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Recent Accounting Standards | 12 Months Ended
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Dec. 31, 2019
Accounting Changes And Error Corrections [Abstract] |
Recent Accounting Standards | (3) Recent Accounting Standards Lease accounting The Company adopted ASU 2016-02 effective as of January 1, 2019 and elected the transition option to apply the new lease requirements as of the adoption date without restating comparative periods presented in its Consolidated Financial Statements. Additionally, the Company elected the package of practical expedients described in ASU 2016-02, which includes not reassessing the following: (i) lease classification of existing leases, (ii) whether expired or existing contracts contain leases, and (iii) initial direct costs for existing leases. Upon adoption of ASU 2016-02, the Company recognized ROU assets of $88.8 million, total lease liabilities of $116.9 million, reductions in total deferred rent of $28.5 million, and reductions in prepaid expenses of $0.4 million in its 2019 beginning balances. All adjustments relate to the Company’s operating leases; the Company does not have any material leases that are classified as finance leases. There was no cumulative effect adjustment to the Company’s 2019 beginning retained earnings balance as the Company did not have material unamortized initial direct costs. Beginning in 2019, the Company presents the amortization of its operating ROU assets and the change in its operating lease liabilities within the operating activities section of its Consolidated Statements of Cash Flows. The adoption of ASU 2016-02 did not have a material impact on the Company’s Consolidated Statements of Operations. Revenue from contracts with customers The Company adopted ASU 2014-09 effective as of January 1, 2018, using the full retrospective method. In adopting ASU 2014-09, the Company has made the following significant changes in accounting principles:
| (i) | Timing of revenue recognition for term license sales. Under ASU 2014-09, the Company recognizes product licenses revenue from term licenses upon delivery of the software. Previously, this revenue was recognized over the term of the arrangement.
| (ii) | Timing of revenue recognition for sales to channel partners. Under ASU 2014-09, the Company recognizes revenue from sales made to OEMs when control of the license transfers to the OEM, less adjustments for returns or price protection. Previously, this revenue was not recognized until the license was sold by the OEM to the en d user. Revenue from sales made to resellers continues to be recognized when control of the license is transferred to the end user.
| (iii) | Allocating the transaction price to the performance obligations in the contract. Under ASU 2014-09, the Company allocates the transaction price to the various performance obligations in the contract based on their relative SSP. Except for SSP of product support, the Company’s methodologies for estimating SSP of its various performance obligations are generally consistent with the Company’s previous methodologies used to establish vendor specific objective evidence (“VSOE”) of fair value on multiple element arrangements. Whereas VSOE of product support was previously based on the optional stated renewal fee within the contract, SSP of product support under ASU 2014-09 is established as a range within each geographic region as discussed in Note 2, Summary of Significant Accounting Policies, to the Consolidated Financial Statements. The impact from SSP-based allocations was not material to the Company’s prior or current period Consolidated Financial Statements and is not expected to be material in future periods.
| (iv) | Material rights. The Company’s contracts with customers may include options to acquire additional goods and services at a discount. Under ASU 2014-09, certain of these options may be considered material rights if the optional goods and services can be purchased at prices below SSP and would be treated as separate performance obligations and included in the allocation of the transaction price. Previously, none of the Company’s options were considered material rights. The impact from material rights was not material to the Company’s prior or current period Consolidated Financial Statements and is not expected to be material in future periods.
| (v) | Presentation of accounts receivable, contract assets, and contract liabilities (deferred revenue). Under ASU 2014-09, the Company’s rights to consideration are presented separately depending on whether those rights are conditional (“contract assets”) or unconditional (“accounts receivable”). See Note 5, Contract Balances, to the Consolidated Financial Statements for further discussion on Balance Sheet presentation. Under ASU 2014-09, the Company cannot net accounts receivable with contract liabilities (“deferred revenue”) and the Company no longer offsets its accounts receivable and deferred revenue balances for unpaid items that are included in the deferred revenue balance and for which there is an enforceable right for payment. Previously, this offsetting of accounts receivable and deferred revenue balances for unpaid amounts was applied in the Company’s prior period Consolidated Financial Statements.
| (vi) | Deferral of incremental direct costs to obtaining a contract with a customer. Under ASU 2014-09, the Company capitalizes certain variable compensation payable to its sales force and subsequently amortizes the capitalized costs over a period of time that is consistent with the transfer of the related good or service to the customer, which the Company has determined to be three years. Previously, the Company elected to expense these incremental direct costs as incurred.
