Summary of Selected Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2016

Summary of Significant Accounting Policies

Principles of Consolidation and Basis of Presentation

Principles of Consolidation and Basis of Presentation -The accompanying consolidated financial statements are presented in conformity with accounting principles generally accepted in the United States of America (“GAAP”), and pursuant to the accounting and disclosure rules and regulations of the Securities and Exchange Commission (the “SEC”) and Regulation S-X. 

The functional currency of the Czech subsidiaries is the local Czech koruna ("CZK") and the functional currency of the German subsidiary is the euro currency ("EUR"). However, as our primary reporting subsidiary, TWH&E, is a Czech entity, all transactions, regardless of sources of origin, are recognized (and in the case of the German hotel operation, are recognized first) in the Czech currency and translated to USD for reporting purposes.

All intercompany balances and transactions have been eliminated in consolidation.

Cash and Cash Equivalents

Cash and Cash Equivalents - Cash and cash equivalents are comprised of cash in hand; current balances with banks and similar institutions; term deposits of three months or less with banks and similar institutions.  The carrying amounts of cash at banks and in-hand and term bank deposits approximate their fair values.

Property and Equipment

Property and Equipment- Property and equipment is stated at cost less accumulated depreciation and amortization.  TWC capitalizes the cost of improvements that extend the life of the asset and expenses maintenance and repair costs as incurred.  The Company provides for depreciation and amortization using the straight-line method over the following estimated useful lives:

Asset	Estimated Useful Life
Buildings	30-50  years
Leasehold improvements	5-20  years
Furniture, fixtures and other equipment	4-10  years

Goodwill

Asset	Estimated Useful Life
Buildings	30-50  years
Leasehold improvements	5-20  years
Furniture, fixtures and other equipment	4-10  years

Goodwill - Goodwill represents the excess of the cost of the Company’s subsidiaries over the fair value of their net assets at the date of acquisition.  In the CZ, this consisted of the Ceska casino and a parcel of land in Hate (upon a portion of which the Route 59 Casino and Hotel Savannah are situated). In Germany, it consists of the Hotel Freizeit Auefeld.  In light of the recent acquisition of German assets, TWC’s allocation of its Czech goodwill over two geographical reporting units, which are components of the casino segment, have been renamed and classified as the “Pilsen reporting unit” (“PRU”), which consists of the Ceska casino, and the “South Moravia reporting unit” (“SMRU”), which consists of the land in Hate. The hotel segment goodwill is derived from the Hotel Freizeit Auefeld, and is represented by the “Lower Saxony reporting unit” (“LSRU”).

Goodwill impairment tests allow the Company to first assess qualitative factors to determine whether it is necessary to perform a two-step quantitative goodwill impairment test.  The Company is not required to calculate the fair value of a reporting unit unless it determines, based on a qualitative assessment, that it is more likely than not that its fair value is less than its carrying amount.  The Company assesses the potential impairment of goodwill annually, as of September 30th, and on an interim basis whenever events or changes in circumstances indicate that the carrying value may not be recoverable.  Upon completion of such review, if impairment is found to have occurred, a corresponding charge will be recorded. 

Based on TWC’s own assessment of qualitative factors which included an analysis of macroeconomic conditions, financial performance, industry and market considerations, and other factors, the Company concluded that it was not necessary to perform a two-step quantitative goodwill impairment test and that the goodwill of the Company was not impaired as of September 30, 2016, its annual assessment date.  There were no triggering factors during the fourth quarter of 2016, hence, no additional goodwill impairment testing was warranted as of December 31, 2016.

Comprehensive Income (Loss)

Comprehensive Income (Loss) —  The Company complies with requirements for reporting comprehensive income (loss).  Those requirements establish rules for reporting and display of comprehensive income (loss) and its components.  Furthermore, they require the Company’s change in the foreign currency translation adjustments to be included in other comprehensive income (loss). There were no other components of the Company’s comprehensive income (loss) in 2016 and 2015.

