as a reduction of revenue and accounts receivable, rather than as costs of revenues and accrued expenses, because the services provided by the Company’s wholesalers cannot generally be provided by third parties and the underlying fees are not specifically identifiable from other services.

The correction of this error resulted in a reduction in previously reported accounts receivable and decrease in previously reported accrued expenses of approximately $7.0 million, respectively, as of December 31, 2017.

(2) Prior to the adoption of ASC 606, the Company classified Medicaid, Medicare and other rebates (the "Rebates") as a reduction of accounts receivable, whereas subsequent to adoption of ASC 606 the Company began classifying the Rebates as accrued expenses. Upon further analysis, management determined that the Rebates should have always been classified as accrued expenses because their terms require cash settlement and are payable to third parties that are other than the Company's customer. The correction of this immaterial error resulted in an increase in previously reported accounts receivable and increase in previously reported accrued expenses of $1.6 million, respectively, as of December 31, 2017.

The following tables summarize the effects of the Revision on the accompanying consolidated statement of cash flows of the Company for the three months ended March 31, 2018:


	Consolidated Statement of Cash Flows
	Three Months Ended March 31, 2018
	As Previously Reported		Adjustment			As Revised
Cash flows from operating activities
Accounts receivable	$	4,690	$	(5,401)	(1)(2)	$	(711)
Accounts payable and accrued expenses	(11,824)		5,401		(1)(2)	(6,423)