Nature of Operations and Summary of Significant Accounting Policies (Text Block)

12 Months Ended

Jun. 30, 2019

Nature of Operations and Summary of Significant Accounting Policies [Abstract]

Nature of Operations and Summary of Significant Accounting Policies [Text Block]

NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF THE COMPANY

Jack Henry & Associates, Inc. and subsidiaries (“JHA” or the “Company”) is a provider of integrated computer systems and services that has developed and acquired a number of banking and credit union software systems. The Company's revenues are predominately earned by marketing those systems to financial institutions nationwide together with computer equipment (hardware), by providing the conversion and implementation services for financial institutions to utilize JHA systems, and by providing other related services. JHA also provides continuing support and services to customers using in-house or outsourced systems.

CONSOLIDATION

The consolidated financial statements include the accounts of JHA and all of its subsidiaries, which are wholly-owned, and all intercompany accounts and transactions have been eliminated.

USE OF ESTIMATES

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

PRIOR PERIOD RECLASSIFICATION

The prior year periods have been recast to reflect the Company's retrospective adoption of Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts with Customers, and related amendments, collectively referred to as Accounting Standards Codification ("ASC") 606.

We also recorded a prior period re-classification of $1,300 to a new assets held for sale caption as of June 30, 2018. These assets were previously recorded under Property and Equipment, net.

PRIOR PERIOD MISCLASSIFICATION

In connection with the preparation of the Company’s 2019 annual financial statements, the Company identified an immaterial prior period misclassification which overstated accounts payable by $4,150, overstated deferred costs by $4,078, and overstated prepaid expenses and other by $72. The Company has corrected for this misclassification in the accompanying Consolidated Balance Sheet by revising the fiscal 2018 balances.

REVENUE RECOGNITION

The Company generates "Services and Support" revenue through software licensing and related services, outsourcing core & complementary software solutions, professional services, and hardware sales. The Company generates "Processing" revenue through processing of remittance transactions, card transactions and monthly fees, and digital transactions.

Significant Judgments in Application of the Guidance

Identification of Performance Obligations

The Company enters into contracts with customers that may include multiple types of goods and services. At contract inception, the Company assesses the solutions and services promised in its contracts with customers and identifies a performance obligation for each promise to transfer to the customer a solution or service (or bundle of solutions or services) that is distinct - that is, if the solution or service is separately identifiable from other items in the arrangement and if the customer can benefit from the solution or service on its own or together with other resources that are readily available. Significant judgment is used in the identification and accounting for all performance obligations. The Company recognizes revenue when or as it satisfies each performance obligation by transferring control of a solution or service to the customer.

Determination of Transaction Price

The amount of revenue recognized is based on the consideration the Company expects to receive in exchange for transferring goods and services to the customer. The Company’s contracts with its customers frequently contain some component of variable consideration. The Company estimates variable consideration in its contracts primarily using the expected value method, based on both historical and current information. Where appropriate, the Company may constrain the estimated variable consideration included in the transaction price in the event of a high degree of uncertainty as to the final consideration amount. Significant judgment is used in the estimate of variable consideration of customer contracts that are long-term and include uncertain transactional volumes.

Taxes collected from customers and remitted to governmental authorities are not included in revenue. The Company includes reimbursements from customers for expenses incurred in providing services (such as for postage, travel and telecommunications costs) in revenue, while the related costs are included in cost of revenue.

Technology or service components from third parties are frequently included in or combined with the Company’s applications or service offerings. Whether the Company recognizes revenue based on the gross amount billed to the customer or the net amount retained involves judgment in determining whether the Company controls the good or service before it is transferred to the customer. This assessment is made at the performance obligation level.

Allocation of Transaction Price

The transaction price, once determined, is allocated between the various performance obligations in the contract based upon their relative standalone selling prices. The standalone selling prices are determined based on the prices at which the Company separately sells each good or service. For items that are not sold separately, the Company estimates the standalone selling prices using all information that is reasonably available, including reference to historical pricing data.

