1. Summary of Significant Accounting Policies

Basis of Consolidation

The consolidated financial statements include the accounts of the Company, its subsidiaries and variable interest entities in which the Company has controlling financial interest. All inter-company balances and transactions are eliminated in consolidation. Entities in which the Company does not have a controlling financial interest but is considered to have significant influence are accounted for on the equity method.

Revision of Cash Flows

In connection with the preparation of the consolidated financial statements for the second quarter of fiscal 2014, the Company identified an error in the treatment of accrued additions for property, plant and equipment in the Consolidated Statements of Cash Flows. This error affected the Consolidated Statements of Cash Flows presented in each consolidated financial statements for the fiscal years ended September 30, 2013, 2012 and 2011. This error resulted in an understatement of net cash provided by operating activities and net cash used in investing activities in the year-end consolidated financial statements for the fiscal years ended September 30, 2013 and 2011. This error resulted in an overstatement of net cash provided by operating activities and net cash used in investing activities for the fiscal year ended September 30, 2012. The Company assessed the materiality of these errors and concluded that they were not material to any of the Company’s previously issued financial statements. The Company has revised its previously issued financial statements to correct for these errors. These revisions did not impact the Company’s Consolidated Statements of Operations or Consolidated Balance Sheets for any of these periods.

The following tables present the effect of this correction on the Company’s Consolidated Statements of Cash Flows for all periods affected:



	Consolidated Statement of Cash Flows September 30, 2013						Consolidated Statement of Cash Flows September 30, 2012						Consolidated Statement of Cash Flows September 30, 2011
(Dollars in Thousands)	Previously Reported		Adjustments		As Revised		Previously Reported		Adjustments		As Revised		Previously Reported		Adjustments		As Revised
Cash flows provided from operating activities:
(Decrease) increase in accounts payable and other accrued liabilities		(3,389)		2,793		(596)		3,982		(677)		3,305		(323)		492		169
Net cash provided by operating activities		22,957		2,793		25,750		37,517		(677)		36,840		31,237		492		31,729

Cash flows used by investing activities:
Acquisition of property, plant & equipment		(6,352)		(2,793)		(9,145)		(15,196)		677		(14,519)		(12,923)		(492)		(13,415)
Net cash used by investing activities		(8,503)		(2,793)		(11,296)		(126,133)		677		(125,456)		(17,349)		(492)		(17,841)

Cash Equivalents

Cash equivalents include investments with an original maturity of three months or less. Primarily all investments are short-term money market instruments. Instruments that have been included in cash equivalents with original maturities of greater than three months are demand instruments with banking institutions that are backed by government supported financial institutions. These instruments also are not subject to penalty for early withdrawal.

Inventories

Inventories, principally the components associated with dosimetry devices, are valued at lower of cost or market utilizing a first-in, first-out method.

Revenues and Deferred Contract Revenue

The source of Radiation Measurement segment revenues for the Company is radiation measuring and monitoring services including other services incidental to measuring and monitoring. The measuring and monitoring services provided by the Company to its customers are of a subscription nature and are continuous. The Company views its business in the Radiation Measurement segment as services provided to customers over a period of time and the wear period is the period over which those services are provided. Badge production, wearing of badges, badge analysis, and report preparation are integral to the benefit that the Company provides to its customers. These services are provided to customers on an agreed-upon recurring basis (monthly, bi-monthly, quarterly, semi-annually or annually) that the customer chooses for the wear period. Revenue is recognized on a straight-line basis, adjusted for changes in pricing and volume, over the wear period as the service is continuous and no other discernible pattern of recognition is evident. Revenues are recognized over the periods in which the customers wear the badges irrespective of whether invoiced in advance or in arrears.

Many customers pay for these services in advance. The amounts recorded as deferred contract revenue in the consolidated balance sheets represent customer deposits invoiced in advance during the preceding twelve months for services to be rendered over the succeeding twelve months, and are net of services rendered through the respective consolidated balance sheet date. Management believes that the amount of deferred contract revenue shown at the respective consolidated balance sheet date fairly represents the level of business activity it expects to conduct with customers invoiced under this arrangement.

Other services incidental to measuring and monitoring augment the basic radiation measurement services that the Company offers, providing administrative and informational tools to customers for the management of their radiation detection programs. Other service revenues are recognized upon delivery of the reports to customers or as other such services are provided.

The Company sells radiation measurement products to its customers, principally InLight products, for their use in conducting radiation measurements or managing radiation detection programs. Revenues from product sales are recognized when shipped.