The following line items for the year ended December 31, 2017 were adjusted in the Company’s previously issued Consolidated Financial Statements to reflect the full retrospective adoption of ASU 2014-09. No further adjustments for the year ended December 31, 2017 have been made in these Consolidated Financial Statements.
| Year Ended December 31, 2017 |
Consolidated Statement of Operations: | As Reported |  |  | Effect of the Adoption of ASU 2014-09 |  |  | As Adjusted |
Product licenses revenue | $ | 93,969 |  |  | $ | (710 | ) |  | $ | 93,259 |
Product support revenues |  | 289,174 |  |  |  | 10 |  |  |  | 289,184 |
Sales and marketing expenses |  | 174,612 |  |  |  | 433 |  |  |  | 175,045 |
Provision for income taxes |  | 54,964 |  |  |  | (1,685 | ) |  |  | 53,279 |
Net income |  | 17,643 |  |  |  | 552 |  |  |  | 18,195 |
Diluted earnings per share |  | 1.53 |  |  |  | 0.05 |  |  |  | 1.58 |
| Year Ended December 31, 2017 |
Consolidated Statement of Comprehensive Income: | As Reported |  |  | Effect of the Adoption of ASU 2014-09 |  |  | As Adjusted |
Net income | $ | 17,643 |  |  | $ | 552 |  |  | $ | 18,195 |
Foreign currency translation adjustment |  | 4,805 |  |  |  | 495 |  |  |  | 5,300 |
Comprehensive income |  | 22,418 |  |  |  | 1,047 |  |  |  | 23,465 |
| Year Ended December 31, 2017 |
Consolidated Statement of Cash Flows: | As Reported |  |  | Effect of the Adoption of ASU 2014-09 |  |  | As Adjusted |
Net income | $ | 17,643 |  |  | $ | 552 |  |  | $ | 18,195 |
Adjustments to reconcile net income to net cash provided by operating activities: |  |  |  |  |  |  |  |  |  |  |
Depreciation and amortization |  | 12,572 |  |  |  | 2,960 |  |  |  | 15,532 |
Deferred taxes |  | (2,011 | ) |  |  | (1,594 | ) |  |  | (3,605 | )
Changes in operating assets and liabilities: |  |  |  |  |  |  |  |  |  |  |
Prepaid expenses and other current assets |  | (4,279 | ) |  |  | (460 | ) |  |  | (4,739 | )
Deposits and other assets |  | 2,981 |  |  |  | 48 |  |  |  | 3,029 |
Accrued compensation and employee benefits |  | (3,683 | ) |  |  | (2,526 | ) |  |  | (6,209 | )
Deferred revenue and advance payments |  | (1,609 | ) |  |  | 1,020 |  |  |  | (589 | )
Intra-entity asset transfers In October 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory (“ASU 2016-16”), to improve the accounting for income tax effects of intra-entity transfers of assets other than inventory. Under ASU 2016-16, the deferral of the income tax consequences of intra-entity transfers of assets other than inventory is eliminated. Entities will be required to recognize the income tax consequences of intra-entity transfers of assets other than inventory when the transfers occur. The standard requires a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption using a modified retrospective approach. The Company adopted this guidance effective as of January 1, 2018. The adoption of this guidance did not have a material impact on the Company’s consolidated financial position, results of operations, or cash flows. No cumulative-effect adjustment to retained earnings was made. Cloud computing arrangements In August 2018, the FASB issued Accounting Standards Update No. 2018-15, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (“ASU 2018-15”). ASU 2018-15 requires customers in a hosting arrangement that is a service contract to follow existing internal-use software guidance to determine which implementation costs to capitalize and which costs to expense. Under this model, customers would need to determine the nature of the implementation costs and the project stage in which they are incurred to determine which costs to capitalize or expense. Customers would be required to amortize the capitalized implementation costs over the term of the hosting arrangement, which might extend beyond the noncancelable period if there are options to extend or terminate. Financial statement presentation under ASU 2018-15 requires: (i) capitalized implementation costs be classified in the same Balance Sheet line item as the amounts prepaid for the related hosting arrangement; (ii) amortization of capitalized implementation costs be presented in the same income statement line item as the service fees for the related hosting arrangement; and (iii) cash flows related to capitalized implementation costs be presented within the same category of cash flow activity as