The following describes the nature of the Company’s primary types of revenue:

Processing

Processing revenue is generated from transaction-based fees for electronic deposit and payment services, electronic funds transfers and debit and credit card processing. The Company’s arrangements for these services typically require the Company to “stand-ready” to provide specific services on a when and if needed basis by processing an unspecified number of transactions over the contractual term. The fees for these services may be fixed or variable (based upon performing an unspecified quantity of services), and pricing may include tiered pricing structures. Amounts of revenue allocated to these services are recognized as those services are performed. Customers are typically billed monthly for transactions processed during the month. The Company evaluates tiered pricing to determine if a material right exists. If, after that evaluation, it determines a material right does exist, it assigns value to the material right based upon standalone selling price after estimation of breakage associated with the material right.

Outsourcing and Cloud

Outsourcing and cloud revenue is generated from data and item processing services and hosting fees. The Company’s arrangements for these services typically require the Company to “stand-ready” to provide specific services on a when and if needed basis. The fees for these services may be fixed or variable (based upon performing an unspecified quantity of services), and pricing may include tiered pricing structures. Amounts of revenue allocated to these services are recognized as those services are performed. Data and item processing services are typically billed monthly. The Company evaluates tiered pricing to determine if a material right exists. If, after that evaluation, it determines a material right does exist, it assigns value to the material right based upon standalone selling price.

Product Delivery and Services

Product delivery and services revenue is generated primarily from software licensing and related professional services and hardware delivery. Software licenses, along with any professional services from which they are not considered distinct, are recognized as they are delivered to the customer. Hardware revenue is recognized upon delivery. Professional services that are distinct are recognized as the services are performed. Deconversion fees are also included within product delivery and services, and are considered a contract modification. Therefore, the Company recognizes these fees over the remaining modified contract term.

In-House Support

In-house support revenue is generated from software maintenance for ongoing client support and software usage, which includes a license and ongoing client support. The Company’s arrangements for these services typically require the Company to “stand-ready” to provide specific services on a when and if needed basis. The fees for these services may be fixed or variable (based upon performing an unspecified quantity of services). Software maintenance fees are typically billed to the customer annually in advance and recognized ratably over the maintenance term. Software usage is typically billed annually in advance, with the license delivered and recognized at the outset, and the maintenance fee recognized ratably over the maintenance term. Accordingly, the Company utilizes the practical expedient which allows entities to disregard the effects of a financing component when the contract period is one year or less.

Disaggregation of Revenue

The tables below present the Company's revenue disaggregated by type of revenue. Refer to Note 13, Reportable Segment Information, for disaggregated revenue by type and reportable segment. The majority of the Company’s revenue is earned domestically, with revenue from customers outside the United States comprising less than1% of total revenue.

	Year Ended June 30,
	2019		2018		2017
Processing	$	594,202	$	550,058	$	506,555
Outsourcing & Cloud	405,359		361,922		327,738
Product Delivery & Services	231,982		251,743		256,794
In-House Support	321,148		307,074		297,203
Services & Support	958,489		920,739		$	881,735
Total Revenue	$	1,552,691	$	1,470,797	$	1,388,290

Contract Balances

The following table provides information about contract assets and contract liabilities from contracts with customers.

	June 30, 2019		June 30, 2018
Receivables, net	$	310,080	$	297,271
Contract Assets- Current	21,446		14,063
Contract Assets- Non-current	50,640		35,630
Contract Liabilities (Deferred Revenue)- Current	339,752		328,931
Contract Liabilities (Deferred Revenue)- Non-current	54,554		40,984

Contract assets primarily result from revenue being recognized when or as control of a solution or service is transferred to the customer, but where invoicing is delayed until the completion of other performance obligations or payment terms differ from the provisioning of services. The current portion of contract assets is reported within prepaid expenses and other in the consolidated balance sheet, and the non-current portion is included in other non-current assets. Contract liabilities (deferred revenue) primarily relate to consideration received from customers in advance of delivery of the related goods and services to the customer. Contract balances are reported in a net contract asset or liability position on a contract-by-contract basis at the end of each reporting period.

