Note C - New Accounting Standards
|9 Months Ended|
Jun. 29, 2019
|Notes to Financial Statements|
|Description of New Accounting Pronouncements Not yet Adopted [Text Block]||
Note C—New Accounting Standards
Recently Adopted Standards
May 2014,the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU")
Revenue from Contracts with Customers("ASU
09"). This new guidance requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU
09was effective for annual periods beginning after
December 15, 2017,for public business entities and permitted the use of either the retrospective or cumulative effect transition method. Early application is permitted only for annual reporting periods beginning after
December 15, 2016.ASU
09was adopted in our fiscal year beginning
September 30, 2018,using the modified retrospective transition method and we applied the provisions of ASU
09to all contracts at the date of adoption.
Our revenue streams consist of wholesale, direct-to-consumer ecommerce and retail stores which are included in our Condensed Consolidated Statements of Operations. The table below identifies the amount and percentage of net sales by distribution channel (in thousands):
The table below provides net sales by reportable segment (in thousands) and the percentage of net sales by distribution channel for each reportable segment:
Revenue is recognized when performance obligations under the terms of the contracts are satisfied. Our performance obligation primarily consists of delivering products to our customers. Control is transferred upon providing the products to customers in our retail stores, upon shipment of our products to the consumers from our ecommerce sites, and upon shipment from our distribution centers to our customers in our wholesale operations. Once control is transferred to the customer, we have completed our performance obligation.
Our receivables resulting from wholesale customers are generally collected within
twomonths, in accordance with our established credit terms. Our direct-to-consumer ecommerce and retail store receivables are collected within a few days. Our revenue, including freight income, is recognized net of applicable taxes in our Condensed Consolidated Statements of Operations.
In certain areas of our wholesale business, we offer discounts and allowances to support our customers. Some of these arrangements are written agreements, while others
maybe implied by customary practices in the industry. Wholesale sales are recorded net of discounts, allowances, and operational chargebacks. As certain allowances and other deductions are
notfinalized until the end of a season, program or other event which
nothave occurred, we estimate such discounts, allowances, and returns that we expect to provide.
In accordance with the new revenue guidance, we only recognize revenue to the extent that it is probable that we will
notrecognize a significant reversal of revenue when the uncertainties related to the variability are ultimately resolved. In determining our estimates for discounts, allowances, chargebacks, and returns, we consider historical and current trends, agreements with our customers and retailer performance. We record these discounts, returns and allowances as a reduction to net sales in our Condensed Consolidated Statements of Operations and as a liability in our accrued expenses in our Condensed Consolidated Balance Sheets, with the estimated value of inventory expected to be returned in prepaid and other current assets in our Condensed Consolidated Balance Sheets.
We have made accounting policy elections related to the new revenue recognition standard. We exclude any taxes collected from customers that are remitted to taxing authorities from net sales. We record shipping and handling charges incurred by us before and after the customer obtains control as a fulfillment cost rather than an additional promised service. Our customers' terms are less than
oneyear from the transfer of goods, and we do
notadjust receivable amounts for the impact of the time value of money. We do
notcapitalize costs of obtaining a contract which we expect to recover, such as commissions, as the amortization period of the asset recognized would be
oneyear or less. We do
notbelieve any of these expedients had a material impact on our financial statements upon our adoption of the guidance.
With the adoption of ASU
09,the timing of revenue recognition for our primary revenue streams remained substantially unchanged, with
nomaterial effect on net sales. See the table below (in thousands) for the effect of the adoption of the standard on our Condensed Consolidated Balance Sheets as of
due to the change in recording provisions for customer refunds as a liability instead of netted against trade accounts receivable.
June 29, 2019
August 2016,the FASB issued ASU
Statement of Cash Flows (Topic(
230), Classification of Certain Cash Receipts and Cash Payments,
15"). The amendments add or clarify guidance on the classification of certain cash receipts and payments in the statement of cash flows. This was issued with the intent of reducing diversity in practice with respect to certain types of cash flows. ASU
15is required to be adopted retrospectively. ASU
15is effective for financial statements issued for fiscal years beginning after
December 15, 2017,and interim periods within those annual periods. ASU
15was adopted in our fiscal year beginning
September 30, 2018.During the
Marchquarter, we paid
$0.6million in contingent consideration. With the adoption of ASU
$0.5million were recorded in net cash used in operating activities and financing activities, respectively.
February 2016,the FASB issued ASU
02requires lessees to recognize assets and liabilities for most leases. All leases will be required to be recorded on the balance sheet with the exception of short-term leases. The guidance must be adopted using a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements. ASU
02is effective for financial statements issued for annual periods beginning after
December 15, 2018,and interim periods within those annual periods, with early application permitted. ASU
02will therefore be adopted in our fiscal year beginning
. We are evaluating the effect that ASU
September 29, 2019
02will have on our Consolidated Financial Statements and related disclosures.
August 2017,the FASB issued ASU
Derivatives and Hedging (Topic(
815): Targeted Improvements to Accounting for Hedging Activities,
12"). The amendments in ASU
12apply to any entity that elects to apply hedge accounting in accordance with U.S. GAAP. ASU
12permits more flexibility in hedging interest rate risk for both variable rate and fixed rate financial instruments, and the ability to hedge risk components for nonfinancial hedges. In addition, this ASU requires an entity to present the earnings effect of hedging the instrument in the same income statement line in which the earnings effect of the hedge item is reported. In addition, companies
nolonger need to separately measure and report hedge ineffectiveness and can use an amortization approach or continue with mark-to-market accounting. ASU
12is effective for financial statements issued for fiscal years beginning after
December 15, 2018,and interim periods within those annual periods. ASU
12will be adopted in our fiscal year beginning
. We are evaluating the effect that ASU
September 29, 2019
12will have on our Consolidated Financial Statements and related disclosures.
January 2017,the FASB issued ASU
Intangibles - Goodwill and other (Topic, ("ASU
350), Simplifying the Test for Goodwill Impairment
04"). To simplify the subsequent measurement of goodwill, ASU
2from 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 a similar process that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination. Under ASU
04an entity should 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
notexceed 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. ASU
04also eliminates the requirements for any reporting unit with a
zeroor negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step
2of 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
zeroor 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. ASU
04is effective for financial statements issued for annual and interim periods beginning after
December 15, 2019.ASU
04will therefore be adopted in our fiscal year beginning
October 4, 2020.We are evaluating the effect that ASU
04will have on our Consolidated Financial Statements and related disclosures.
The entire disclosure for a new accounting pronouncement that has been issued but not yet adopted.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef