BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (Policies)

9 Months Ended

Dec. 31, 2015

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

During the quarter ended June 30, 2015, the Company reviewed its classification of expenses in its statement of operations and made several changes in an effort to bring added transparency to its reporting. Expenses for prior periods have been reclassified to conform to the current-year presentation. The reclassifications had no effect on loss from operations, loss from continuing operations before income taxes, or net loss. The following is a summary of the reclassifications for the quarter and year-to-date periods ended December 31, 2014:

Additional categories of operating costs and expenses in the Consolidated Statement of Operations: The Company has segregated research and development costs previously reported as a component of cost of revenue and has separated selling, general and administrative into sales and marketing and general and administrative. In addition, the Company added a gross profit subtotal to its Consolidated Statements of Operations.

Reclassification of operating costs and expenses: The Company previously classified all account management functions (which include activities supporting existing client relationships and managing client service activities, as well as responsibilities for existing client contract extensions and up-sell) and all IT project management activities as cost of revenue. As the Company is now disaggregating its operating results into more granular categories of costs, and as a result of activities during fiscal 2015 to clarify and segregate account management roles between those supporting existing client relationships and those focused on existing contract extensions and upsell and IT project management roles between client-facing and internal projects, certain costs are presented in a new category. Account management costs supporting contract extension and upsell are now classified as sales and marketing, and internal IT project management costs are now classified as general and administrative. Accordingly, prior year amounts have been reclassified to conform to the current presentation.

Operating costs and expenses are now classified in the following categories in the Consolidated Statements of Operations:

Cost of revenue includes all direct costs of sales such as data and other third party costs directly tied to revenue. Cost of revenue also includes operating expenses for each of the Company’s operations cost centers such as client services, account management, agency, consulting, IT, data acquisition, and product operations. Finally, cost of revenue includes amortization of internally developed software.

Research and development includes operating expenses for the Company’s engineering and product/project management functions supporting research, new development, and related product enhancement.

Sales and marketing includes operating expenses for the Company’s sales, marketing, and product marketing cost centers.

General and administrative represents operating expenses for all corporate costs centers, including finance, human resources, legal, corporate IT, and the corporate office.

The following table summarizes the reclassification activity for the three months ended December 31, 2014 (dollars in thousands):

	As previously reported(1)		Category expansion			Account management reclass			IT reclass and other			As currently reported
Cost of revenue	$	162,521	$	(18,973	)	$	(15,454	)	$	(2,287	)	$	125,807
Research and development	$	—	$	18,973		$	—		$	—		$	18,973
Selling, general and administrative	$	44,634	$	(44,634	)	$	—		$	—		$	—
Sales and marketing	$	—	$	15,342		$	15,454		$	(242	)	$	30,554
General and administrative	$	—	$	29,292		$	—		$	2,529		$	31,821

(1)

Adjusted for discontinued operations

The following table summarizes the reclassification activity for the nine months ended December 31, 2014 (dollars in thousands):

	As previously reported(1)		Category expansion			Account management reclass			IT reclass and other			As currently reported
Cost of revenue	$	474,294	$	(55,121	)	$	(45,436	)	$	(7,408	)	$	366,329
Research and development	$	—	$	55,121		$	—		$	—		$	55,121
Selling, general and administrative	$	135,360	$	(135,360	)	$	—		$	—		$	—
Sales and marketing	$	—	$	40,216		$	45,436		$	(242	)	$	85,410
General and administrative	$	—	$	95,144		$	—		$	7,650		$	102,794

(1)

Adjusted for discontinued operations

During fiscal 2015, the Company completed the sale of its U.K. call center operation, 2Touch, to Parseq Ltd., a European business process outsourcing service provider. The business qualified for treatment as discontinued operations during fiscal 2015. Accordingly, the results of operations, cash flows, and the balance sheet amounts pertaining to 2Touch, for all periods reported, have been classified as discontinued operations in the condensed consolidated financial statements. Refer to Note 4, Discontinued Operations, for more information regarding the sale.