The Company, through its Medical Physics segment, offers full scope medical physics services to hospitals and radiation therapy centers. Services offered include, but are not limited to, clinical physics support in radiation oncology, commissioning services, special projects support and imaging physics services. Delivery of the medical physics services can be of a contracted, recurring nature or as a discrete project with a defined service outcome. Recurring services often are provided on the customer's premises by a full-time employee or fraction of a full-time employee. These services are recognized as revenue on a straight-line basis over the life of the contract. Fee for service projects’ revenue is recognized when the service is delivered.

Contracted services are billed on an agreed-upon recurring basis, either in advance or arrears of the service being delivered. Customers may be billed monthly, quarterly, or at some other regular interval over the contracted period. The amounts recorded as deferred revenue represent invoiced amounts in advance of delivery of the service. Management believes that the amount of deferred contract revenue fairly represents remaining business activity with customers invoiced in advance.

Fee for service revenue is typically associated with much shorter contract periods, or with discrete individual projects. Invoicing is usually done after completion of the project and customer acceptance thereof.

Additional medical physics services under the full scope offering of the medical physics practice groups comprising the Medical Physics segment include radiation center design and consulting, accreditation work and quality assurance reviews.

The Company, through its Medical Products segment, offers high quality medical consumable accessories used in radiology, radiation therapy, and image guided surgery procedures. IZI’s customer base includes buyers at several stages along the supply chain including distributors, manufacturers of image guided navigation equipment, and product end users such as hospitals, radiation oncology clinics, mammography clinics, and imaging centers. Revenues from medical product sales are recognized when shipped.

Research and Development

The cost of research and development programs is charged to selling, general and administrative expense as incurred and amounted to approximately $4,121, $3,957 and $2,361 in fiscal 2013, 2012 and 2011, respectively. Research and development costs include salaries and allocated employee benefits, third-party research contracts, depreciation and supplies.

Depreciation, Amortization and Maintenance

Property, plant and equipment are recorded at cost. Plant, equipment and custom software are depreciated on a straight-line basis over their estimated useful lives, which are primarily 30 years for buildings, three to eight years for equipment and five to ten years for internal software. Dosimetry devices, principally badges, and software are amortized on a straight-line basis over their estimated lives, which are thirty months to eight years. Maintenance and repairs are charged to expense, and renewals and betterments are capitalized.

Advertising

The Company expenses the costs of advertising as incurred. Advertising expense, primarily related to product shows and exhibits, amounted to $1,339, $920 and $877 in fiscal 2013, 2012 and 2011, respectively.

Income Taxes

The Company files income tax returns in the jurisdictions in which it operates. The Company estimates the income tax provision for income taxes that are currently payable, and records deferred tax assets and liabilities for the temporary differences in tax consequences between the financial statements and tax returns. The Company would record a valuation allowance in situations where the realization of deferred tax assets is not more likely than not. The Company recognizes the financial statement effects of its tax positions in its current and deferred tax assets and liabilities when it is more likely than not that the position will be sustained upon examination by a taxing authority. Further information regarding the Company’s income taxes is contained under the footnote “Income Taxes” of this Annual Report on Form 10-K.

Fair value of financial instruments

The Company’s financial instruments consist primarily of cash and cash equivalents, accounts receivable, accounts payable, and debt. The carrying value of the Company’s financial instruments approximates their fair value.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at 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.

Reclassifications and Adjustments

Certain reclassifications have been made in the financial statements for comparative purposes. These reclassifications have no effect on the results of operations or financial position.

In addition, the 2012 statement of cash flows was corrected for a classification error related to the payment of debt financing fees. The correction increases net cash provided by operating activities and decreases net cash (used) provided by financing activities by $1.8 million. The Company believes this classification change is immaterial to the previously issued financial statements.

Further, the current year financial statements include the correction of certain out of period adjustments relating to prior periods. The net effect of the corrections were primarily related to the equity in income of joint ventures that increased net income in the current year by approximately $400,000. The Company does not believe these corrections were material to any current or prior interim or annual periods that were affected.

Accumulated Other Comprehensive Loss

The components of accumulated other comprehensive loss included in the accompanying consolidated balance sheets consist of defined benefit pension and postretirement plan adjustments for net gains, losses and prior service costs, net defined benefit plan curtailment loss and cumulative foreign currency translation adjustments. The following table sets forth the balances in accumulated other comprehensive loss for the years ended September 30:



(Dollars in Thousands)	2013		2012		2011
Foreign currency translation adjustments	$	(178)	$	1,900	$	2,286
Defined benefit pension and postretirement plans activity, net of tax		(4,278)		(7,172)		(5,415)
Total accumulated other comprehensive loss	$	(4,456)	$	(5,272)	$	(3,129)

Stock-Based Compensation

The Company measures and recognizes compensation cost at fair value for all share-based payments, including stock options. Stock-based compensation expense, primarily for grants of restricted stock, totaled approximately $2,634, $2,434 and $1,481 for fiscal 2013, 2012 and 2011, respectively. The total income tax benefit recognized in the consolidated statements of income related to expense for stock-based compensation was approximately $981, $901 and $537 during fiscal 2013, 2012 and 2011, respectively.

The Company has not granted stock options subsequent to fiscal 2005. Awards of stock options in prior fiscal years were granted with an exercise price equal to the market value of the stock on the date of grant. The fair value of stock options was estimated using the Black-Scholes option-pricing model. Expected volatility and the expected life of stock options were based on historical experience. The risk free interest rate was derived from the implied yield available on U.S. Treasury zero-coupon issues with a remaining term, as of the date of grant, equal to the expected term of the option. The dividend yield was based on annual dividends and the fair market value of the Company’s stock on the date of grant. Compensation expense was recognized ratably over the vesting period of the stock option.

Subsequent to fiscal 2005, key employees and/or non-employee directors have been granted restricted share awards that consist of performance shares and time vested restricted stock. Performance shares represent a right to receive shares of common stock upon satisfaction of performance goals or other specified metrics. Restricted stock represents a right to receive shares of common stock upon the passage of a specified period of time. Upon the adoption of the Company’s Incentive Compensation Plan in February 2008, the fair value of performance shares and restricted stock granted under the new plan is based on the Company’s closing stock price on the date of grant. Compensation expense for performance shares is recorded ratably over the vesting period, assuming that achievement of performance goals is deemed probable. Compensation expense for restricted stock is recognized ratably over the vesting period. The per share weighted average fair value of restricted shares, including restricted stock and performance shares, granted during fiscal 2013, 2012 and 2011 was $58.19, $51.89 and $62.17, respectively.

Employee Benefit Plans

The Company sponsors postretirement benefit plans to provide pension, supplemental retirement funds, and medical expense reimbursement to eligible retired employees, as well as a directors' retirement plan that provides for certain retirement benefits payable to non-employee directors. Further information on these benefit plans is contained under the footnote “Employee Benefit Plans” of this Annual Report on Form 10-K.

Recent Accounting Pronouncements

In July 2012, FASB issued new guidance on the impairment testing for indefinite-lived intangible assets other than goodwill. This guidance now permits entities to initially perform a qualitative assessment on indefinite-lived intangible assets impairment to assess whether it is more likely than not that the fair value of an indefinite-lived intangible asset is less than its carrying amount. If, as a result of the qualitative assessment, it is determined that it is more likely than not that the fair value of an indefinite-lived intangible asset is less than its carrying amount, the quantitative impairment test is required. The Company has adopted the guidance for its annual impairment tests performed in fiscal 2013.

In February 2013, the FASB issued new guidance on the presentation of comprehensive income. This guidance requires reclassification adjustments from other comprehensive income to be presented either in the financial statements or in the notes to the financial statements. The standard would not change the current requirements for reporting net income or other comprehensive income in financial statements. However, the guidance would require an entity to provide enhanced disclosures to present separately by component reclassifications out of accumulated other comprehensive income. This guidance is effective for the Company in the first quarter of fiscal 2014. The Company does not expect the adoption of this guidance to have a material impact on its consolidated financial statements.

In March 2013, the FASB issued an accounting update that clarifies the applicable guidance for the release of the cumulative translation adjustment when an entity ceases to have a controlling financial interest in a subsidiary or a group of assets that is a business within a foreign entity. The guidance outlines the events when cumulative translation adjustments should be released into net income and is intended by FASB to eliminate some disparity in current accounting practice. This guidance is effective for the Company in the first quarter of fiscal 2014. The Company does not expect the adoption of this guidance to have a material impact on its consolidated financial statements.

In July 2013, the FASB issued new guidance to reduce the diversity in presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss or a tax credit carryforward exists. This requires an unrecognized tax benefit to be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, with certain exceptions listed in the guidance. This guidance is effective for the Company in the first quarter of fiscal 2015. The Company does not expect the adoption of this guidance to have a material impact on its consolidated financial statements.