Basis of Preparation and Summary of Significant Accounting Policies (Policies)

3 Months Ended

Jun. 30, 2018

Effective April 1, 2018, the Company adopted the Financial Accounting Standards Board (“FASB”) standard update ASU 2014-09, “Revenue from Contracts with Customers,” (“Topic 606”) which provides a principles-based, five-step approach to measure and recognize revenue from contracts with customers. The adoption of this guidance did not have a material impact on the Company’s consolidated results of operations, cash flows, and financial position. Additional information and disclosures required by this new standard are contained in “Note 4. Revenue Recognition,” to the Company’s consolidated financial statements.

Effective April 1, 2018, the Company adopted the FASB standard update ASU 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities,” which requires certain financial assets to be measured at fair value with changes in fair value recognized in the statement of operations. The adoption of this guidance did not have a material impact on the Company’s consolidated results of operations, cash flows, and financial position. Additional information and disclosures required by this new standard are contained in “Note 5. Cash Equivalents, Marketable Securities, and Fair Value Measurements,” to the Company’s consolidated financial statements.

On June 20, 2018, the FASB issued ASU 2018-07, “Compensation – Stock Compensation (“Topic 718”): Improvements to Nonemployee Share-Based Payment Accounting,” which simplifies the accounting for share-based payments granted to nonemployees for goods and services. ASU 2018-07 eliminated the previous guidance for accounting for share-based payments to nonemployees and expand Topic 718 to include share-based payments transactions to nonemployees. ASU 2018-07 is effective for public companies for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. Early adoption is permitted, but no earlier than an entity’s adoption date of Topic 606. The adoption of ASU 2018-07 requires a modified retrospective transition approach, with a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year. The Company early adopted ASU 2018-07 on June 20, 2018. The adoption of this guidance did not have a material impact on the Company’s consolidated results of operations, cash flows, and financial position.

Recent Accounting Pronouncements

In February 2016, the FASB issued ASU 2016-02, “Leases.” The new guidance significantly impacts lessee accounting and financial statement disclosures. Specifically, this guidance requires lessees to identify arrangements that should be accounted for as leases. Under this guidance, for lease arrangements exceeding a one year term, a right-of-use asset and lease obligation is recorded by the lessee for all leases on the balance sheet, whether operating or financing, while the statement of operations includes lease expense for operating leases and amortization and interest expense for financing leases. The balance sheet amount recorded at the date of adoption of this guidance must be calculated using the applicable incremental borrowing rate at the date of adoption. Leases with a term of one year or less will be accounted for similar to existing guidance for operating leases. The Company is currently in the process of evaluating its lessee arrangements to determine the impact of ASU 2016-02 on its consolidated financial statements. This evaluation includes a review of the Company’s existing leasing arrangements on its facilities. The Company currently expects that its lease commitments will be recognized as operating lease liabilities and right-of-use assets upon adoption, which will increase total assets and total liabilities that the Company reports relative to such amounts prior to adoption. ASU 2016-02 must be adopted using a modified retrospective approach for all leases existing at, or entered into after the date of initial adoption, with an option to elect to use certain transition relief. ASU 2016-02 will become effective for the Company on April 1, 2019.

Adoption of Topic 606, Revenue from Contracts with Customers

The Company adopted Topic 606 on April 1, 2018, using the modified retrospective method for all contracts not completed as of the date of adoption. The reported results for fiscal year 2019 reflect the application of Topic 606 guidance while the reported results for fiscal year 2018 were prepared under the guidance of ASC 605, “Revenue Recognition.” The adoption of Topic 606 did not have a material impact on the timing or amount of revenue recognized upon adoption and there was no cumulative prior period adjustment recorded to the opening balance of retained earnings upon adoption. Accordingly, the adoption of Topic 606 did not have a material impact on the Company’s consolidated financial position, results of operations, equity or cash flows as of the adoption date or for the three months ended June 30, 2018.

The Company has made the following accounting policy elections and elected to use certain practical expedients, as permitted by the FASB, in applying Topic 606: (1) the Company accounts for amounts collected from customers for sales and other taxes, net of related amounts remitted to tax authorities; (2) the Company does not adjust the promised amount of consideration for the effects of a significant financing component because, at contract inception, the Company expects the period between the time when the Company transfers a promised good or service to the customer and the time when the customer pays for that good or service will be one year or less; (3) the Company expenses costs to obtain a contract as they are incurred if the expected period of benefit, and therefore the amortization period, is one year or less; (4) the Company accounts for shipping and handling activities that occur after control transfers to the customer as a fulfillment cost rather than an additional promised service and these fulfillment costs fall within selling, general and administrative expenses; (5) the Company does not assess whether promised goods or services are performance obligations if they are immaterial in the context of the contract with the customer; and (6) the Company does not disclose the transaction price allocated to unsatisfied performance obligations when the original expected contract duration is one year or less.

The Company generates revenue primarily from the sale of Impella 2.5, Impella CP, Impella 5.0, Impella LD, Impella RP and Impella AIC devices. The Company also generates revenue from preventative maintenance service contracts and maintenance calls.

The Company determines revenue recognition through the following steps:

•

Identification of the contract, or contracts, with a customer

•

Identification of the performance obligation in the contract

•

Determination of the transaction price

•

Allocation of the transaction price to the performance obligation in the contract

•

Recognition of revenue when, or as, a performance obligation is satisfied