On May 20, 2015, the Company announced it had entered into a definitive agreement to sell its IT Infrastructure Management business (“ITO”) to Charlesbank Capital Partners and M/C Partners. The sale was completed on July 31, 2015. Beginning in the first quarter of the current fiscal year, the Company began reporting the results of operations, cash flows, and the balance sheet amounts pertaining to ITO as a component of discontinued operations in the condensed consolidated financial statements. Prior to the discontinued operations classification, the ITO business unit was included in the IT Infrastructure Management segment in the Company’s segment results. Refer to Note 4, Discontinued Operations, for more information regarding the sale.

Unless otherwise indicated, information in these notes to the condensed consolidated financial statements relates to continuing operations.

New Accounting Pronouncements

In April 2014, the Financial Accounting Standards Board (“FASB”) issued update ASU No. 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. This update changed the requirements for determining whether a component is included in discontinued operations and required expanded disclosures that provide readers of financial statements with more information about the assets, liabilities, revenues, and expenses of discontinued operations. The update was effective for Acxiom at the beginning of the current fiscal year. The update did not have a material impact on the Company’s condensed consolidated financial statements.

In September 2015, the FASB issued update ASU No. 2015-16, Simplifying the Accounting for Measurement-Period Adjustments. This update eliminates the requirement for an acquirer to restate prior period financial statements for measurement period adjustments. The new guidance requires that the cumulative impact of a measurement period adjustment, including the impact on prior periods, be recognized in the reporting period in which the adjustment is identified. In addition, separate presentation on the face of the income statement or disclosure in the notes is required regarding the portion of the adjustment recorded in the current period earnings (loss) that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. The Company has early adopted this update, as permitted, beginning in the current quarter ended December 31, 2015. There was no impact on the Company’s financial condition and earnings (loss) as a result of adopting this guidance. Because adoption of the guidance is prospective, the impact of ASU 2015-16 on the Company’s financial condition and earnings (loss) will depend upon the nature of any measurement period adjustments identified in future periods.

New Accounting Pronouncements Not Yet Adopted

In May 2014, the FASB issued update ASU 2014-09, Revenue from Contracts with Customers: Topic 606 (ASU 2014-09), to supersede nearly all existing revenue recognition guidance under U.S. GAAP, as well as some cost guidance and guidance on certain gains and losses. The core principle of the new guidance is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. The guidance defines a five step process to achieve this core principle and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP, including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation, among others. The effective date for the update has been deferred until fiscal 2019 for the Company, with early application allowed for fiscal 2018. Adoption of the update may be applied using either of two methods: (i) retrospective application of ASU 2014-09 to each prior reporting period presented with the option to elect certain practical expedients as defined within ASU 2014-09; or (ii) retrospective application of ASU 2014-09 with the cumulative effect of initially applying ASU 2014-09 recognized at the date of initial application and providing certain additional disclosures as defined per ASU 2014-09. We are currently evaluating the accounting, transition and disclosure requirements of the standard and cannot currently estimate the financial statement impact of adoption.

In April 2015, the FASB issued update ASU No. 2015-03, Interest — Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs. This update requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The existing recognition and measurement guidance for debt issuance costs is not affected by the new guidance. The update is effective for the Company beginning in fiscal year 2017 and must be applied on a retrospective basis to all periods presented. Because this guidance impacts presentation only, the adoption of the new requirements of ASU 2015-03 will not have any impact on our consolidated financial position or results of operations. Under ASU 2015-03, unamortized debt issuance costs of $3.0 million would be reclassified from other assets, net to a reduction of long-term debt as of December 31, 2015.

In November 2015, the FASB issued update ASU 2015-17, Balance Sheet Classification of Deferred Taxes, as part of its U.S. GAAP simplification initiative. This update requires entities to present deferred tax assets (DTAs) and deferred tax liabilities (DTLs) as noncurrent in a classified balance sheet, thus simplifying the current guidance which requires entities to separately present DTAs and DTLs as current or noncurrent in a classified balance sheet. The update may be applied either prospectively or retrospectively and is effective for the Company at the beginning of fiscal year 2018 and early adoption is allowed. We are currently evaluating the impact of our pending adoption of ASU 2015-17 on our condensed consolidated financial statements.