XML 18 R7.htm IDEA: XBRL DOCUMENT

New Accounting Pronouncements

9 Months Ended

Nov. 03, 2018

2.	New Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued a comprehensive new revenue recognition standard (“ASC 606”) that superseded previous existing revenue recognition guidance and was adopted by the Company using the modified retrospective method as of February 4, 2018, the beginning of the first quarter of its fiscal year ending February 2, 2019. The adoption of the new guidance primarily affected the recognition of minimum guaranteed royalties under the Company’s agreements with its licensees that have historically been recognized as earned in accordance with the underlying license agreements. Under this new standard, such royalties will generally be recognized on a straight-line basis over the term of the license agreement. Accordingly, for license agreements with escalating minimum guaranteed royalties, revenues will generally be higher during the early years of the license agreement than they would have been under the previous guidance. Royalties are typically earned based on the licensees’ retail or wholesale sales of licensed products, or based on the cost of producing the licensed goods. Revenues from license fees, up-front payments and milestone payments, which are received in connection with other rights and services that represent continuing obligations of the Company, are deferred and recognized in accordance with the license agreements. The cumulative effect on adoption of ASC 606 totaled $0.3 million, resulting in a charge to accrued revenue and an adjustment to deferred revenue with a corresponding credit to accumulated deficit for all contracts not completed as of the adoption date. In the three and nine months ended November 3, 2018 the Company recognized additional revenue of $0.2 million and $0.8 million, respectively, as a result of applying ASC 606. The comparative information for the prior period has not been restated.

The Company recognizes contract liabilities as deferred revenue when licensees prepay royalties, or from license fees, up-front payments and milestone payments that have not yet been earned. Deferred revenue is classified as current or noncurrent depending on when it is anticipated to be recognized. Deferred revenue totaled $2.8 million and $5.1 million at November 3, 2018 and February 3, 2018, respectively. Revenue recognized in the three and nine months ended November 3, 2018 that was previously included in deferred revenue was $0.2 million and $2.1 million, respectively. The Company recognizes contract assets as accrued revenue when minimum guaranteed royalties are recognized that have not yet been earned under the license agreements. The Company typically bills and receives payments from customers on a quarterly basis for royalties earned or for minimum guaranteed royalties that have historically been recognized as earned in accordance with the underlying license agreements. Accrued revenue is classified as current or noncurrent depending on when the asset is anticipated to be charged to revenue. Accrued revenue totaled $1.1 million and $0.4 million at November 3, 2018 and February 4, 2018, respectively. Revenue recognized in the three and nine months ended November 3, 2018 for minimum guaranteed royalties that had not yet been earned was $0.2 million and $0.8 million, respectively.

The Company’s remaining performance obligation is to maintain the licensed intellectual property, or in some cases, to provide product development and design services. As of November 3, 2018, the Company had a contractual right to receive approximately $64.0 million of aggregate minimum licensing revenue through the remaining terms of the current licenses, excluding any renewals, which is primarily expected to be recognized approximately over the next 10 years.