Revenue Recognition

On January 1, 2018, the Company adopted Accounting Standards Codification (ASC) 606, "Revenue from Contracts with Customers," using the full retrospective method to present all periods reported on a consistent basis. Accordingly, prior-period results have been restated to apply the provisions of this ASC.

As a result of this adoption, revenue for software-only products sold as part of multiple-deliverable arrangements are no longer deferred when vendor-specific objective evidence of fair value does not exist for the undelivered elements of the arrangement. This change results in earlier recognition of revenue. In addition, certain of the Company’s product accessory sales, which were reported on a net basis, are now reported on a gross basis as a result of applying the expanded guidance in the new standard related to principal versus agent considerations. This change results in the Company reporting higher revenue and higher cost of revenue when these sales are reported on a gross basis, although the gross margin dollars do not change. Furthermore, for arrangements that include customer-specified acceptance criteria, revenue is recognized when the Company can objectively determine that control has been transferred to the customer in accordance with the agreed-upon specifications in the contract, which may occur before formal customer acceptance. This change primarily impacts revenue recognition for arrangements in the logistics industry where certain customer solutions include installed ID products and results in earlier recognition of revenue.

The adoption of the standard impacted our previously-reported results as follows (in thousands):



Statement of Operations
	Year Ended December 31, 2017
	As previously reported		Adjustment			As restated
Revenue	$	747,950	$	18,133		$	766,083
Cost of revenue	168,698		18,591			187,289
Gross margin	579,252		(458		)	578,794
Operating income	259,319		(458		)	258,861
Income before income tax expense	266,922		(458		)	266,464
Income tax expense (benefit)	89,744		8			89,752
Net income	$	177,178	$	(466	)	$	176,712

Net income per weighted-average common and common-equivalent share:
Basic	$	1.02	$	—		$	1.02
Diluted	$	0.99	$	(0.01	)	$	0.98



Statement of Operations
	Year Ended December 31, 2016
	As previously reported		Adjustment			As restated
Revenue	$	520,753	$	8,762		$	529,515
Cost of revenue	115,590		15,480			131,070
Gross margin	405,163		(6,718		)	398,445
Operating income	160,784		(6,718		)	154,066
Income before income tax expense	168,795		(6,718		)	162,077
Income tax expense (benefit)	18,968		(840		)	18,128
Net income	$	149,572	$	(5,878	)	$	143,694

Net income per weighted-average common and common-equivalent share:
Basic	$	0.88	$	(0.04	)	$	0.84
Diluted	$	0.86	$	(0.03	)	$	0.83



Balance Sheet
	December 31, 2017
	As previously reported		Adjustment			As restated
Prepaid expenses and other current assets	$	30,800	$	(117	)	$	30,683
Accrued income taxes	11,391		112			11,503
Deferred revenue and customer deposits	9,969		(549		)	9,420
Retained earnings	668,267		320			668,587



Statement of Shareholders' Equity
	December 31, 2016
	As previously reported		Adjustment		As restated
Retained Earnings	$	643,836	$	786	$	644,622



Statement of Shareholders' Equity
	December 31, 2015
	As previously reported		Adjustment		As restated
Retained Earnings	$	566,622	$	6,664	$	573,286

The following table summarizes disaggregated revenue information by geographic area based upon the customer's country of domicile (in thousands):



	Year Ended December 31,
	2018		2017		2016
Americas	$	267,043	$	214,338	162,359
Europe	307,965		328,826		230,311
Greater China	126,109		108,738		66,179
Other Asia	105,221		114,181		70,666
	$	806,338	$	766,083	$	529,515

The following table summarizes disaggregated revenue information by revenue type (in thousands):



	Year Ended December 31,
	2018		2017		2016
Standard products and services	$	654,509	$	603,196	$	413,425
Application-specific customer solutions	151,829		162,887		116,090
	$	806,338	$	766,083	$	529,515

Costs to Fulfill a Contract

Costs to fulfill a contract are included in "Prepaid expenses and other current assets" on the Consolidated Balance Sheet and amounted to $3,514,000 and $3,230,000 as of December 31, 2018 and 2017, respectively.

Accounts Receivable, Contract Assets, and Contract Liabilities

Accounts receivable represent amounts billed and currently due from customers which are reported at their net estimated realizable value. The Company maintains reserves against its accounts receivable for potential credit losses. Credit losses recognized on accounts receivable were immaterial for the year ended December 31, 2018 and 2017. Contract assets consist of unbilled revenue which arises when revenue is recognized in advance of billing for certain application-specific customer solutions contracts. Contract liabilities consist of deferred revenue and customer deposits which arise when amounts are billed to or collected from customers in advance of revenue recognition.

The following table summarizes the deferred revenue and customer deposits activity (in thousands):



	Amount
Balance as of December 31, 2016	$	7,078
Increases to deferred revenue and customer deposits	24,985
Recognition of revenue	(23,195		)
Foreign exchange rate changes	552
Balance as of December 31, 2017	$	9,420
Increases to deferred revenue and customer deposits	63,231
Recognition of revenue	(61,819		)
Foreign exchange rate changes	(987		)
Balance as of December 31, 2018	$	9,845

As a practical expedient, the Company has elected not to disclose the aggregate amount of the transaction price allocated to unsatisfied performance obligations, as our contracts have an original expected duration of less than one year.