New Accounting Pronouncements

12 Months Ended

Dec. 31, 2016

New Accounting Pronouncements

New Accounting Pronouncements

(2) New Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update No. 2014-09 (“ASU 2014-09”), “Revenue from Contracts with Customers,” which stipulates 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.  To achieve this core principle, an entity should apply the following steps: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract(s); (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract(s); and (5) recognize revenue when (or as) the entity satisfies a performance obligation.  The new guidance will be effective for the Company beginning January 1, 2018, with early adoption permitted for annual periods beginning after December 15, 2016.  Almost all of the Company’s purchase orders, contracts or purchase agreements do not contain performance obligations other than delivery of the agreed upon product, which is primarily FOB shipping point.  Thus, the Company generally recognizes revenue upon shipment of the product.  While the Company is still in the process of completing an analysis of all of its revenue generating activities and the contracts which might impact its revenue generating activities in light of the new standard, the Company does not believe that any of its revenue streams will be materially affected by the adoption of ASU 2014-09, and therefore it does not expect its Consolidated Statements of Operations will be materially affected.  The Company plans to adopt ASU 2014-09 using the modified retrospective approach and recognize a cumulative effect of the change, if any, to opening retained earnings in the year of adoption.

In August 2014, the FASB issued Accounting Standards Update No. 2014-15 (“ASU 2014-15”), “Disclosure of Uncertainties About an Entity’s Ability to Continue as a Going Concern.” ASU 2014-15 requires management to perform interim and annual assessments of an entity’s ability to continue as a going concern for a period of one year after the date the financial statements are issued and provides guidance on determining when and how to disclose going concern uncertainties in the financial statements. Certain disclosures will be required if conditions give rise to substantial doubt about an entity’s ability to continue as a going concern. ASU 2014-15 applies to all entities and is effective for the Company beginning January 1, 2017, with early adoption permitted. The Company applied this guidance in 2016 and the effect of adopting this standard was not significant to the Company’s Consolidated Financial Statements.

In February 2016, the FASB issued Accounting Standards Update No. 2016-02 (“ASU 2016-02”), “Leases,” which requires the recognition of lease assets and lease liabilities by lessees for all leases greater than one year in duration and classified as operating leases under previous guidance.  ASU 2016-02 is effective for fiscal years beginning after December 15, 2018 and interim periods within those periods, with early adoption permitted.  ASU 2016-02 must be adopted using a modified retrospective transition and requires application of the new guidance at the beginning of the earliest comparative period presented.  As of December 31, 2016 and 2015, the Company’s undiscounted minimum contractual commitments under long-term leases, which were not recorded on the Company’s Consolidated Balance Sheets, were $6,778 and $6,771, respectively, which is an estimate of the effect on total assets and total liabilities that the new accounting standard would have on those dates.  The Company is currently evaluating the effect that this standard will have on the Company’s Consolidated Financial Statements. 

In March 2016, the FASB issued Accounting Standards Update No. 2016-09 (“ASU 2016-09”), “Compensation–Stock Compensation,” which requires that excess tax benefits (which represent the excess of actual tax benefits received at the date of vesting or settlement over the vesting period or upon issuance of share-based payments) and tax deficiencies (which represents the amount by which actual tax benefits received at the date of vesting or settlement is lower than the benefits recognized over the vesting period or upon issuance of share-based payments) be recorded in the income statement as a reduction or increase of income taxes when an award vests.  It also requires excess tax benefits to be classified as an operating activity in the statement of cash flows rather than a financing activity.  In addition, it simplifies other aspects of share-based payment transactions, including classification of awards that permit repurchase to satisfy statutory tax withholding requirements and classification of tax payments on behalf of employees on the statement of cash flows.  ASU 2016-09 is effective for fiscal years beginning after December 15, 2016 and interim periods within those periods, with early adoption permitted.  The Company will adopt this guidance in the first quarter 2017.  Application of ASU 2016-09 may create volatility in the Company’s effective tax rate and diluted earnings per share due to the tax effects being recorded to the Company’s Consolidated Statements of Income.  The volatility in future periods will depend primarily on the Company’s stock price at the vesting dates and the number of awards that vest each period.  As permitted by the guidance, the Company will elect to recognize forfeitures as they occur, rather than estimating forfeitures as previously required. The Company does not believe that adoption of ASU 2016-09 will have a material effect on the Company’s Consolidated Financial Statements.