Foreign Currency Translation

Foreign Currency Translation- The Company complies with requirements for reporting foreign currency translation, which require that for foreign subsidiaries whose functional currency is the local foreign currency, balance sheet accounts are translated at exchange rates in effect at the end of the year and resulting translation adjustments are included in “accumulated other comprehensive income.”  Statement of income accounts are translated by applying monthly averages of daily exchange rates on the respective monthly local statement of operations accounts for the year.

The impact of foreign currency translation on goodwill is presented below:

	Goodwill
	Casino Segment						Hotel Segment			Total
	Pilsen			South-Moravia			Lower Saxony
As of December 31, 2016 (in thousands, except FX)	reporting unit			reporting unit			reporting unit
Balance in USD ($)	$	3,042	(1)	$	537	(1)	$	131		$	3,710
Balance in EUR (€)							€	119		€	119
Foreign Exchange Rate ("FX")		33.883			33.883			27.245
Balance in CZK (Kč)	Kč	103,072	(2)	Kč	18,195	(2)	Kč	3,242	(3)	Kč	124,509
Applicable FX(4)		25.639			25.639			25.639
Balance at December 31, 2016	$	4,020		$	710		$	127		$	4,857
Net cumulative change to goodwill due to foreign currency translation	$	978		$	173		$	(4)		$	1,147

(1) Goodwill was amortized over 15 years until the Company started to comply with revised GAAP requirements, as of January 1, 2002. This balance represents the remaining, unamortized goodwill, after an impairment charge was taken prior to January 1, 2003.

(2) USD residual balance translated to CZK at June 30, 1998, the date of acquisition of such assets, with the date of acquisition CZK to USD FX rate of 33.883.

(3) EUR balance translated to CZK at June 1, 2015, the date of acquisition of the Hotel Freizeit, with the date of acquisition FX rate of 27.245 from CZK to EUR.

(4) FX central bank foreign exchange rates taken from www.CNB.CZ.

Earnings Per Common Share

Earnings Per Common Share- The Company complies with accounting and disclosure requirements regarding earnings per share.  Basic earnings per common share are computed by dividing net income by the weighted average number of common shares outstanding during the period.  Diluted earnings per common share incorporate the dilutive effect of Common Stock equivalents on an average basis during the period.  As of December 31, 2016, the Company’s Common Stock equivalents include 665,000 unexercised stock options, 50,000 shares of restricted stock, and 626,028 shares issuable under the Company’s Deferred Compensation Plan.  As of December 31, 2015, the Common Stock equivalents included 635,000 unexercised stock options, 75,000 shares of restricted stock, and 436,842 deferred compensation shares.  These shares for the respective years were included in the computation of diluted earnings per common share, if such unexercised stock options, restricted stock, and deferred compensation stock were vested and/or “in-the-money,” as the case may be.

A table illustrating the impact of dilution on earnings per share, based on the treasury stock method, is presented below:

	For the Year Ended
	December 31,
	2016		2015
Basic earnings per share:
Net income	$	6,323	$	3,858
Weighted average common shares		8,838,984		8,822,488
Basic earnings per share	$	0.72	$	0.44
Diluted earnings per share:
Net income	$	6,323	$	3,858
Weighted average common shares		8,838,984		8,822,488
Addition due to the effect of dilutive securities using the treasury stock method:
Stock options		33,566		223
Stock issuable under the Deferred Compensation Plan		626,028		436,842
Dilutive potential common shares		9,498,578		9,259,553
Diluted earnings per share	$	0.67	$	0.42

Revenue Recognition

Revenue Recognition -Casino revenue is defined as the net win from gambling activities, which is the difference between gaming wagers and the amount paid out to patrons, and is recognized on the day it is earned. Revenues generated from ancillary services include hotel room rentals, sales of F&B, spa services, and sales of casino logo merchandise and are recognized at the time the related services are performed or goods sold, as shown in the table below, as a percentage of total revenue.

Revenue segment as percentage of total revenue:

	For the Year Ended
	December 31,
	2016		2015
Gaming	87.4	%	87.5	%
Rooms	7.1	%	7.1	%
F&B	4.9	%	4.7	%
Spa/Other departments	0.2	%	0.3	%
Other	0.4	%	0.4	%
Total Revenue	100.0	%	100.0	%

Business Acquisitions

Business Acquisitions - Assets acquired and liabilities assumed in business combinations are recorded on the Company’s consolidated balance sheets as of the respective agreed acquisition dates based upon their estimated fair values at such dates.  The results of operations of businesses acquired by the Company have been included in the consolidated statements of income since their respective dates of acquisition.  In certain circumstances, the purchase price allocations may be based upon preliminary estimates and assumptions.  Accordingly, the allocations are subject to revision until the Company receives final information and other analyses during the measurement period ending a year after the date of  acquisition.

Segment Reporting

Segment ReportingOn September 1, 2014, the Company acquired Hotel Columbus and after this acquisition, the Company determined, due to the significance of the assets acquired and pursuant to Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 280, Segment Reporting, that the Company had two reportable segments, a casino segment and a hotel segment.  ASC 280 designates the internal reporting that is used by management for making operating decisions and assessing performance as the source of the Company’s reportable segments.  The Company is including this segment reporting under Note 14 – “Segment Information,” below.

Promotional Allowances

Promotional AllowancesPromotional allowances primarily consist of the provision of complimentary food and beverages and, to certain of its valuable players, hotel or room accommodations.  For the years ended December 31, 2016 and 2015, revenues do not include the aggregate of retail amount of food and beverages (“F&B”) and hotel or room accommodations of $7,496 and $6,688, respectively, provided at no-charge to customers. The retail value of the F&B given away is determined by dividing the F&B costs charged to the gaming operation of $2,655 and $2,404, for the respective periods, by the average percentage of cost of F&B sold.  The cost of hotel or room accommodations is either the out-of-pocket expenses paid to other hotels to accommodate TWC’s customers or the retail charge of room accommodations at the Company’s Hotel Savannah and at its VIP guest rooms at Ceska and at Route 55.

The promotional allowances are summarized below:

	For the Year Ended
	December 31,
	2016			2015
Cost of complimentary F&B (A)	$	2,655		$	2,404
Average cost of F&B sold (B)		36.1	%		36.7	%
Retail value of F&B (A/B)		7,355			6,550
Cost of hotel accommodations		141			138
Total hypothetical retail value	$	7,496		$	6,688

External Advertising

External Advertising-  The Company complies with the accounting and reporting requirements for reporting on advertising costs.  External advertising expenses are charged to operations as incurred and were $140 and $175 for the years ended December 31, 2016 and 2015, respectively, as recorded in the selling, general and administrative expenses of the consolidated statements of operations.

Fair Value of Financial Instruments

Fair Value of Financial Instruments-The fair values of the Company’s assets and liabilities that qualify as financial instruments, mainly the debts underlying the assets of the three German hotels, approximate their carrying amounts presented in the accompanying consolidated balance sheets at December 31, 2016 and 2015, respectively.

Use of Estimates

Use of Estimates-The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, as well as the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

Impairment of Long-lived Assets

Impairment of Long-Lived Assets-The Company periodically evaluates whether current facts or circumstances indicate that the carrying value of its depreciable assets to be held and used may be recoverable.  If such circumstances are determined to exist, an estimate of undiscounted future cash flows produced by the long-lived assets, or by the appropriate grouping of assets, is compared to the carrying value to determine whether an impairment exists.  If an asset is determined to be impaired, the loss is measured based on the difference between the asset’s fair value and its carrying value. An estimate of the asset’s fair value is based on quoted market prices in active markets, if available. If quoted market prices are not available, the estimate of fair value is based on various valuation techniques, including a discounted value of estimated future cash flows. The Company reports an asset to be disposed of at the lower of its carrying value or its estimated net realizable market value. There were no impairment losses for long-lived assets recorded for the years ended December 31, 2016 and 2015, respectively.