the cash flows for the related hosting arrangement (i.e. operating activity). ASU 2018-15 also requires disclosures for material capitalized implementation costs, including the nature of the hosting arrangement and additional disclosures similar to those required for major classes of depreciable assets. The Company will apply this guidance prospectively to eligible costs incurred on or after January 1, 2020 and is in the process of implementing processes and in ternal controls to properly identify cloud computing arrangements within the scope of ASU 2018-15, track and approve capitalizable implementation costs, and determine appropriate amortization methods and periods. The adoption of ASU 2018-15 will not resul t in the adjustment of any prior period Consolidated Financial Statements, nor will it result in any adjustment to the 2020 opening retained earnings balance. Credit losses In June 2016, the FASB issued Accounting Standards Update No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which requires the application of a current expected credit loss (“CECL”) impairment model to financial assets measured at amortized cost (including trade accounts receivable), net investments in leases, and certain off-balance-sheet credit exposures. Under the CECL model, lifetime expected credit losses on such financial assets are measured and recognized at each reporting date based on historical, current, and forecasted information. Furthermore, the CECL model requires financial assets with similar risk characteristics to be analyzed on a collective (pooled) basis. ASU 2016-13 also changes the impairment accounting for available-for-sale debt securities, requiring credit losses to be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities. Impairment due to factors other than credit loss will continue to be recorded through other comprehensive income (loss). The Company will adopt this guidance and its subsequent amendments effective January 1, 2020 using a modified retrospective approach, which requires a cumulative-effect adjustment to the 2020 opening retained earnings balance. As of December 31, 2019, the Company’s material financial assets measured at amortized cost include trade accounts receivable, and the Company does not have any net investment in leases or off-balance-sheet credit exposures. All of the Company’s available-for-sale debt securities are in U.S. Treasury securities with stated maturity dates between three months and one year from the purchase date and any impairments are not expected to result from credit losses. Although classified as available-for-sale, the Company does not generally intend to sell these investments prior to their maturity dates, nor is it likely the Company would be required to sell these investments prior to recovery of any impairment. The Company does not currently expect the cumulative-effect adjustment to its 2020 opening retained earnings balance to be material and does not anticipate that the adoption of this guidance will have a material impact on its consolidated financial position, results of operations, or cash flows. The Company is currently in the process of implementing improved processes and internal controls to reassess the pooling and calculation of expected credit losses of its trade accounts receivable each reporting period. The Company will also provide appropriate disclosures to satisfy the requirements set forth in ASU 2016-13 once it adopts this guidance. Accounting for Income Taxes In December 2019, the FASB issued Accounting Standards Update No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”). ASU 2019-12 simplifies the accounting for income taxes by eliminating certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities related to outside basis differences. The standard is effective for interim and annual periods beginning January 1, 2021, with certain amendments applied prospectively and others requiring retrospective application. Early adoption is permitted, with any adjustments reflected as of the beginning of the fiscal year of adoption. If early adoption is elected, all changes as a result of the standard must be adopted in the same period. The Company is currently evaluating the impact of this guidance on its consolidated financial position, results of operations, and cash flows.

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