Summary of Significant Accounting Policies (Policies)

9 Months Ended

Dec. 31, 2015

The Condensed Consolidated Financial Statements include all the accounts of the Company's and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. The Company prepared the accompanying unaudited Condensed Consolidated Financial Statements pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”).

In management’s opinion, the unaudited Condensed Consolidated Financial Statements reflect all adjustments (consisting only of normal recurring adjustments) necessary to fairly present the Company's financial position, results of operations and cash flows. Interim period operating results do not necessarily indicate the results that may be expected for any other interim period or for the full fiscal year. These financial statements and accompanying notes should be read in conjunction with the Consolidated Financial Statements and notes thereto in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2015.

Commencing the quarter ended December 31, 2015, the Company recognizes revenue from development agreements upon completion and acceptance by the customer of contract deliverables or as services are provided, depending on the terms of the arrangement. Revenue is deferred for any amounts billed or received prior to completion of milestones or delivery of services. As the Company retains the intellectual property, or IP, generated from these development agreements, costs related to these arrangements are included in Research and Development ("R&D"), expense.

Use of Estimates

The preparation of financial statements in accordance with U.S. generally accepted accounting principles, or GAAP, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of net revenue and expenses in the reporting period. The Company regularly evaluates estimates and assumptions related to its:


•	capitalized mask sets including their useful lives, which affect cost of goods sold and property and equipment or R&D expenses, if not capitalized;


•	inventory valuation, warranty liabilities and revenue reserves, which affect cost of sales, gross margin, and revenues;


•	allowance for doubtful accounts, which affects operating expenses;


•	unrealized losses or other-than-temporary impairments of short-term investments available for sale, which affect interest income (expense), net;


•	valuation of other long-lived assets and goodwill, which affects depreciation and impairment of long-lived assets, impairment of goodwill and apportionment of goodwill related to divestitures;


•	potential costs of litigation, which affect operating expenses;


•	valuation of deferred income taxes, which affects income tax expense (benefit); and


•	stock-based compensation, which affects gross margin and operating expenses.

The Company bases its estimates and assumptions on historical experience and on various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from management’s estimates. To the extent there are material differences between the estimates and actual results, future results of operations will be affected.

Concentrations of Credit Risk and Significant Customers

The Company's cash, cash equivalents, short-term investments and accounts receivable are potentially subject to concentration of credit risk. Cash and cash equivalents may be redeemable upon demand and are maintained with several financial institutions that management believes are of high credit quality and therefore bear minimal credit risk. The Company's accounts receivables are derived from revenue earned from customers located around the world. The Company mitigates collection risks from its customers by performing regular credit evaluations of customers' financial condition and payment history and requiring collateral, such as letters of credit, corporate guarantee or prepayment, in certain circumstances.

The Company sells its products primarily through direct sales force and distributors. Based on direct shipments, 3 customers individually each accounted for at least 10% of total net revenues during the three months ended December 31, 2015 and 2014 and 2 customers individually each accounted for at least 10% of total net revenues during the nine months ended December 31, 2015 and 2014. The Company expects that its largest customers collectively will continue to account for a substantial portion of its net revenue for the foreseeable future.

New Accounting Pronouncements

In August 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standard Update ("ASU") No. 2014-15, "Presentation of Financial Statements - Going Concern, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern", which requires an entity's management to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued or within one year after the date that the financial statements are available to be issued, when applicable. The standard is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. The Company is currently evaluating this new standard, and after adoption, it will incorporate this guidance in its assessment of going concern.

In May 2014, the FASB issued ASU No. 2014-09, "Revenue from Contracts with Customers", which will supersede most of the existing revenue recognition guidance under U.S. GAAP. This ASU requires an entity to recognize revenue when it transfers promised goods or 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. This standard is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Early adoption is not permitted but adoption on the original effective date is permitted. The ASU allows for either full retrospective or modified retrospective adoption. The Company is currently evaluating the potential effect of this ASU on its financial statements and related disclosures.

In November 2015, the FASB issued ASU No. 2015-17, "Income Taxes (Topic 740) - Balance Sheet Classification of Deferred Taxes" to simplify the presentation of deferred taxes in the statement of financial position. The new guidance requires that deferred tax assets and liabilities be classified as non-current in a classified balance sheet. This ASU is effective for fiscal years beginning after December 15, 2016, and for interim periods within those fiscal years. Earlier adoption is permitted as of the beginning of an interim or annual reporting period, and may be applied either prospectively, for all deferred tax assets and liabilities, or retrospectively. The Company is currently evaluating the potential effect of this ASU on its financial position.

Warrant, Intellectual Property Indemnities, Guarantees and Indemnities

Warranty

The Company's products typically carry a one-year warranty. The Company establishes reserves for estimated product warranty costs at the time revenue is recognized. Although the Company engages in extensive product quality programs and processes, its warranty obligation is affected by product failure rates, use of materials, and service delivery costs incurred in correcting any product failure. Historically, the Company’s warranty returns have not been material.

Intellectual Property Indemnities

The Company indemnifies certain customers and contract manufacturers against liability arising from third-party claims of IP rights infringement related to its products. These indemnities appear in development and supply agreements with customers as well as manufacturing service agreements with contract manufacturers and generally survive the expiration of the contract. Given that the amount of any potential liabilities related to such indemnities cannot be determined until an infringement claim has been made, the Company is unable to determine the maximum amount of losses that could be incurred related to such indemnifications.

Guarantees and Indemnities

In the normal course of business, the Company is occasionally required to provide other guarantees and indemnities for which it may be required to make future payments under specific circumstances. The amount of any potential liabilities related to such obligations cannot be accurately determined until a formal claim is filed. The Company maintains general and product liability insurance which may provide a source of recovery in the event of an indemnification claim.