Stock-based Compensation

Stock-based Compensation The Company accounts for stock options using the modified prospective method in accordance with FASB ASC 718-10, “Compensation-Stock Compensation.”  Under this method, compensation costs include the estimated grant date fair value of the awards amortized over the options’ vesting period.

The Company currently utilizes the Black-Scholes option pricing model to measure the fair value of stock options granted to certain key management employees (“KMEs”).  Stock-based compensation was approximately $358 and $78 for the years ended December 31, 2016 and 2015, respectively, and is included in selling, general and administrative expenses in the consolidated statements of operations.

Czech Gaming Taxes

Czech Gaming Taxes- In December 2011, the Czech parliament passed sweeping gaming tax legislation, which was then signed by the Czech president into law. The gaming tax law (“2012 Gaming Tax Law”) law took effect on January 1, 2012. The gaming tax law is summarized below, in actual monetary amounts (not in thousands):

	2012 Gaming Tax Law
(in actual amounts)	(Effective from January 1, 2012 to December 31, 2015)
Live Games	20% gaming tax from revenue earned from live games (70% of tax paid to the federal government; 30% paid to the local municipality).
Slots	20% gaming tax from revenue earned from slot games (20% of tax paid to the federal government; 80% paid to the local municipality);
	CZK 55 (or approximately $2.15) gaming tax per slot machine, per day (paid to the federal government).
Net Income	19% corporate income tax on adjusted net income earned in the Czech Republic, net of exemptions (paid to the federal government).

In December 2015, the President of the Czech Republic signed an amendment to the Gaming Tax Law (“2016 Gaming Tax Amendment”) that effectively raised the rates of these gaming taxes. The amendment became effective on January 1, 2016 and the new rates in the gaming tax law are as follow:

	2016 Gaming Tax Amendment
(in actual amounts)	(Effective from January 1, 2016 to December 31, 2016)
Live Games	23% gaming tax from revenue earned from live games (70% of tax allocated to the federal government; 30% of tax allocated to the local municipality).
Slots	28% gaming tax from revenue earned from slot games (20% of tax allocated to the federal government; 80% of tax allocated to the local municipality); and a per diem fixed fee of Kč 80 (approximately $3.12) per slot machine (allocated to the federal government).
Net Income	No change from the 19% corporate income tax noted above

Gaming taxes are payable by the 25th day following the end of each calendar quarter, while corporate income tax obligation is paid by June 30th of the subsequent year. The Company is also required to make estimated quarterly income tax payments. TWC was current on all of its Czech tax payments at December 31, 2016 and through the date of this report.

TWC’s gaming-related taxes and fees, which are recognized in the Gaming Department’s expenses, for the years ended December 31, 2016 and 2015 are summarized in the following table:

	For the Year Ended
(amounts in thousands)	December 31,
	2016			2015
Gaming revenues (excluding ancillary revenues)	$	44,967		$	35,682
Gaming taxes and fees		12,398			7,441
Gaming taxes and fees as % of above gaming revenues		27.6	%		20.9	%

In conformity with the European Union (“EU”) taxation legislation, the Czech Republic’s VAT has gradually increased from 5%, when that country joined the EU in 2004, to 21%, the effective rate since 2013. Unlike in other industries, VATs are not recoverable for gambling operations. The recoverable VAT under the Hotel Savannah and Hotel Columbus operations was not material for the years ended December 31, 2016 and 2015, respectively.  

On June 7, 2016, the President of Czechia signed the 2017 Gambling Act (186/2016 Coll.) (the “Gambling Act”) and the 2017 Gambling Tax Act (187/2016 Coll.) (the “2017 Gambling Tax Act”) (collectively referred to as the “Gambling Acts”).  The Gambling Acts became law on June 15, 2016, when they were published in the official Collection of Laws, maintained by the Czech Ministry of the Interior.  The 2017 Gambling Tax Act, which is took effect on January 1, 2017, raised the gaming tax rate on technical game (i.e. slot machine or electromechanical roulette or dice) revenues to the greater of a “minimum tax” or 35%, and eliminated the per diem fixed fee of actual amount of Kč 80 (approximately $3.12) on each slot machine.  This new “minimum tax” on technical games is equal to the product of:  (x) the sum of all gambling positions of individual approved terminal devices (such as slot machines, electromechanical roulette and dice machines) permitted for the location of the gambling premises, times (y) Kč 9,200 (approximately $359).  Therefore, if the aggregate tax amount collected from the 35% gaming tax on technical game revenues is lower than the computed “minimum tax,” then the casino operator must pay the “minimum tax” and not the aggregate tax amount collected from the 35% gaming tax.  Otherwise, if the aggregate tax amount collected from the 35% gaming tax on technical game revenues is greater than the computed “minimum tax,” then the casino operator need only pay the aggregate tax amount collected from the 35% gaming tax and not the “minimum tax.”  The gaming tax rate on live game (i.e. cards, roulette or dice) revenues remains unchanged at 23%.  Further, the 2017 Gambling Tax Act modified the tax revenue allocation between the federal government and local municipalities.  A summary table of the 2017 Gambling Tax Act is shown below:

	2017 Gambling Tax Act
(in actual amounts)	(Effective from January 1, 2017)
Live Games	23% gaming tax from revenue earned from live games (70% of tax allocated to the federal government; 30% of tax allocated to the local municipality).
Slot and other technical games	The greater of either: (a) the aggregate amount collected from 35% gaming tax from revenue earned from slot and other technical games (35% of tax allocated to the federal government; 65% of tax allocated to the local municipality), or (b) a "minimum tax," calculated as the product of the sum of all gambling positions of individual approved terminal devices referred to in the permit for the location of the gambling premises times Kč 9,200 (approximately $359).

The 2017 Gambling Act introduces many new changes, requirements and conditions, that will take effect at various times in the future, some taking effect on the date of enactment, some on January 1, 2017 and certain provisions taking effect upon the renewal of the casino operator’s gambling licenses.  Although TWC’s 10-year gambling license expires in September 2018, and its slot operating one-year license expires at the end of 2017, the Company has begun to take steps to conform to these requirements for when it applies for renewal of its slot and other technical game license.  The Company is also awaiting the Czech Ministry of Finance’s (“MOF”) final interpretation of these new measures, some of which were clarified in August 2016 and others are awaiting further clarifications from the MOF.  The notable changes and requirements are summarized in the section, “New Gambling Acts and their Impact” in in Item 7. “Management Discussion and Analysis.” 

The Company currently estimates that if the 2017 Gambling Tax Act were in effect for the full year ended December 31, 2016, it would have resulted in an annual reduction of approximately $1,300 to the Company’s consolidated earnings before income taxes, assuming all other factors remained constant.  The total impact of the 2017 Gambling Act cannot be quantified or estimated pending the interpretation of these measures by the MOF and their eventual implementation into the Company’s gambling operations.

