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

9 Months Ended

Dec. 31, 2019

Recently Adopted Accounting Pronouncements

Effective April 1, 2019, the Company adopted the Financial Accounting Standards Board, or FASB standard update ASU 2016-02 (“Topic 842”), “Leases,” which requires lessees with lease arrangements exceeding a one-year term to record a right-of-use asset and lease obligation on the balance sheet, whether operating or financing, and related lease expenses for operating leases and amortization and interest expense for financing leases in the statement of operations. Additional information and disclosures required by this standard are contained in “Note 8. Leases.”

Recently Issued Accounting Pronouncements Not Yet Effective

In June 2016, the FASB issued ASU 2016-13 (“Topic 326”), “Financial Instruments - Credit Losses” This new guidance will require financial instruments to be measured at amortized cost, and accounts receivables to be presented at the net amount expected to be collected. The new model requires an entity to estimate credit losses based on historical information, current information, and reasonable and supportable forecasts, including estimates of prepayments. ASU 2016-13 is effective for annual reporting periods beginning after December 31, 2019. The Company does not expect the adoption of this standard to have a material impact on its consolidated financial statements. ASU 2016-13 will become effective for the Company in fiscal 2021.

In January 2017, the FASB issued ASU 2017-04, (“Topic 350”), “Intangibles - Goodwill and Other” This new guidance simplifies the accounting for goodwill impairment by removing Step 2 of the goodwill impairment test, which required companies to estimate the implied fair value of goodwill and recognize an impairment charge by the amount in which the carrying value exceeds the implied fair value. Under the new guidance, if the carrying value of a reporting unit exceeds its fair value, a goodwill impairment charge will be recorded, even if the difference is attributable to the fair value of other assets in the reporting unit. ASU 2017-04 is effective for annual reporting periods beginning after December 15, 2019. The Company does not expect the adoption of this standard to have a material impact on its consolidated financial statements. ASU 2017-04 will become effective for the Company in fiscal 2021.

In August 2018, the FASB issued ASU 2018-13 (“Topic 820”), “Fair Value Measurement” This new guidance modifies the disclosure requirements for fair value measurements. The Company has investments accounted for and disclosed under Topic 820 and will modify disclosures as applicable to conform with the new guidance. ASU 2018-13 is effective for annual reporting periods beginning after December 15, 2019 and early adoption is permitted. The Company does not expect the adoption of this standard and the required disclosure changes to have a material impact on its consolidated financial statements. ASU 2018-13 will become effective for the Company in fiscal 2021.

Leases

The Company adopted ASC Topic 842 on April 1, 2019 using the optional transition method. As such, the disclosures required under ASC Topic 842 are not presented for periods before the date of adoption. For the comparative period prior to adoption, the Company presents the disclosures which were previously required under ASC Topic 840.

The Company elected the package of transitional practical expedients for leases existing prior to the adoption date. The Company did not reassess whether existing contracts are or contain leases, leases retained their historical lease classification and initial direct costs were not reassessed for capitalization under the new standard. Operating lease assets and operating lease liabilities were recognized based on the present value of minimum lease payments over the remaining lease term as of the adoption date.

The following table presents supplemental balance sheet information related to our operating leases:

	December 31, 2019
	(in $000's)
Assets
Operating lease right-of-use assets in other assets	$	11,455
Liabilities
Operating lease liabilities in other current liabilities		3,115
Operating lease liabilities in other long-term liabilities		9,506
Total operating lease liabilities	$	12,621

Expense charged to operations under operating leases was $1.2 million and $3.2 million during the three and nine months ended December 31, 2019, respectively. Short-term lease expenses were not material.

Under ASC Topic 840, Leases (“ASC 840”), the Company recognized rent expense on a straight-line basis over the term of the lease and recorded the difference between the amount charged to expense and the rent paid as prepaid rent or deferred rent liability. As of March 31, 2019, the amount of deferred rent was $0.3 million, which was subsequently reclassified as contra-asset against the ROU asset upon adoption of ASU No. 2016-02 on April 1, 2019.

Maturities of operating lease liabilities as of December 31, 2019 are as follows:

(in thousands, except lease term and discount rate)

Fiscal Years Ended March 31,
2020	$	895
2021		3,378
2022		2,561
2023		1,533
2024		1,442
Thereafter		3,322
Total minimum lease payments		13,131
Less: imputed interest		(510	)
Present value of operating lease liabilities	$	12,621

Weighted average remaining lease term	5.59

Weighted average discount rate		3.23	%

Minimum future lease payments previously disclosed under ASC 840 in our Annual Report on Form 10-K for the year ended March 31, 2019 were as follows:

Fiscal Years Ended March 31,	(in $000's)
2020	$	3,398
2021		2,712
2022		2,000
2023		1,462
2024		1,414
Thereafter		3,288
Total minimum lease payments	$	14,274

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 adoption of Topic 606 did not have a material impact on the Company’s consolidated balance sheet, statement of operations, stockholders’ equity or cash flows as of the adoption date or for the three and nine months ended December 31, 2019.

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 are recorded as 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, Impella 5.5, and Impella AIC products. The Company also earns 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