The Company analyzes contract language to identify if a significant financing component does exist, and would adjust the transaction price for any material effects of the time value of money if the timing of payments provides either party to the contract with a significant benefit of financing the transaction.

During the fiscal years ended June 30, 2019, 2018, and 2017, the Company recognized revenue of $265,946, $269,593, and $264,517, respectively, that was included in the corresponding deferred revenue balance at the beginning of the periods.

Revenue recognized that related to performance obligations satisfied (or partially satisfied) in prior periods were immaterial for each period presented. These adjustments are primarily the result of transaction price adjustments and re-allocations due to changes in estimates of variable consideration.

Transaction Price Allocated to Remaining Performance Obligations

As of June 30, 2019, estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) at the end of the reporting period totaled $3,640,955. The Company expects to recognize approximately 30% over the next 12 months and 18% in 13-24 months, and the balance thereafter.

Contract Costs

The Company incurs incremental costs to obtain a contract as well as costs to fulfill contracts with customers that are expected to be recovered. These costs consist primarily of sales commissions, which are incurred only if a contract is obtained, and customer conversion or implementation-related costs. Capitalized costs are amortized based on the transfer of goods or services to which the asset relates, in line with the percentage of revenue recognized for each performance obligation to which the costs are allocated.

Capitalized costs totaled $231,273 and $176,954 at June 30, 2019 and 2018, respectively.

For the fiscal years ended June 30, 2019, 2018, and, 2017 amortization of deferred contract costs totaled $110,894, $94,337, and $88,064, respectively. There were no impairment losses in relation to capitalized costs for the periods presented.

COMPUTER SOFTWARE DEVELOPMENT

The Company capitalizes new product development costs incurred for software to be sold from the point at which technological feasibility has been established through the point at which the product is ready for general availability. Software development costs that are capitalized are evaluated on a product-by-product basis annually and are assigned an estimated economic life based on the type of product, market characteristics, and maturity of the market for that particular product. These costs are amortized based on current and estimated future revenue from the product or on a straight-line basis, whichever yields greater amortization expense. All of this amortization expense is included within components of operating income, primarily cost of revenue.

The Company capitalizes development costs for internal use software beginning at the start of application development. Amortization begins on the date the software is placed in service and the amortization period is based on estimated useful life.

CASH EQUIVALENTS

The Company considers all highly liquid investments with maturities of three months or less at the time of acquisition to be cash equivalents.

ACCOUNTS RECEIVABLE

Receivables are recorded at the time of billing. A reasonable estimate of the realizability of customer receivables is made through the establishment of an allowance for doubtful accounts, which is estimated based on a combination of write-off history, aging analysis, and any specifically known collection issues.

PROPERTY AND EQUIPMENT AND INTANGIBLE ASSETS

Property and equipment is stated at cost and depreciated using the straight-line method over the estimated useful lives of the assets.

Intangible assets consist of goodwill, customer relationships, computer software, and trade names acquired in business acquisitions in addition to internally developed computer software. The amounts are amortized, with the exception of those with an indefinite life (goodwill), over an estimated economic benefit period, generally three to twenty years.

The Company reviews its long-lived assets and identifiable intangible assets with finite lives for impairment whenever events or changes in circumstances have indicated that the carrying amount of its assets might not be recoverable. The Company evaluates goodwill for impairment of value on an annual basis as of January 1 and between annual tests if events or changes in circumstances indicate that the asset might be impaired.

