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Impact of Recently Issued Accounting Pronouncements

The following accounting pronouncements became effective for the Company in the

first

six

months of

2017:

Simplification of Employee Share-Based Payment Accounting

March 2016,

the FASB issued ASU

2016

which simplifies several aspects of the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures and classification in the statement of cash flows. This standard became effective for the Company on

January 1, 2017.

The new standard requires recognition of excess tax benefits that had

not

previously been recognized. The Company had

remaining unrecognized excess tax benefits as of

December 31, 2016.

All excess tax benefits and deficiencies in future periods will be recorded as part of the current period tax provision within the Income Statement. This will result in increased volatility in the Company’s effective tax rate. During the

first

six

months of

2017,

the Company recognized a tax benefit of

$4,379

which lowered the effective tax rate by

7.1%.

other provisions in this new standard had a significant impact on the consolidated financial statements including the Company’s accounting policy election to account for forfeitures when they occur.

To conform to the current year presentation, the Company reclassified

$770

of excess tax benefits under financing activities to operating activities for the

six

months ended

June 30, 2016

on the consolidated statement of cash flows.

Simplifying the Measurement of Inventory

July 2015,

the FASB issued ASU

2015

which requires that inventory be measured at the lower of cost and net realizable value, which eliminates the other

two

options that currently exist for market, replacement cost and net realizable value less an approximately normal profit margin. This update became effective on

January 1, 2017

and did

not

have a material impact on the Company’s consolidated financial statements.

The following recently issued accounting pronouncements will become effective for the Company in the future:

Business Combinations – Clarifying the Definition of a Business

January 2017,

the FASB issued ASU

2017

which clarifies the definition of a business to assist entities with evaluating whether transactions should be accounted for as acquisitions or disposals of assets or businesses. The standard introduces a screen for determining when assets acquired are

not

a business and clarifies that a business must include, at a minimum, an input and a substantive process that contribute to an output to be considered a business. This standard is effective for fiscal years beginning after

December 15, 2017,

including interim periods within that reporting period. The Company does

not

expect this new guidance to have a material impact on its consolidated financial statements.

Statement of Cash Flows – Restricted Cash

November 2016,

the FASB issued ASU

2016

which clarifies the presentation requirements of restricted cash within the statement of cash flows. The changes in restricted cash and restricted cash equivalents during the period should be included in the beginning and ending cash and cash equivalents balance reconciliation on the statement of cash flows. When cash, cash equivalents, restricted cash or restricted cash equivalents are presented in more than

one

line item within the statement of financial position, an entity shall calculate a total cash amount in a narrative or tabular format that agrees to the amount shown on the statement of cash flows. Details on the nature and amounts of restricted cash should also be disclosed. This standard is effective for fiscal years beginning after

December 15, 2017,

including interim periods within that reporting period. The Company does

not

expect this new guidance to have a material impact on its consolidated financial statements.

Statement of Cash Flows

- Classification of Certain Cash Receipts and Cash Payments

August 2016,

the FASB issued ASU

2016

which provides guidance on the presentation and classification in the statement of cash flows for specific cash receipt and payment transactions, including debt prepayment or extinguishment costs, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims and corporate-owned life insurance policies, and distributions received from equity method investees. This standard is effective for fiscal years beginning after

December 15, 2017,

including interim periods within that reporting period. The Company does

not

expect this new guidance to have a material impact on its consolidated financial statements.

Leases

February 2016,

the FASB issued ASU

2016

which requires lessees to recognize right of use assets and lease liabilities on the balance sheet for all leases except short-term leases. On the income statement, leases will be classified as operating or finance leases. This standard is effective for fiscal years beginning after

December 15, 2018,

including interim periods within that reporting period. At this time, the Company has

financing leases and only a limited number of operating leases. The result of adoption will be an increase to assets and liabilities by the same amount for the identified operating leases. This adjustment will

not

be material to the Company, assuming there is

not

an increase in lease activity.

Revenue from Contracts with Customers

May 2014,

the FASB issued ASU

2014

that introduces a new

five

-step revenue recognition model in which 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. This ASU also requires disclosures sufficient to enable users to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers, including qualitative and quantitative disclosures about contracts with customers, significant judgments and changes in judgments, and assets recognized from the costs to obtain or fulfill a contract. Numerous updates were issued in

2016

that provide clarification on a number of specific issues as well as requiring additional disclosures. The new standard is effective for fiscal years beginning after

December 15, 2017,

including interim periods within that reporting period.

The Company continues to evaluate the impact of adoption of the new standard. As part of this evaluation, the Company has identified the revenue streams and reviewed the related critical customer contract terms and provisions. The Company has concluded that the timing of the recognition of revenue for certain products that was previously recognized upon delivery will be recognized over time utilizing a measure of progress toward satisfaction of the performance obligations. These products, which represented

63%

2016

net revenue, are typically manufactured exclusively for specific customers and have

other alternative use. Generally, under these customer agreements, Cambrex is entitled to compensation for progress to date that includes an element of profit margin. The Company expects to adopt the new standard using the modified retrospective method. Upon adoption of the new standard, the Company will be required to make an estimate of the progress completed to date for these products and record the net effect as a cumulative effect adjustment in the equity section. This adjustment will cause the

2018

Income Statement to have lower sales and associated costs since they will be recorded in equity at adoption. Depending on the amount of these projects in process at the end of

2017,

the adjustment could be significant. The Company will also record a contract asset for the unbilled revenue and a reduction in inventory. The Company continues to assess the impact of the related disclosures as well as finalizing a methodology and process for recognizing product revenue over time.

Presentation of Net Periodic Benefit Cost Related to Defined Benefit Plans

March 2017,

the FASB issued ASU

2017

which amends the requirements in ASC

715

related to the income statement presentation of the components of net periodic benefit cost for an entity’s sponsored defined pension and other postretirement plans. The ASU requires entities to (

) disaggregate the current-service-cost component from the other components of net benefit cost and present it with other current compensation costs for related employees in the income statement and (

) present the other components elsewhere in the income statement and outside of income from operations if such subtotal is presented. The ASU also requires entities to disclose the income statement lines that contain the other components if they are

not

presented separately. The ASU’s amendment is effective for fiscal years beginning after

December 15, 2017,

including interim periods within that reporting period. The Company does

not

expect this new guidance to have an impact on its consolidated financial statements.

Simplifying the Test for Goodwill Impairment

January 2017,

the FASB issued ASU

2017

which simplifies the goodwill impairment test by eliminating Step

in the determination on whether goodwill should be considered impaired. Instead, an impairment charge should equal the amount by which a reporting unit’s carrying amount exceeds its fair value,

not

to exceed the amount of goodwill allocated to the reporting unit. The new standard is effective for fiscal years beginning after

December 15, 2019,

including interim periods within that reporting period. The Company is currently evaluating the new guidance and does

not

expect it to have an impact on its consolidated financial statements.

Scope of Modification Accounting

, Stock Based Compensation

May 2017,

the FASB issued ASU

2017

which provides clarification on when modification accounting should be used for changes to the terms or conditions of a share-based payment award. This ASU does

not

change the accounting for modifications but clarifies that modification accounting guidance should only be applied if there is a change to the value, vesting conditions, or award classification and would

not

be required if the changes are considered non-substantive.

The amendment is effective for fiscal years beginning after

December 15, 2017,

including interim periods within that reporting period.

The Company is currently assessing the impact that adopting this new accounting standard will have on its consolidated financial statements.