Summary of Significant Accounting Policies

Principles of Consolidation. These accompanying consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States and include the accounts of Zebra and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

Fiscal Calendar. Zebra operates on a 4 week/4 week/5 week fiscal quarter, and each fiscal quarter ends on a Saturday. The fiscal year always begins on January 1 and ends on December 31. This fiscal calendar results in some fiscal quarters being either greater than or less than 13 weeks, depending on the days of the week on which those dates fall. During the 2017 fiscal year, our quarter end dates were April 1, July 1, September 30, and December 31.

Use of Estimates. These consolidated financial statements were prepared using estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Examples of estimates include: cash flow projections and other assumptions included in our annual goodwill impairment test; loss contingencies; product warranties; useful lives of our tangible and intangible assets; allowances for doubtful accounts; the recognition and measurement of income tax assets and liabilities; and share-based compensation forfeiture rates. The Company bases its estimates on historical experience and on various other assumptions that the Company believes to be reasonable under the circumstances. Actual results could differ from those estimates.

Cash and Cash Equivalents. Cash consists primarily of deposits with banks. In addition, the Company considers highly liquid short-term investments with original maturities of less than three months to be cash equivalents. These highly liquid short-term investments are readily convertible to known amounts of cash and are so near their maturity that they present insignificant risk of a change in value because of changes in interest rates.

Included in the Company’s Cash and cash equivalents are amounts held by foreign subsidiaries. The Company had $54 million and $98 million of foreign cash and cash equivalents included in the Company’s total cash positions of $62 million and $156 million as of December 31, 2017 and 2016, respectively.

Accounts Receivable and Allowance for Doubtful Accounts. Accounts receivable consist primarily of amounts due to us from our customers in the course of normal business activities. Collateral on trade accounts receivable is generally not required. The Company maintains an allowance for doubtful accounts for estimated uncollectible accounts receivable. The allowance is based on our assessment of known delinquent accounts. Accounts are written off against the allowance account when they are determined to be no longer collectible. During 2017, the Company initiated a receivables financing facility of up to $180 million. See Note 8, Long-Term Debt for further information.

Inventories. Inventories are stated at the lower of a moving-average cost (which approximates cost on a first-in, first-out basis) and net realizable value. Manufactured inventory cost includes materials, labor, and manufacturing overhead. Purchased inventory cost also includes internal purchasing overhead costs.

Provisions are made to reduce excess and obsolete inventories to their estimated net realizable values. Inventory provisions are based on forecasted demand, experience with specific customers, the age and nature of the inventory, and the ability to redistribute inventory to other programs or to rework into other consumable inventory.

The components of Inventories, net are as follows (in millions):



	December 31,
	2017		2016
Raw material	$	116	$	111
Work in process	1		1
Finished goods	341		233
Inventories, net	$	458	$	345

Property, Plant and Equipment. Property, plant and equipment is stated at cost. Depreciation is computed primarily using the straight-line method over the estimated useful lives of the various classes of property, plant and equipment, which are 30 years for buildings and range from 3 to 10 years for all other asset categories. Leasehold improvements are amortized using the straight-line method over the shorter of the lease term or estimated useful life of the asset.

Property, plant and equipment, net is comprised of the following (in millions):



	December 31,
	2017			2016
Buildings	$	54		$	51
Land	8			10
Machinery and equipment	233			226
Furniture and office equipment	19			15
Software and computer equipment	235			197
Leasehold improvements	69			64
Projects in progress	23			35
	641			598
Less accumulated depreciation	(377		)	(306		)
Property, plant and equipment, net	$	264		$	292

Depreciation expense was $79 million, $75 million and $69 million for the periods ended December 31, 2017, 2016 and 2015, respectively.

