Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2017

Basis of Accounting, Policy [Policy Text Block]

In the opinion of management, the accompanying consolidated financial statements for Tandy Leather Factory, Inc. and its consolidated subsidiaries contain all adjustments (consisting of normal recurring adjustments) necessary to present fairly its financial position as of

June 30, 2017

and

December 31, 2016,

and its results of operations and cash flows for the

three

and

six

-month periods ended

June 30, 2017

and

2016.

Operating results for the

three

and

six

-month periods ended

June 30, 2017

are

not

necessarily indicative of the results that

may

be expected for the year ending

December 31, 2017.

These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes included in our Annual Report on Form

-K for the year ended

December 31, 2016.

The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Reclassification, Policy [Policy Text Block]

Reclassificati

ons

Certain prior year amounts have been reclassified to conform to the current year presentation.

Inventory, Policy [Policy Text Block]

Inventory

Inventory is valued at the lower of

first

-in,

first

-out cost or market. In addition, the value of inventory is periodically reduced to net realizable value for slow-moving or obsolete inventory based on management's review of items on hand compared to their estimated future demand.

Based on negotiations with vendors, title generally passes to us when merchandise is put on board. Merchandise to which we have title but have

not

yet received is recorded as inventory in transit.

	June 30, 2017		December 31, 2016
Inventory on hand:
Finished goods held for sale	$	33,665,227	$	30,684,026
Raw materials and work in process		1,574,142		1,034,041
Inventory in transit		2,088,119		1,459,472
	$	37,327,488	$	33,177,539

Goodwill and Intangible Assets, Policy [Policy Text Block]

Goodwill and Other Intangibles

Goodwill represents the excess of the purchase price over the fair value of net assets acquired in a business combination. Goodwill is required to be evaluated for impairment on an annual basis, absent indicators of impairment during the interim. Application of the goodwill impairment test requires exercise of judgment, including the estimation of future cash flows, determination of appropriate discount rates and other important assumptions. Changes in these estimates and assumptions could materially affect the determination of fair value and/or goodwill impairment for each reporting unit.

two

-step process is used to test for goodwill impairment. The

first

phase screens for impairment, while the

second

phase (if necessary) measures the impairment. We have elected to perform the annual analysis during the

fourth

calendar quarter of each year. As of

December 31, 2016,

management determined that the present value of the discounted estimated future cash flows of the stores associated with the goodwill is sufficient to support their respective goodwill balances.

indicators of impairment were identified during the

first

half of

2017.

The only change in our goodwill for the

six

-month periods ended

June 30, 2017

and

2016

resulted from foreign currency translation of

$3,596

and

$6,512,

respectively.

Other intangibles consist of the following:

	June 30, 2017						December 31, 2016
	Gross		Accumulated Amortization		Net		Gross		Accumulated Amortization		Net
Trademarks, Copyrights	$	554,369	$	545,665	$	8,704	$	554,369	$	545,279	$	9,090
Non-Compete Agreements		175,316		164,066		11,250		175,316		163,566		11,750
	$	729,685	$	709,731	$	19,954	$	729,685	$	708,845	$	20,840

We recorded amortization expense of

$886

during the

six

months ended

June 30, 2017

compared to

$5,054

during the

first

half of

2016.

All of our intangible assets, other than goodwill, are subject to amortization under U.S. GAAP. Based on the current amount of intangible assets subject to amortization, the estimated amortization expense for each of the succeeding

years is as follows:

2017		871
2018		1,417
2019		666
2020		666
2021		666
Thereafter	$	5,668

Revenue Recognition, Policy [Policy Text Block]

Revenue Recognition

Our sales generally occur via

two

methods: (

) at the counter in our stores, and (

) shipment by common carrier. Sales at the counter are recorded and title passes as transactions occur. Otherwise, sales are recorded and title passes when the merchandise is shipped to the customer. Shipping terms are normally FOB shipping point. Sales tax and comparable foreign tax is excluded from revenue

We offer an unconditional satisfaction guarantee to our customers and accept all product returns. Net sales represent gross sales less negotiated price allowances, product returns, and allowances for defective merchandise.

Comprehensive Income, Policy [Policy Text Block]

Comprehensive Income (

loss

Comprehensive income includes net income and certain other items that are recorded directly to Stockholders’ Equity. Our only source of other comprehensive income is foreign currency translation adjustments

New Accounting Pronouncements, Policy [Policy Text Block]

Recent Account

ing Pronouncements.

May 2014,

the Financial Accounting Standards Board (“FASB”) issued ASU

No.

2014

09,

which amends ASC Topic

606,

“Revenue from Contracts with Customers”. The amendments in this ASU are intended to provide a more robust framework for addressing revenue issues, improve comparability of revenue recognition practices and improve disclosure requirements. The amendments in this accounting standard update are effective for interim and annual reporting periods beginning after

December

15,

2016.

April 2015,

FASB issued ASU

No.

2015

24,

Revenue from Contracts with Customers: Deferral of the Effective Date which proposed a deferral of the effective date by

one

year, and on

July 7, 2015,

FASB decided to delay the effective date by

one

year. The deferral results in the new revenue standard being effective for fiscal years, and interim periods within those fiscal years, beginning after

December 15, 2017.

We are therefore required to apply the new revenue guidance beginning in our

2018

interim and annual financial statements. This ASU can be adopted either retrospectively or as a cumulative-effect adjustment as of the date of adoption. Entities reporting under U.S. GAAP are

not

permitted to adopt this standard earlier than the original effective date for public entities (that is,

earlier than

2017

for calendar year-end entities.) We are currently evaluating what impact, if any, the adoption of this guidance will have on our financial condition, results of operations, cash flows and financial disclosures. Based on our procedures to date, we believe that the adoption will

not

have a material impact to our financial condition, results of operations or cash flows although our disclosures will be expanded. We expect to adopt ASU

No.

2014

under the modified retrospective method. Given the nature of our business and that our sales generally occur at the counter or by shipment through common carrier at observable transaction prices with little, if any, variable consideration factors, we do

not

expect there to be significant changes to the amount and timing of revenue recognition. Finally, while we offer an unconditional right of return to our customers, this has historically been immaterial to our financial condition, results of operations and cash flows (annual gross product returns historically have represent less than

0.5%

of our net sales over the last

three

years).

February 2016,

the FASB issued ASU

2016

02,

“Leases”, a comprehensive new standard that amends various aspects of existing accounting guidance for leases, including the recognition of a right of use asset and a lease liability for leases with a duration greater than

one

year. The guidance is effective for fiscal years beginning after

December 15, 2018,

including interim periods within those fiscal years. Early adoption is permitted. We have

not

completed our review of the new guidance; however, we anticipate that upon adoption of the standard, using a modified retrospective approach, we will recognize additional assets and corresponding liabilities related to leases on our balance sheet.