Revenue Recognition

On January 1, 2018, the Company adopted Accounting Standards Codification (ASC) 606, "Revenue from Contracts with Customers," using the full retrospective method to present all periods reported on a consistent basis. Accordingly, prior-period results have been restated to apply the provisions of this ASC.

As a result of this adoption, revenue for software-only products sold as part of multiple-deliverable arrangements are no longer deferred when vendor-specific objective evidence of fair value does not exist for the undelivered elements of the arrangement. This change results in earlier recognition of revenue. In addition, certain of the Company’s product accessory sales, which were reported on a net basis, are now reported on a gross basis as a result of applying the expanded guidance in the new standard related to principal versus agent considerations. This change results in the Company reporting higher revenue and higher cost of revenue when these sales are reported on a gross basis, although the gross margin dollars do not change. Furthermore, for arrangements that include customer-specified acceptance criteria, revenue is recognized when the Company can objectively determine that control has been transferred to the customer in accordance with the agreed-upon specifications in the contract, which may occur before formal customer acceptance. This change primarily impacts revenue recognition for arrangements in the logistics industry where certain customer solutions include installed products and results in earlier recognition of revenue.

The adoption of the standard impacted our previously-reported results as follows (in thousands):



Statement of Operations
	Three-months Ended						Nine-months Ended
	October 1, 2017						October 1, 2017
	As previously reported		Adjustment		As restated		As previously reported		Adjustment		As restated
Revenue	$	259,739	$	6,303	$	266,042	$	567,585	$	15,576	$	583,161
Cost of revenue	62,360		5,701		68,061		128,056		14,701		142,757
Gross margin	197,379		602		197,981		439,529		875		440,404
Operating income	110,247		602		110,849		207,211		875		208,086
Income before income tax expense	112,150		602		112,752		212,918		875		213,793
Income tax expense (benefit)	9,802		457		10,259		8,843		491		9,334
Net income	$	102,348	$	145	$	102,493	$	204,075	$	384	$	204,459

Net income per weighted-average common and common-equivalent share:
Basic	$	0.59	$	—	$	0.59	$	1.18	$	—	$	1.18
Diluted	$	0.57	$	—	$	0.57	$	1.14	$	—	$	1.14



Balance Sheet
	December 31, 2017
	As previously reported		Adjustment			As restated
Prepaid expenses and other current assets	$	30,800	$	(117	)	$	30,683
Accrued income taxes	11,391		112			11,503
Deferred revenue and customer deposits	9,969		(549		)	9,420
Retained earnings	668,267		320			668,587

The following table summarizes disaggregated revenue information by geographic area based upon the customer's country of domicile (in thousands):



	Three-months Ended				Nine-months Ended
	September 30, 2018		October 1, 2017		September 30, 2018		October 1, 2017
Europe	$	115,592	$	146,230	$	242,161	$	252,386
Americas	58,830		54,902		189,859		155,977
Greater China	32,796		35,546		101,130		84,764
Other Asia	25,003		29,364		79,902		90,034
	$	232,221	$	266,042	$	613,052	$	583,161

The following table summarizes disaggregated revenue information by revenue type (in thousands):



	Three-months Ended				Nine-months Ended
	September 30, 2018		October 1, 2017		September 30, 2018		October 1, 2017
Standard products and services	$	150,993	$	159,981	$	493,019	$	453,464
Application-specific customer solutions	81,228		106,061		120,033		129,697
	$	232,221	$	266,042	$	613,052	$	583,161

Costs to Fulfill a Contract

Costs to fulfill a contract are included in "Prepaid expenses and other current assets" on the Consolidated Balance Sheet and amounted to $6,811,000 and $3,230,000 as of September 30, 2018 and December 31, 2017, respectively.

Accounts Receivable, Contract Assets, and Contract Liabilities

Accounts receivable represent amounts billed and currently due from customers which are reported at their net estimated realizable value. The Company maintains reserves against its accounts receivable for potential credit losses. Credit losses recognized on accounts receivable were immaterial for the three-month and nine-month periods ended September 30, 2018 and October 1, 2017, respectively. Contract assets consist of unbilled revenue which arises when revenue is recognized in advance of billing for certain application-specific customer solutions contracts. Contract liabilities consist of deferred revenue and customer deposits which arise when amounts are billed to or collected from customers in advance of revenue recognition.

The following table summarizes the deferred revenue and customer deposits activity for the nine-month period ended September 30, 2018 (in thousands):



	Amount
Balance as of December 31, 2017	$	9,420
Increases to deferred revenue and customer deposits	55,408
Recognition of revenue	(50,590		)
Foreign exchange rate changes	(986		)
Balance as of September 30, 2018	$	13,252

As a practical expedient, the Company has elected not to disclose the aggregate amount of the transaction price allocated to unsatisfied performance obligations, as our contracts have an original expected duration of less than one year.