Income Taxes

Income Taxes-The Company complies with accounting and reporting requirements with respect to accounting for U.S. federal and foreign income taxes, which require an asset and liability approach to financial accounting and reporting for income taxes.  Deferred income tax assets and liabilities are computed for differences between the financial statement and the tax bases of assets and liabilities that will result in future taxable or deductible amounts, based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income.  Valuation allowances are established, when necessary, to reduce deferred income tax assets to the amount expected to be realized.  In accordance with U.S. GAAP, the Company is required to determine whether a tax position of the Company is more likely than not to be sustained upon examination by the applicable taxing authority, including resolution of any related appeals or litigation processes, based on the technical merits of the position.  The tax benefit to be recognized is measured as the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement.  De-recognition of a tax benefit previously recognized could result in the Company recording a tax liability that would reduce net assets.  This policy also provides guidance on thresholds, measurement, de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition that is intended to provide better financial statement comparability among different entities.  The Company recognizes interest and penalties related to unrecognized tax benefits in interest expense and other expenses, respectively. No interest expense or penalties have been recognized as of and for the years ended December 31, 2016 and 2015. However, management’s conclusions regarding this policy may be subject to review and adjustment at a later date based on factors including, but not limited to, on-going analyses of and changes to tax laws, regulations and interpretations thereof.

Effective January 1, 2012, the Czech government instituted an effective corporate income tax of 19% on income derived from gaming revenues, which prior to the law changes were subject only to gaming taxes. See Note 10 – “Income Taxes,” below.

Germany had an effective corporate income tax rate of approximately 30% for the years ended December 31, 2016 and 2015. The Company’s German hotel operations were not subject to income tax due to a net operating loss for the years ended December 31, 2016 and 2015, respectively.

Recent Accounting Pronouncements

Recent Accounting Pronouncements- In May 2014, the FASB issued guidance on recognizing revenue from contracts with customers. The guidance clarifies the principles for recognizing revenue and establishes a common revenue standard for US GAAP and International Financial Reporting Standards. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. Early adoption is not permitted. Retrospective application is required. The Company is currently evaluating the impact of adopting and does not expect the standard to have any material impact on its consolidated financial statements.

In June 2014, the FASB issued guidance on stock compensation that requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. As such, the performance target should not be reflected in estimating the grant date fair value of the award. The guidance is effective for annual reporting periods beginning after December 31, 2015, with early adoption permitted. The Company’s adoption of this standard did not have a material impact on the Company’s consolidated financial statements.

In August 2014, the FASB issued guidance on the presentation of financial statements for a going concern. The aim is to provide guidance on management’s responsibility to evaluate whether there is substantial doubt about a company’s ability to continue as a going concern and to provide related footnote disclosures. This guidance is effective for fiscal years ending after December 15, 2016, and annual and interim periods thereafter. The Company’s adoption of this standard did not have a material impact on the Company’s consolidated financial statements.

In April 2015, the FASB issued amended accounting guidance that changes the balance sheet presentation of debt issuance costs. Under the amended guidance, debt issuance costs will be presented on the balance sheet as a direct deduction from the related debt liability rather than as an asset. For public companies, the new guidance is effective for financial statements issued for fiscal years beginning after December 15, 2015 (including interim periods within those fiscal years), and is required to be applied on a retrospective basis. The impact of the adoption did not have an effect on the Company’s consolidated financial statements.

In September 2015, the FASB issued updated guidance on business combinations.  GAAP required that during the measurement period, the acquirer retrospectively adjust the provisional amounts recognized at the acquisition date with a corresponding adjustment to goodwill. Those adjustments are required when new information is obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement of the amounts initially recognized or would have resulted in the recognition of additional assets or liabilities. The acquirer also must revise comparative information for prior periods presented in financial statements as needed, including revising depreciation, amortization, or other income effects as a result of changes made to provisional amounts. To simplify the accounting for adjustments made to provisional amounts recognized in a business combination, this update eliminates the requirement to retrospectively account for those adjustments.  For public companies, the updated guidance is effective for financial statements issued for fiscal years beginning after December 15, 2015.  This update should be applied prospectively to adjustments to provisional amounts that occur after the effective date of this update with earlier application permitted for financial statements that have not been issued.  The Company adopted this guidance in 2016, which did not have any material impact on its consolidated financial statements.