PURCHASE OF INVESTMENT

In the third quarter of fiscal 2018, the Company made an investment totaling $5,000 for the purchase of preferred stock of Automated Bookkeeping, Inc ("Autobooks"), representing a non-controlling share of the voting equity of Autobooks as of that date. This investment was recorded at cost and is included within other non-current assets on the Company's balance sheet. The fair value of this investment has not been estimated, as estimation is not practicable. There have been no events or changes in circumstances that would indicate an impairment and no price changes resulting from observing a similar or identical investment. An impairment and/or an observable price change would be an adjustment to recorded cost. Fair value will not be estimated unless there are identified events or changes in circumstances that may have a significant adverse effect on the fair value of the investment.

COMPREHENSIVE INCOME

Comprehensive income for each of the fiscal years ending June 30, 2019, 2018, and 2017 equals the Company’s net income.

REPORTABLE SEGMENT INFORMATION

In accordance with U.S. GAAP, the Company's operations are classified as four reportable segments: Core, Payments, Complementary, and Corporate and Other (see Note 13). Substantially all the Company’s revenues are derived from operations and assets located within the United States of America.

COMMON STOCK

The Board of Directors has authorized the Company to repurchase shares of its common stock. Under this authorization, the Company may finance its share repurchases with available cash reserves or short-term borrowings on its existing credit facilities. The share repurchase program does not include specific price targets or timetables and may be suspended at any time. At June 30, 2019, there were 26,508 shares in treasury stock and the Company had the remaining authority to repurchase up to 3,483 additional shares. The total cost of treasury shares at June 30, 2019 is $1,110,124. During fiscal 2019, the Company repurchased 400 treasury shares for $54,864. At June 30, 2018, there were 26,108 shares in treasury stock and the Company had authority to repurchase up to 3,883 additional shares.

EARNINGS PER SHARE

Per share information is based on the weighted average number of common shares outstanding during the year. Stock options and restricted stock have been included in the calculation of income per diluted share to the extent they are dilutive. The difference between basic and diluted weighted average shares outstanding is the dilutive effect of outstanding stock options and restricted stock (see Note 10).  

INCOME TAXES

Deferred tax liabilities and assets are recognized for the tax effects of differences between the financial statement and tax bases of assets and liabilities. A valuation allowance would be established to reduce deferred tax assets if it is more likely than not that a deferred tax asset will not be realized.

The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based upon the technical merits of the position. The tax benefit recognized in the financial statements from such a position is measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. Also, interest and penalties expense are recognized on the full amount of deferred benefits for uncertain tax positions. The Company's policy is to include interest and penalties related to unrecognized tax benefits in income tax expense.

Recent Accounting Pronouncements

RECENT ACCOUNTING PRONOUNCEMENTS

Recently Adopted Accounting Guidance

The Financial Accounting Standards Board (“FASB”) issued ASU No. 2014-09, Revenue from Contracts with Customers, in May 2014. This standard (and related amendments collectively referred to as “ASC 606”) is part of an effort to create a common revenue standard for U.S. GAAP and International Financial Reporting Standards (“IFRS”). The new standard has superseded much of the authoritative literature for revenue recognition. The new model enacts a five-step process for achieving the core principle, which is that an entity should recognize revenue to depict the transfer of 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. The standard was effective for the Company on July 1, 2018. Entities are allowed to transition to the new standard by either recasting prior periods (full retrospective) or recognizing the cumulative effect as of the beginning of the period of adoption (modified retrospective).

The Company adopted the new standard using the full retrospective transition approach, using certain practical expedients. The Company has not disclosed the amount of transaction price allocated to remaining performance obligations for reporting periods presented before the date of initial application. Also, the Company did not separately consider the effects of contract modifications that occurred before the beginning of the earliest reporting period presented, but reflects the aggregate effect of all modifications that occurred before the beginning of the earliest period presented. As a result, all fiscal 2018 and fiscal 2017 financial information has been adjusted for the effects of applying ASC 606. The details of the significant changes are disclosed below:

Software Revenue Recognition

The Company previously recognized software license and related services within the scope of ASC Topic 985-605, which required the establishment of vendor-specific objective evidence (“VSOE”) of fair value in order to separately recognize revenue for each software-related good or service. Due to the inability to establish VSOE, the Company had previously deferred all revenue on software-related goods and services on a master contract until all the goods and services had been delivered. Under ASC 606, VSOE is no longer required for separation of otherwise distinct performance obligations within a revenue arrangement. This change has resulted in earlier recognition of revenue for the Company’s software-related goods and services, leading to a decrease in deferred revenue balances within its adjusted consolidated balance sheets.

Impacts on Financial Statements

The following tables summarize the impacts of ASC 606 adoption on the Company’s Consolidated Financial Statements:

Consolidated Balance Sheet as of June 30, 2018:

	As Previously Reported (Adjusted)*			Adjustments			As Adjusted
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	31,440		$	—		$	31,440
Receivables, net	291,630			5,641			297,271
Income tax receivable	21,671			—			21,671
Prepaid expenses and other*	84,738			11,331			96,069
Deferred costs*	34,907			(11,916		)	22,991
Assets held for sale*	1,300			—			1,300
Total current assets	465,686			5,056			470,742
PROPERTY AND EQUIPMENT, net*	285,550			—			285,550
OTHER ASSETS:
Non-current deferred costs	95,540			(20,675		)	74,865
Computer software, net of amortization	288,172			—			288,172
Other non-current assets	107,775			2,524			110,299
Customer relationships, net of amortization	115,034			—			115,034
Other intangible assets, net of amortization	38,467			—			38,467
Goodwill	649,929			—			649,929
Total other assets	1,294,917			(18,151		)	1,276,766
Total assets	$	2,046,153		$	(13,095	)	$	2,033,058
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable*	$	30,360		$	—		$	30,360
Accrued expenses	97,848			(9,084		)	88,764
Deferred revenues	355,538			(26,607		)	328,931
Total current liabilities	483,746			(35,691		)	448,055
LONG-TERM LIABILITIES:
Non-current deferred revenues	93,094			(52,110		)	40,984
Non-current deferred income tax liability	189,613			18,690			208,303
Other long-term liabilities	12,872			—			12,872
Total long-term liabilities	295,579			(33,420		)	262,159
Total liabilities	779,325			(69,111		)	710,214
STOCKHOLDERS' EQUITY
Preferred stock - $1 par value; 500,000 shares authorized, none issued	—			—			—
Common stock - $0.01 par value; 250,000,000 shares authorized; 103,278,562 shares issued at June 30, 2018	1,033			—			1,033
Additional paid-in capital	464,138			—			464,138
Retained earnings	1,856,917			56,016			1,912,933
Less treasury stock at cost 26,107,903 shares at June 30, 2018	(1,055,260		)	—			(1,055,260		)
Total stockholders' equity	1,266,828			56,016			1,322,844
Total liabilities and equity	$	2,046,153		$	(13,095	)	$	2,033,058
*Adjusted for reclassifications and corrections not related to ASC 606 adoption. See comments under "Prior Period Reclassification" and "Prior Period Misclassification" headings in this Note 1 to the Consolidated Financial Statements.

Consolidated Statements of Income for the fiscal years ended ended June 30, 2018 and June 30, 2017:

	Year Ended June 30, 2018									Year Ended June 30, 2017
	As Previously Reported			Adjustments			As Adjusted			As Previously Reported			Adjustments			As Adjusted
REVENUE	$	1,536,603		$	(65,806	)	$	1,470,797		$	1,431,117		$	(42,827	)	$	1,388,290
EXPENSES
Cost of Revenue	873,642			(20,504		)	853,138			819,034			(13,179		)	805,855
Research and Development	90,340			—			90,340			84,753			—			84,753
Selling, General, and Administrative	182,146			(10,436		)	171,710			162,898			(3,663		)	159,235
Gain on Disposal of a Business	(1,894		)	—			(1,894		)	(3,270		)	—			(3,270		)
Total Expenses	1,144,234			(30,940		)	1,113,294			1,063,415			(16,842		)	1,046,573
OPERATING INCOME	392,369			(34,866		)	357,503			367,702			(25,985		)	341,717
INTEREST INCOME (EXPENSE)
Interest Income	575			—			575			248			—			248
Interest Expense	(1,920		)	—			(1,920		)	(996		)	—			(996		)
Total Interest Income (Expense)	(1,345		)	—			(1,345		)	(748		)	—			(748		)
INCOME BEFORE INCOME TAXES	391,024			(34,866		)	356,158			366,954			(25,985		)	340,969
PROVISION/ (BENEFIT) FOR INCOME TAXES	14,364			(23,240		)	(8,876		)	121,161			(9,753		)	111,408
NET INCOME	$	376,660		$	(11,626	)	$	365,034		$	245,793		$	(16,232	)	$	229,561
Basic earnings per share	$	4.88					$	4.73		$	3.16					$	2.95
Basic weighted average shares outstanding	77,252						77,252			77,856						77,856
Diluted earnings per share	$	4.85					$	4.70		$	3.14					$	2.93
Diluted weighted average shares outstanding	77,585						77,585			78,255						78,255

Consolidated Statement of Cash Flows for the fiscal years ended June 30, 2018 and June 30, 2017:

	Year Ended June 30, 2018									Year Ended June 30, 2017
	As Previously Reported*			Adjustments			As Adjusted			As Previously Reported			Adjustments			As Adjusted
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income	$	376,660		$	(11,626	)	$	365,034		$	245,793		$	(16,232	)	$	229,561
Adjustments to reconcile net income from operations to net cash from operating activities:
Depreciation	47,975			—			47,975			49,677			—			49,677
Amortization	104,011			—			104,011			90,109			—			90,109
Change in deferred income taxes	(51,644		)	(23,240		)	(74,884		)	30,940			(9,753		)	21,187
Expense for stock-based compensation	11,758			—			11,758			11,129			—			11,129
(Gain)/loss on disposal of assets and businesses	(954		)	—			(954		)	4,771			—			4,771
Changes in operating assets and liabilities:
Change in receivables	(9,219		)	30,708			21,489			(22,499		)	(10,597		)	(33,096		)
Change in prepaid expenses, deferred costs and other*	(24,304		)	(58,359		)	(82,663		)	(25,088		)	96			(24,992		)
Change in accounts payable*	6,922			—			6,922			(7,812		)	—			(7,812		)
Change in accrued expenses	9,091			(2,000		)	7,091			(4,454		)	(7,512		)	(11,966		)
Change in income taxes	5,108			—			5,108			(6,444		)	—			(6,444		)
Change in deferred revenues	(63,262		)	64,517			1,255			(8,800		)	43,998			35,198
Net cash from operating activities	412,142			—			412,142			357,322			—			357,322
CASH FLOWS FROM INVESTING ACTIVITIES:
Payment for acquisitions, net of cash acquired	(137,562		)	—			(137,562		)	—			—			—
Capital expenditures	(40,135		)	—			(40,135		)	(41,947		)	—			(41,947		)
Proceeds from the sale of businesses	350			—			350			5,632			—			5,632
Proceeds from the sale of assets	306			—			306			968			—			968
Purchased software	(13,138		)	—			(13,138		)	(16,608		)	—			(16,608		)
Computer software developed	(96,647		)	—			(96,647		)	(89,631		)	—			(89,631		)
Purchase of investments	(5,000		)	—			(5,000		)	—			—			—
Net cash from investing activities	(291,826		)	—			(291,826		)	(141,586		)	—			(141,586		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on credit facilities	125,000			—			125,000			80,000			—			80,000
Repayments on credit facilities	(175,000		)	—			(175,000		)	(30,200		)	—			(30,200		)
Purchase of treasury stock	(48,986		)	—			(48,986		)	(130,140		)	—			(130,140		)
Dividends paid	(105,021		)	—			(105,021		)	(91,707		)	—			(91,707		)
Proceeds from issuance of common stock upon exercise of stock options	176			—			176			1			—			1
Tax withholding payments related to share based compensation	(7,333		)	—			(7,333		)	(5,480		)	—			(5,480		)
Proceeds from sale of common stock	7,523			—			7,523			6,245			—			6,245
Net cash from financing activities	(203,641		)	—			(203,641		)	(171,281		)	—			(171,281		)
NET CHANGE IN CASH AND CASH EQUIVALENTS	$	(83,325	)	$	—		$	(83,325	)	$	44,455		$	—		$	44,455
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	$	114,765		$	—		$	114,765		$	70,310		$	—		$	70,310
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	31,440		$	—		$	31,440		$	114,765		$	—		$	114,765
*Adjusted for reclassifications and corrections not related to ASC 606 adoption. See comments under "Prior Period Reclassification" and "Prior Period Misclassification" headings in this Note 1 to the Consolidated Financial Statements.

ASU 2016-15 issued by the FASB in August 2016 clarifies cash flow classification of eight specific cash flow issues and was effective for the Company's annual reporting period beginning July 1, 2018. The adoption of this standard did not have any impact on its financial statements.

Recent Accounting Pronouncements Not Yet Adopted [Text Block]

Not Yet Adopted

The FASB issued ASU No. 2016-02, Leases, in February 2016. This ASU aims to increase transparency and comparability among organizations by recognizing lease assets and liabilities on the balance sheet and requiring disclosure of key information regarding leasing arrangements to enable users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. Specifically, the standard requires operating lease commitments to be recorded on the balance sheet as operating lease liabilities and right-of-use assets, and the cost of those operating leases to be amortized on a straight-line basis. ASU No. 2016-02 will be effective for JHA's annual reporting period beginning July 1, 2019. The Company established a cross-functional team to implement this standard and evaluated arrangements that would be subject to the standard, implemented software to meet the reporting and disclosure requirements of the standard, and assessed the impact of the standard on its processes and internal controls. The Company will adopt the new standard using the optional transition method in ASU 2018-11. Under this method, the Company will not adjust its comparative period financial statements for the effects of the new standard or make the new, expanded required disclosures for periods prior to the effective date. The Company will recognize a cumulative-effect adjustment, as necessary, to the opening balance of retained earnings for fiscal 2020 in connection with the adoption of the standard.

The Company will take advantage of the transition package of practical expedients permitted within the new standard, which among other things, allows it to carryforward the historical lease classification. In addition, the Company will make an accounting policy election that will keep leases with an initial term of twelve months or less off of the balance sheet. The Company also elected the practical expedient not to separate the non-lease components of a contract from the lease component to which they relate.

Upon adoption of the standard, the Company will record right-of-use assets of approximately$70,000 to $73,000 and lease obligations of approximately$73,000 to $75,000 on the Company's balance sheet as of July 1, 2019. Adoption of the standard is not expected to significantly impact the Company's net income and is not expected to have a material impact on the Company's compliance with the financial covenants under its credit facility.

In August of 2018, the FASB issued ASU No. 2018-15, Intangibles, Goodwill and Other - Internal-Use Software (Subtopic 350-40), which broadens the scope of Subtopic 350-40 to include costs incurred to implement a hosting arrangement that is a service contract. The costs are capitalized or expensed depending on the nature of the costs and the project stage during which they are incurred, consistent with costs for internal-use software. The amendments in this update can be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. The ASU will be effective for the Company on July 1, 2020, with early adoption permitted. The Company is currently evaluating the impact that the guidance will have on its financial statements.