Recently Adopted Accounting Standards

ASU 2015-11, “Simplifying the Measurement of Inventory”. ASU 2015-11 was issued in July 2015. ASU 2015-11 applies to inventory measured using the first-in, first-out (“FIFO”) or average cost methods. Under the updated guidance, an entity should measure inventory that is within scope at the lower of cost and net realizable value, which is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. The Company adopted ASU 2015-11 in the quarter ended March 31, 2017, and it did not have a material impact on our financial position or results of operations.

ASU 2016-09, “Improvements to Employee Share-Based Payment Accounting”. ASU 2016-09 was issued in March 2016 and it simplifies several aspects of accounting for share-based payment transactions, including the income tax consequences, forfeitures, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The guidance is effective for annual reporting periods beginning after December 15, 2016, including interim periods. Early adoption is permitted. An entity that elects early adoption of the amendment under ASU 2016-09 must adopt all aspects of the amendment in the same period. The Company adopted ASU 2016-09 in the quarter ended March 31, 2017 and it did not have a material effect on our financial position or results of operations.

ASU 2015-17, “Income Taxes”. ASU 2015-17 was issued in December 2015 and addresses simplification of the presentation of deferred income taxes. The amendments in ASU 2015-17 require that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. The amendments in this Update apply to all entities that present a classified statement of financial position. The current requirement is that deferred tax liabilities and assets, net of a tax-paying component of an entity be offset and presented as two amounts; one current and one long-term. ASU 2015-17 is effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Early adoption was permitted. The Company adopted ASU 2015-17 in the quarter ended March 31, 2017 and it did not have a material impact on our financial position or results of operations.

Accounting Standards Issued; Not Yet Adopted

ASU 2017-09, “Compensation – Stock Compensation (Topic 718)”. ASU 2017-09 was issued in May 2017. The amendment in ASU 2017-09 provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. More specifically, that an entity should account for the effects of modification unless all the following are met: 1) the fair value, calculated or intrinsic value of the modified award is the same fair value, calculated or intrinsic value of the original award immediately before the original award is modified, 2) the vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified and 3) the classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original grant is modified. The current disclosure requirements in Topic 718 apply regardless of whether accounting modification is applied. ASU 2017-09 is effective for annual periods and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted. The Company is in the process of evaluating the impact of ASU 2017-09.

ASU 2017-07, “Compensation - Retirement Benefits”. ASU 2017-07 was issued in March 2017. The amendments in ASU 2017-07 require an employer to report the service cost component of pension and postretirement benefits in the same line item or items as other compensation costs. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside of a subtotal of income from operations. In addition, only the service cost component will be eligible for capitalization as applicable following labor. ASU 2017-07 is effective for interim and annual periods beginning after December 15, 2017. Early adoption is permitted as of the beginning of an annual period for which financial statements have not been issued or made available for issuance. The Company is in the process of evaluating the impact of ASU 2017-07.

ASU 2017-04, “Intangibles – Goodwill and Other (Topic 350)”. ASU 2017-04 was issued in January 2017. The amendments in ASU 2017-04 indicate that an entity will no longer perform a hypothetical purchase price allocation to measure impairment, eliminating step 2 of the goodwill impairment test. Instead, impairment will be measured using the difference of the carrying amount to the fair value of the reporting unit. The ASU is effective prospectively for annual and interim periods in fiscal years beginning after December 15, 2019, but early adoption is permitted for goodwill impairment tests with measurement dates after January 1, 2017. The Company is in the process of evaluating the impact of ASU 2017-04.

ASU 2017-01, “Business Combinations (Topic 805)”. ASU 2017-01 was issued in January 2017. The amendments in ASU 2017-01 clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions or disposals of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The guidance is effective for interim and annual periods beginning after December 15, 2017 and should be applied prospectively on or after the effective date. The Company is in the process of evaluating the impact of ASU 2017-01.

ASU 2016-02, “Leases”. ASU 2016-02 was issued in February 2016 and it requires a lessee to recognize a lease liability and a right-of-use asset on its balance sheet for all leases, including operating leases, with a term greater than 12 months. Lease classification will determine whether a lease is reported as a financing transaction in the income statement and statement of cash flows. ASU 2016-02 does not substantially change lessor accounting, but it does make certain changes related to leases for which collectability of the lease payments is uncertain or there are significant variable payments. Additionally, ASU 2016-02 makes several other targeted amendments including a) revising the definition of lease payments to include fixed payments by the lessee to cover lessor costs related to ownership of the underlying asset such as for property taxes or insurance; b) narrowing the definition of initial direct costs which an entity is permitted to capitalize to include only those incremental costs of a lease that would not have been incurred if the lease had not been obtained; c) requiring seller-lessees in a sale-leaseback transaction to recognize the entire gain from the sale of the underlying asset at the time of sale rather than over the leaseback term; and d) expanding disclosures to provide quantitative and qualitative information about lease transactions. ASU 2016-02 is effective for all annual and interim periods beginning January 1, 2019, and is required to be applied retrospectively to the earliest period presented at the date of initial application, with early adoption permitted. The Company is currently evaluating the impact of adopting ASU 2016-02.

ASU 2014-09, “Revenue from Contracts with Customers”. ASU 2014-09 was issued in May 2014 and it provides guidance for revenue recognition. The core principle of ASU 2014-09 is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In doing so, companies will need to use more judgment and make more estimates than under current guidance. Examples of the use of judgments and estimates may include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. The update also requires more detailed disclosures to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. ASU 2014-09 provides for two transition methods to the new guidance: a retrospective approach and a modified retrospective approach. In August 2015, ASU 2015-14, “Revenue from Contracts with Customers: Deferral of the Effective Date” was issued as a revision to ASU 2014-09. ASU 2015-14 revised the effective date to fiscal years, and interim periods within those years, beginning after December 15, 2017. Early adoption is permitted but not prior to periods beginning after December 15, 2016 (i.e. the original adoption date per ASU No. 2014-09). The Company is currently evaluating the transition methods and the impact of adopting this ASU.

There are no other accounting pronouncements issues during the six months ended June 30, 2017 that are expected to have or that could have a significant impact on our financial position or results of operations.