New Accounting Standards

New Accounting Standards Implemented

In March 2016, the FASB issued Accounting Standards Update ("ASU") 2016-09, Compensation - Stock Compensation, which is intended to simplify the accounting for share-based payment transactions. This new guidance changes several aspects of the accounting for share-based payment transactions, including accounting for income taxes, forfeitures and employer-tax withholding requirements. ASU 2016-09 also clarifies the Statements of Cash Flows presentation for certain components of share-based payment awards. We adopted this new accounting guidance in the first quarter of 2017, which did not have a material impact on our Consolidated Financial Statements.

Accounting Standards to be Implemented

ASU 2014-09, Revenue from Contracts with Customers

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, as a new Topic, Accounting Standards Codification Topic ("ASC") 606. The core principle of the guidance is 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. This new accounting guidance may be adopted either retrospectively or as a cumulative-effect adjustment as of the date of adoption. We will be adopting this new accounting guidance as a cumulative-effect adjustment to equity as of January 1, 2018. Based on our evaluation, we expect to:


•	consider some of our sales incentive programs as a separate deliverable and allocate a portion of the sales transaction price to this deliverable, and thus defer a portion of the sales transaction price until the incentive prize is redeemed;


•	consider some of our prospective discounts achieved based on sales targets as a separate deliverable and allocate a portion of the sales transaction prices to this deliverable, thus deferring a portion of the sales transaction price until future discounts are realized;


•	adjust the manner in which we present our allowance for sales returns in our Consolidated Balance Sheets, to reflect a refund liability and a returns asset;


•	reflect fees paid by Representatives to the Company for items such as brochures, sales aids and late payments as revenue, rather than as a reduction to selling, general and administrative expenses ("SG&A"), as these represent separate performance obligations;


•	reflect certain of the costs associated with the fees paid by the Representative in cost of sales, rather than SG&A; and


•	recharacterize certain costs related to sales incentives, brochures and sales aids in our Consolidated Balance Sheets from prepaid expenses and other to inventories.

We estimate that the cumulative-effect adjustment upon adoption of the new revenue recognition standard as of January 1, 2018 will be:


•	a reduction to equity of approximately $50 to $60 before taxes ($35 to $45 after tax), with a corresponding impact to deferred taxes of approximately $10 to $20;


•	a reduction to prepaid expenses and other of approximately $50 to $60;


•	an increase to inventories of approximately $35 to $45; and


•	an increase to other accrued liabilities of approximately $35 to $45 due to the net impact of the establishment of a contract liability for deferred revenue where satisfaction of our performance obligation is not yet complete, which is partially offset by a reduction in the sales incentive accrual.

This cumulative-effect adjustment impacting our Consolidated Balance Sheets is primarily driven by sales incentives and brochures. The other changes resulting from the new revenue recognition standard are estimated to not be material.

As a result of adopting this new accounting guidance, we estimate that had we adopted the new standard as of January 1, 2017, the impact on our full-year 2017 Consolidated Statement of Operations would have been:

•an increase in total revenue by approximately 5%;

•a decrease in gross margin by approximately 300 to 450 basis points; and

•a decrease in operating margin by approximately 10 to 30 basis points.

These impacts are associated with reclassifications of items in our Consolidated Statements of Operations only, which will have no impact on operating profit. These impacts do not reflect the impact due to the change in timing of recognition of revenue and associated costs that would be deferred until sales incentive programs and prospective discounts are fulfilled, which we do not believe is material to the estimated 2017 impacts discussed above. If we had adopted the new standard as of January 1, 2017, we believe that the cumulative-effect adjustment at that time would reasonably approximate the cumulative-effect adjustment calculated as of January 1, 2018 noted above. In addition, upon adoption, we do not expect the change in timing of recognition of revenue and associated costs to have a significant impact on our full-year Consolidated Statements of Operations; however, the impact may vary depending on the types of incentive programs, the volume of incentives offered, and the timing of the programs.

ASU 2017-07, Compensation - Retirement Benefits

In March 2017, the FASB issued ASU 2017-07, Compensation - Retirement Benefits. This new guidance requires entities to (1) disaggregate the service cost component from the other components of net periodic benefit costs and present it with other current employee compensation costs in our Consolidated Statements of Operations and (2) present the other components of net periodic benefit costs below operating profit in other expense, net. We intend to adopt this new accounting guidance effective January 1, 2018. The new accounting guidance is applied retrospectively and will increase our operating profit by $7.9 and $2.1, for the years ended December 31, 2017 and 2016, respectively, but will have no impact on net income (loss).

ASU 2016-02, Leases

In February 2016, the FASB issued ASU 2016-02, Leases, which requires all assets and liabilities arising from leases to be recognized in our Consolidated Balance Sheets. We intend to adopt this new accounting guidance effective January 1, 2019. While we are still evaluating the full effect that adopting this new accounting guidance will have on our Consolidated Financial Statements, we believe that it will significantly increase the assets and liabilities in our Consolidated Balance Sheets.