Income Taxes. The Company accounts for income taxes under the liability method in accordance with Accounting Standards Codification (“ASC”) 740, Income Taxes. Accordingly, deferred income taxes are provided for the future tax consequences attributable to differences between the carrying amounts of assets and liabilities for financial reporting and income tax purposes. Deferred tax assets and liabilities are measured using tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. A valuation allowance is established when necessary to reduce deferred tax assets to the amount that is more likely than not to be realized. The Company recognizes the benefit of tax positions when it is more likely than not to be sustained on its technical merits. The Company recognizes interest and penalties related to income tax matters as part of income tax expense. The Company has elected consolidated tax filings in certain of its jurisdictions which may allow the group to offset one member’s income with losses of other members in the current period and on a carryover basis. The Company classifies its balance sheet tax accounts adopting a jurisdictional netting principle for those countries where a consolidated tax return election is in place.

The Tax Cut and Jobs Act (“TCJA” or “the Act”) enacted on December 22, 2017 contains provisions related to the taxation of certain foreign earnings under the Global Intangible Low-Taxed Income (“GILTI”) regime which is effective for tax years beginning on or after January 1, 2018. Under guidance issued by the Financial Accounting Standards Board on January 10, 2018, companies must account for the impact of the GILTI tax as either a temporary difference in the book and tax basis of assets giving rise to the GILTI income, net of a foreign tax credit, or as a charge to tax expense in the year GILTI income is included in the U.S. tax return. The Company has elected to treat its GILTI inclusions as a charge to tax expense in the year included in its U.S. tax return.

The effects of changes in tax rates and laws on deferred tax balances are recorded as a component of tax expense related to continuing operations for the period in which the law was enacted, even if the assets and liabilities related to items of accumulated other comprehensive income (“AOCI”). In other words, backward tracing of the income tax effects of items originally recognized through AOCI is prohibited. On February 7, 2018, the Financial Accounting Standards Board issued guidance requiring the reclassification to retained earnings of tax effects stranded in accumulated AOCI due to tax reform. The guidance requires that these changes be effective with fiscal years beginning on or after December 15, 2018 but allows companies to early adopt the provision. The Company plans to adopt this provision with its fiscal year beginning January 1, 2018.

Goodwill. Goodwill is not amortized but is evaluated for impairment annually, or more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. If a quantitative assessment is completed as part of our impairment analysis for a reporting unit, we may engage a third-party appraisal firm to assist in the determination of estimated fair value for each reporting unit. This determination includes estimating the fair value using both the income and market approaches. The income approach requires management to estimate a number of factors for each reporting unit, including projected future operating results, economic projections, anticipated future cash flows and discount rates. The market approach estimates fair value using comparable marketplace fair value data from within a comparable industry grouping. The fair value of the reporting unit is compared to the carrying amount of the reporting unit. If a reporting unit is considered impaired, the impairment is recognized in the amount by which the carrying amount exceeds the fair value of the reporting unit.

The determination of the fair value of the reporting units and the allocation of that value to individual assets and liabilities within those reporting units requires us to make significant estimates and assumptions. These estimates and assumptions primarily include, but are not limited to: the selection of appropriate peer group companies; control premiums appropriate for acquisitions in the industries in which we compete; the discount rates; terminal growth rates; and forecasts of revenue, operating income, depreciation and amortization and capital expenditures. The allocation requires several analyses to determine the fair value of assets and liabilities including, among other things, customer relationships and trade names. Although we believe our estimates of fair value are reasonable, actual financial results could differ from those estimates due to the inherent uncertainty involved in making such estimates.

Changes in assumptions concerning future financial results or other underlying assumptions could have a significant impact on either the fair value of the reporting units, the amount of any goodwill impairment charge, or both.

We also compare the sum of the estimated fair values of the reporting units to the Company’s total value as implied by the market value of the Company’s securities. This comparison indicated that, in total, our assumptions and estimates were reasonable. However, future declines in the overall market value of the Company’s securities may indicate that the fair value of one or more reporting units has declined below its carrying value.

One measure of the sensitivity of the amount of goodwill impairment charges to key assumptions is the amount by which each reporting unit “passed” (fair value exceeds the carrying amount) or “failed” (the carrying amount exceeds fair value) the first step of the goodwill impairment test. See Note 4, Goodwill and Other Intangibles, net, for additional information.

Other Intangibles. Other intangible assets capitalized consist primarily of current technology, customer relationships, trade names, unpatented technology, and patents and patent rights. These assets are recorded at cost and amortized on a straight-line basis over the asset’s useful life which range from 3 years to 15 years.

Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of. The Company accounts for long-lived assets in accordance with the provisions of ASC 360, Property, Plant and Equipment. The statement requires that long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the sum of the undiscounted cash flows expected to result from the use and the eventual disposition of the asset. If such assets are impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.

Cost Method Investments. The Company’s long-term investments are accounted for using the cost method. These investments are primarily in venture capital backed technology companies, where the Company's ownership interest is less than 20% of each investee. Under the cost method of accounting, investments are carried at cost and are adjusted only for other-than-temporary declines in fair value, certain distributions and additional investments. The Company held cost method investments in the amount of $25 million as of December 31, 2017 and 2016. These investments are included in Other long-term assets on the Consolidated Balance Sheets. The Company recognized impairments of $1 million during fiscal 2017 which were recorded within Other expenses in the Consolidated Statements of Operations. There were $7 million of impairments to cost method investments in fiscal 2016 and no impairments in fiscal 2015.

Revenue Recognition. Revenue includes sales of hardware, supplies and services (including repair services and product maintenance service contracts, which typically occur over time, and professional services, which typically occur in the early stages of a project). We enter into revenue arrangements that may consist of multiple deliverables of our hardware products and services due to the needs of our customers. For these type of revenue arrangements, we apply the guidance in ASC 605, Revenue Recognition to identify the separate units of accounting by determining whether the delivered items have value to the customer on a standalone basis. Generally, there is no right of return for the hardware we sell. Allocation of arrangement consideration to repair services, product maintenance services, and extended warranty is equal to the stated contractual rate for such services, in accordance with the guidance in ASC 605-20. We also follow the accounting principles that establish a hierarchy to determine the selling price to be used for allocating revenue to deliverables as follows: (i) vendor-specific objective evidence of fair value (“VSOE”), (ii) third-party evidence of selling price (“TPE”) and (iii) best estimate of the selling price (“BESP”). Generally, our agreements contain termination provisions whereby we are entitled to payment for delivered equipment and services rendered through the date of the termination. Some of our agreements may also contain cancellation provisions that in certain cases result in customer penalties. The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred and title has passed to the customer, which typically happens at the point of shipment provided that no significant obligations remain, the price is fixed and determinable and collectability of the sales price is reasonably assured. For hardware sales, in addition to the criteria discussed above, revenue recognition incorporates allowances for discounts, price protection, returns and customer incentives that can be reasonably estimated. In addition to cooperative marketing and other incentive programs, the Company has arrangements with some distributors, which allow for price protection and limited rights of return, generally through stock rotation programs. Under the price protection programs, the Company gives distributors credits for the difference between the original price paid and the Company’s then current price. Under the stock rotation programs, distributors are able to exchange certain products based on the number of qualified purchases made during the period. We monitor and track these programs and record a provision for future payments or credits granted as reductions of revenue based on historical experience. Recorded revenues are reduced by these allowances. The Company enters into product maintenance and support agreements; revenues are deferred and then recognized ratably over the service period and the cost of providing these services is expensed as incurred. The Company includes shipping and handling charges billed to customers as revenue when the product ships; any costs incurred related to these services are included in cost of sales. Taxing authorities may assess tax on the Company based on the gross receipts from customers, referred to as indirect taxes. The Company’s policy is to record indirect taxes as a short-term liability and not as a component of gross revenue.

Research and Development Costs. Research and development costs (“R&D”) are expensed as incurred. These costs include:


•	Salaries, benefits, and other R&D personnel related costs,


•	Consulting and other outside services used in the R&D process,


•	Engineering supplies,


•	Engineering related information systems costs, and


•	Allocation of building and related costs.

Advertising. Advertising is expensed as incurred. Advertising costs totaled $18 million, $18 million and $22 million for the years ended December 31, 2017, 2016 and 2015, respectively.

Warranty. The Company generally provides warranty coverage of 1 year on mobile computers, printers and batteries. Advanced data capture products are warrantied from 1 to 5 years, depending on the product. Thermal printheads are warrantied for 6 months and battery-based products, such as location tags, are covered by a 90-day warranty. A provision for warranty expense is adjusted quarterly based on historical warranty experience.

The following table is a summary of the Company’s accrued warranty obligation (in millions):



	Year Ended December 31,
Warranty reserve	2017			2016			2015
Balance at the beginning of the year	$	21		$	22		$	25
Warranty expense	28			31			30
Warranty payments	(31		)	(32		)	(33		)
Balance at the end of the year	$	18		$	21		$	22

Fair Value of Financial Instruments. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Our financial assets and liabilities that require recognition under the accounting guidance generally include our available-for-sale investments, employee deferred compensation plan investments, foreign currency derivatives, and interest rate swaps. In accordance with ASC 815, Derivatives and Hedging, we recognize derivative instruments and hedging activities as either assets or liabilities on the Consolidated Balance Sheets and measure them at fair value. Gains and losses resulting from changes in fair value are accounted for depending on the use of the derivative and whether it is designated and qualifies for hedge accounting. See Note 7, Derivative Instruments for additional information on our derivatives and hedging activities.

The Company has foreign currency forwards to hedge certain foreign currency exposures and interest rate swaps to hedge a portion of the variability in future cash flows on debt. We use broker quotations or market transactions, in either the listed or over-the-counter markets to value our foreign currency exchange contracts and relevant observable market inputs at quoted intervals, such as forward yield curves and the Company’s own credit risk to value our interest rate swaps.

The Company’s investments in marketable debt securities are classified as available-for-sale except for securities held in the Company’s deferred compensation plans, which are considered to be trading securities. In general, we use quoted prices in active markets for identical assets to determine fair value. If active markets for identical assets are not available to determine fair value, then we use quoted prices for similar assets or inputs that are observable either directly or indirectly.

The carrying amounts of cash and cash equivalents, receivables and accounts payable approximate fair value due to the short-term nature of these financial instruments. See Note 6, Fair Value Measurements for financial assets and liabilities carried at fair value.

Share-Based Compensation. At December 31, 2017, the Company had a share-based compensation plan and an employee stock purchase plan under which shares of our common stock were available for future grants and sales, and which are described more fully in Note 11, Share-Based Compensation. We account for these plans in accordance with ASC 505, Equity and ASC 718, Compensation - Stock Compensation. The Company recognizes compensation costs using the straight-line method over the vesting period upon grant of up to 4 years, net of estimated forfeitures.

The compensation expense and the related income tax benefit for share-based compensation were included in the Consolidated Statements of Operations as follows (in millions):



	Year Ended December 31,
Compensation costs and related income tax benefit	2017		2016		2015
Cost of sales	$	3	$	2	$	3
Selling and marketing	8		6		8
Research and development	11		9		8
General and administration	16		11		14
Total compensation expense	$	38	$	28	$	33
Income tax benefit	$	11	$	9	$	11

Foreign Currency Translation. The balance sheet accounts of the Company’s non-U.S. subsidiaries, those not designated as U.S. dollar functional currency, are translated into U.S. dollars using the year-end exchange rate, and statement of earnings items are translated using the average exchange rate for the year. The resulting translation gains or losses are recorded in Stockholders’ equity as a cumulative translation adjustment, which is a component of Accumulated other comprehensive income loss within the Consolidated Balance Sheets.

Acquisitions. We account for acquired businesses using the acquisition method of accounting. This method requires that the purchase price be allocated to the identifiable assets acquired and liabilities assumed at their estimated fair values. The excess of the purchase price over the identifiable assets acquired and liabilities assumed is recorded as goodwill.

The estimates used to determine the fair value of long-lived assets, such as intangible assets, can be complex and require significant judgments. We use information available to us to make fair value determinations and engage independent valuation specialists, when necessary, to assist in the fair value determination of significant acquired long-lived assets. While we use our best estimates and assumptions as a part of the purchase price allocation process, our estimates are inherently uncertain and subject to refinement. Critical estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows from customer relationships, customer attrition rates, and discount rates. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but due to the inherent uncertainty during the measurement period, which may be up to one year from the acquisition date, we record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill.

Recently Adopted Accounting Pronouncement

In January 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2017-04, “Intangibles - Goodwill and Other (Topic 350).” The amendments of this ASU are effective for annual or any interim goodwill impairment tests beginning after December 15, 2019, and early adoption is permitted for annual and interim goodwill impairment testing dates after January 1, 2017. The amendments in this ASU simplify goodwill impairment testing by eliminating the Step 2 procedure to determine the implied fair value of goodwill of a reporting unit which fails the Step 1 procedure. The implication of this update results in the amount by which a carrying amount exceeds the reporting unit’s fair value to be recognized as an impairment charge in the interim or annual period identified. The standard is effective for public companies in the first calendar quarter of 2020 with early adoption permitted on a prospective basis. The Company has adopted this ASU on a prospective basis effective as of January 1, 2017 and has concluded that this pronouncement has no impact on its consolidated financial statements or existing accounting policies.

In January 2017, the FASB issued ASU 2017-01, “Business Combinations (Topic 805)- Clarifying the Definition of a Business,” which clarifies the definition of a business when considering whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The clarified definition requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business. This definition reduces the number of transactions that need to be further evaluated as to be considered a business, an asset must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create output. The effective date of this ASU is for fiscal years and interim periods beginning after December 15, 2017. This ASU should be applied prospectively on or after the effective date. No disclosures are required at transition. The Company adopted this ASU on January 1, 2017, on a prospective basis, and there was no impact on the Company’s consolidated financial statements or existing accounting policies.

In October 2016, the FASB issued ASU 2016-16, “Income Taxes (Topic 740) Intra-Entity Transfers of Assets Other Than Inventory.” This ASU allows for an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. Consequently, the amendments in this ASU eliminate the exception for an intra-entity transfer of an asset other than inventory. The standard will be effective for public companies in the first calendar quarter of 2018, with early adoption permitted and on a modified retrospective basis as of the beginning of the period of adoption. The Company adopted this ASU on January 1, 2017. The Company recorded a reduction to retained earnings for the prior period catch-up of approximately $9 million for the unamortized prepaid tax on an intra-entity transfer of workforce in place. In the first quarter of 2017, the Company also recorded a $12 million benefit related to an intercompany transfer of intellectual property as a result of newly adopted accounting standards. The Company recognized no additional tax benefit in the fiscal year ended December 31, 2017.

In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230) - Classification of Certain Cash Receipts and Cash Payments.” This ASU provides clarification guidance on eight specific cash flow presentation issues that have developed due to diversity in practice. The issues include, but are not limited to, debt prepayment or extinguishment costs, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, and cash receipts from payments on beneficial interests in securitization transactions. The amendments in this ASU where practicable will be applied retrospectively. The Company has retrospectively adopted this ASU during the third quarter 2017. The Company has recognized $4 million in the current year as financing activities and reclassified $5 million in the prior year of cash paid for debt issuance costs and discounts on the Consolidated Statements of Cash Flows from operating activities to financing activities. There was no impact to the Consolidated Statements of Cash Flow in 2015.

In March 2016, the FASB issued ASU 2016-09, “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.” This ASU requires that entities recognize excess tax benefits and deficiencies related to employee share-based payment transactions as income tax expense and benefit versus additional paid in capital. This ASU also eliminates the requirement to reclassify excess tax benefits and deficiencies from operating activities to financing activities within the Consolidated Statements of Cash Flows. The Company has adopted recognition of excess tax benefits and deficiencies within income tax expense effective January 1, 2017 on a prospective basis. The Company has adopted presentation of excess tax benefits and deficiencies within operating activities in the Consolidated Statements of Cash Flows effective January 1, 2017 on a retrospective basis. The Company recognized $7 million as operating activities in the current year and reclassified excess tax benefits of $3 million, and $12 million on the Consolidated Statements of Cash Flows from financing activities to operating activities for the years ended December 31, 2016 and 2015, respectively. The Company has reflected a tax benefit of $7 million for the year ending December 31, 2017, as a discrete item within the Consolidated Statements of Operations under the new ASU.