In November 2015, the FASB issued updated guidance on income taxes.  Current GAAP requires an entity to separate deferred income tax liabilities and assets into current and noncurrent amounts in a classified statement of financial position. To simplify the presentation of deferred income taxes, this update requires that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. The current requirement that deferred tax liabilities and assets of a tax-paying component of an entity be offset and presented as a single amount is not affected by this update.  For public companies, the updated guidance is effective for financial statements issued for annual periods beginning after December 15, 2016.  Early adoption is permitted. The adoption of this guidance is reflected in the Company’s consolidated financial statements.

In February 2016, the FASB issued updated guidance to increase transparency and comparability among organizations by reporting lease assets and lease liabilities, both finance (capital) and operating leases, on the balance sheet and disclosing key information about leasing arrangements.  For public companies, the updated guidance is effective for financial statements issued for fiscal years beginning after December 15, 2018 (including interim periods within those fiscal years).  Early adoption is permitted.  The Company has not adopted this guidance for 2016 and is currently evaluating the impact of adopting this standard. The adoption of this standard would require the Company to report its leases on slot machines in assets and liabilities of its consolidated balance sheets.

In March 2016, the FASB issued updated guidance, as part of its Simplification Initiative, which covers several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. For public business entities, the amendments in this updated guidance are effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods.  Early adoption is permitted for any entity in any interim or annual period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. An entity that elects early adoption must adopt all of the amendments in the same period.  The Company is currently evaluating the impact of adopting and does not expect the standard to have any material impact on its consolidated financial statements.   

In January 2017, the FASB issued updated guidance to 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.  Under the current implementation guidance, there are three elements of a business—inputs, processes, and outputs. While an integrated set of assets and activities (collectively referred to as a “set”) that is a business usually has outputs, outputs are not required to be present. In addition, all the inputs and processes that a seller uses in operating a set are not required if market participants can acquire the set and continue to produce outputs, for example, by integrating the acquired set with their own inputs and processes. The amendments in this Update provide a screen to determine when a set is not a business. The screen 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 screen reduces the number of transactions that need to be further evaluated. If the screen is not met, the amendments in this Update (1) require that to be considered a business, a set must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create output and (2) remove the evaluation of whether a market participant could replace missing elements. The updated guidance provide a framework to assist entities in evaluating whether both an input and a substantive process are present. The framework includes two sets of criteria to consider that depend on whether a set has outputs. Although outputs are not required for a set to be a business, outputs generally are a key element of a business; therefore, the Board has developed more stringent criteria for sets without outputs. Lastly, the updated guidance narrows the definition of the term output so that the term is consistent with how outputs are described in another guidance regarding revenue from contracts with customers.  Public business entities should apply the amendments in this Update to annual periods beginning after December 15, 2017, including interim periods within those periods.  This updated guidance should be applied prospectively on or after the effective date. No disclosures are required at transition.  The Company is currently evaluating the impact of adopting and does not expect the standard to have any material impact on its consolidated financial statements.   

In January 2017, the FASB issued updated guidance to simplify the subsequent measurement of goodwill, by eliminating Step 2 from the goodwill impairment test. In computing the implied fair value of goodwill under Step 2, an entity had to perform procedures to determine the fair value at the impairment testing date of its assets and liabilities (including unrecognized assets and liabilities) following the procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination. Instead, under the amendments in this Update, an entity must perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Additionally, an entity should consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. The FASB also eliminated the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test. Therefore, the same impairment assessment applies to all reporting units. An entity is required to disclose the amount of goodwill allocated to each reporting unit with a zero or negative carrying amount of net assets. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary.  An entity should apply this updated guidance in this update on a prospective basis. An entity is required to disclose the nature of and reason for the change in accounting principle upon transition. That disclosure should be provided in the first annual period and in the interim period within the first annual period when the entity initially adopts the amendments in this update. A public business entity that is an SEC filer should adopt this updated guidance for its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019.  Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017.  The Company has not adopted this updated guidance for 2016 and is currently evaluating the impact of adopting this standard.