In July 2015, the FASB issued ASU 2015-11, “Inventory (Topic 330): Simplifying the Measurement of Inventory,” which changes the measurement principle for inventory from the lower of cost or market to the lower of cost or net realizable value for entities that measure inventory using first-in, first-out (FIFO) or average cost. Net realizable value is defined as the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The Company has adopted this ASU effective January 1, 2017 on a prospective basis. There are no material impacts to the Company's consolidated financial statements or disclosures resulting from the adoption of this ASU.

Recently Issued Accounting Pronouncements Not Yet Adopted

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606).” Several ASUs have been issued since the issuance of ASU 2014-09 which modify certain sections of ASU 2014-09, and are intended to promote a more consistent interpretation and application of the principles outlined in the new standard. The core principle of the new standard is that a company should recognize revenue to depict the transfer of goods or services to a customer at an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. The new standard also requires that certain costs to obtain a contract, which have generally been expensed as incurred under the current guidance, will now be capitalized and amortized in a pattern consistent with the transfer to the customer of the goods or services to which the asset relates.

We completed the assessment and implementation phases of the process to adopt ASU 2014-09. We also completed updating our accounting policy around revenue recognition and evaluating new disclosure requirements. We will continue to implement and enhance appropriate changes to our business processes, systems, and controls, as necessary, to support recognition and disclosure under the new standard. The new disclosure requirements will change the content and presentation of the financial statement footnotes.

As a result of applying the provisions of the new standard, certain of our agreements will have different timing of revenue recognition as compared to ASC 605, Revenue Recognition. We will adopt this new ASU on January 1, 2018 using the modified retrospective approach. The Company expects to record an increase to retained earnings on its Consolidated Balance Sheets of approximately $17 million to $20 million in the first quarter of 2018 due to the cumulative impact of adopting ASU 2014-09. The increase to retained earnings will result from the initial capitalization of previously expensed services sales commissions, the impact of revenue recognized for open service contracts sold with other products, and the impact of different revenue recognition timing patterns for open customer contract arrangements initiated before January 1, 2018. Additionally, new disclosures of disaggregated revenue information by reportable segment, as well as new disclosures of remaining performance obligations will be included in the Company’s filings beginning with the first quarter of fiscal 2018.

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments-Credit Losses (Topic 326) -Measurement of Credit Losses on Financial Instruments.” The new standard requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. It replaces the existing incurred loss impairment model with an expected loss methodology, which will result in more timely recognition of credit losses. There are two transition methods available under the new standard dependent upon the type of financial instrument, either cumulative effect or prospective. The standard will be effective for the Company in the first quarter of 2020. Earlier adoption is permitted only for annual periods after December 15, 2018. Management is currently assessing the impact of adoption on the Company’s consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, “Leases (Subtopic 842).” This ASU increases the transparency and comparability of organizations by recognizing lease assets and liabilities on the Consolidated Balance Sheets and disclosing key quantitative and qualitative information about leasing arrangements. The principal difference from previous guidance is that the lease assets and lease liabilities arising from operating leases were not previously recognized in the Consolidated Balance Sheets. The recognition, measurement, presentation, and cash flows arising from a lease by a lessee have not significantly changed. This standard will be effective for the Company in the first quarter of 2019, with early adoption permitted. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach, which includes a number of optional practical expedients that entities may elect to apply. Management is currently assessing the impact of adoption on its consolidated financial statements. The impact of this ASU is non-cash in nature and will not affect the Company’s cash position.

In January 2016, the FASB issued ASU 2016-01, “Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.” ASU 2016-01 amends various aspects of the recognition, measurement, presentation, and disclosure for financial instruments. This ASU requires updates to the presentation of other comprehensive income resulting from a change in instrument-specific credit risk. This standard will be effective for the Company in the first quarter of 2018. Early adoption is prohibited for those provisions that apply to the Company. Amendments should be applied by means of cumulative effect adjustment to the Consolidated Balance Sheets as of the beginning of the fiscal year of adoption. The amendments related to equity securities without readily determinable fair values including disclosure requirements should be applied prospectively to equity investments that exist as of the date of adoption of the ASU. The impacts of adoption primarily relate to presentation, and there are no material impacts to the Company's consolidated financial statements or disclosures resulting from the adoption of this ASU.