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ACCOUNTING STANDARDS ADOPTIONS | 9 Months Ended
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Sep. 30, 2018
ACCOUNTING STANDARDS ADOPTIONS [Abstract] |
ACCOUNTING STANDARDS ADOPTIONS |
(2) | ACCOUNTING STANDARDS ADOPTIONS
In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-14, “Compensation – Retirement Benefits - Defined Benefit Plans – General (Subtopic 715-20): Disclosure Framework – Changes to the Disclosure Requirements for Defined Benefit Plans” which amends the annual disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans by removing certain requirements, providing clarification on existing requirements and adding new requirements including adding an explanation of the reasons for significant gains and losses related to changes in the benefit obligation for the period. The guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Early adoption is permitted. The amendments in this update are required to be applied on a retrospective basis to all periods presented. The Company is currently evaluating this guidance to determine the impact on its disclosures. In February 2018, the FASB issued ASU 2018-02, “Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income” which allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the recent federal tax reform legislation. ASU 2018-02 eliminates the stranded tax effects resulting from the recent federal tax reform legislation and will improve the usefulness of information reported to financial statement users. The amendments in ASU 2018-02 will be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the recent federal tax reform legislation is recognized. ASU 2018-02 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted, including adoption in any interim period, for which financial statements have not yet been made available for issuance. The Company elected to early adopt ASU 2018-02 in the 2018 first quarter, which resulted in the reclassification of $7,925,000 from accumulated other comprehensive income (loss) to retained earnings due to the change in the federal corporate tax rate. In March 2017, the FASB issued ASU 2017-07, “Compensation – Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost” (“ASU 2017-07”) which requires employers to include only the service cost component of net periodic pension cost and net periodic postretirement benefit cost in operating expenses. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations. The standard allows only the service cost component to be eligible for capitalization when applicable. ASU 2017-07 is effective for annual and interim periods beginning after December 15, 2017 with early adoption permitted. This standard shall be applied retrospectively for the presentation of the service cost component and the other components of net periodic pension cost and net periodic postretirement benefit cost in the income statement and prospectively for the capitalization of the service cost benefit in assets. The Company adopted ASU 2017-07 on January 1, 2018 and applied the standard retrospectively. The other components of net benefit cost are shown in Note 13, Retirement Plans. As a result of the adoption, for the three months and nine months ended September 30, 2017, the Company reclassified income of $433,000 and $189,000, respectively, from operating expense into non-operating expense in the condensed statement of earnings. In January 2017, the FASB issued ASU 2017-04, “Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment” (“ASU 2017-04”) which simplifies the subsequent measurement of goodwill by eliminating Step 2 in the goodwill impairment test that required an entity to perform procedures to determine the fair value of its assets and liabilities at the testing date. An entity instead will perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying value and record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value. 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 2017-04 will be applied prospectively and is effective for annual and interim goodwill impairment tests conducted in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment testing dates after January 1, 2017. The Company is currently evaluating the impact, if any, that the adoption of this standard will have on its consolidated financial statements. In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments” (“ASU 2016-15”) to create consistency in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. ASU 2016-15 is effective for annual and interim periods beginning after December 15, 2017. Early adoption is permitted. The Company adopted ASU 2016-15 on January 1, 2018 and the adoption of the standard did not have a material impact on the consolidated financial statements. In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02”) to increase transparency and comparability among organizations by requiring recognition of lease assets and lease liabilities on the balance sheet and disclosure of key information about leasing arrangements. ASU 2016-02 is effective for annual and interim periods beginning after December 15, 2018, with early adoption permitted. The method of adoption may be a modified retrospective approach or an approach that utilizes recognizing a cumulative-effect adjustment to the opening balance of retained earnings as of the date of adoption. The Company has formed a project team to evaluate the impact that the adoption of this standard will have on its consolidated financial statements and disclosures. The project team has completed training on the new standard and has started lease review and documentation, including review of practical expedients available. The project team has also selected a software package and continued to load the lease population into the system. The Company has not selected a method of adoption and has not yet determined the effect of ASU 2016-02 on its ongoing financial reporting. In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (ASC Topic 606)” (“ASU 2014-09” or “ASC 606”). ASU 2014-09 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 2014-09 replaces most existing revenue recognition guidance in United States Generally Accepted Accounting Principles and is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. ASU 2014-09 permits the use of either the retrospective, modified retrospective or prospective with a cumulative catch-up approach. The Company adopted ASU 2014-09 on January 1, 2018 under the modified retrospective approach with a cumulative adjustment that decreased the opening balance of retained earnings by $9,722,000. Prior period amounts were not adjusted and the prior period amounts continue to be reported under the accounting standards in effect for those periods. The cumulative adjustment primarily relates to recognition of revenue on certain contract manufacturing activities, primarily construction of new pressure pumping units in the Company’s distribution and services segment. The Company previously recognized revenue on manufacturing and assembly projects on a percentage of completion method using measurements of progress towards completion appropriate for the work performed. Upon the adoption of ASU 2014-09, the Company recognizes the revenues on contract manufacturing activities upon shipment and transfer of control versus the percentage of completion method. The following tables summarize the financial statement line items within the Company’s condensed consolidated financial statements impacted by ASU 2014-09 for the three months and nine months ended September 30, 2018 (in thousands):
|  | Three months ended September 30, 2018 |
|  | As Reported |  |  | Balances without Adoption of ASC 606 |  |  | Effect of Change |
Statements of earnings: |  |  |  |  |  |  |  |  |
Distribution and services revenues |  | $ | 322,805 |  |  | $ | 349,805 |  |  | $ | (27,000 | )
Costs of sales and operating expenses |  | $ | 498,421 |  |  | $ | 520,721 |  |  | $ | (22,300 | )
Operating income |  | $ | 67,957 |  |  | $ | 72,657 |  |  | $ | (4,700 | )
Earnings before taxes on income |  | $ | 57,066 |  |  | $ | 61,766 |  |  | $ | (4,700 | )
Provision for taxes on income |  | $ | (15,116 | ) |  | $ | (16,282 | ) |  | $ | 1,166 |
Net earnings attributable to Kirby |  | $ | 41,816 |  |  | $ | 45,350 |  |  | $ | (3,534 | )
Statements of comprehensive income: |  |  |  |  |  |  |  |  |  |  |  |
Net earnings |  | $ | 41,950 |  |  | $ | 45,484 |  |  | $ | (3,534 | )
Comprehensive income attributable to Kirby |  | $ | 42,194 |  |  | $ | 45,728 |  |  | $ | (3,534 | )
|  | Nine months ended September 30, 2018 |
|  | As Reported |  |  | Balances without Adoption of ASC 606 |  |  | Effect of Change |
Statements of earnings: |  |  |  |  |  |  |  |  |
Distribution and services revenues |  | $ | 1,148,598 |  |  | $ | 1,154,398 |  |  | $ | (5,800 | )
Costs of sales and operating expenses |  | $ | 1,640,366 |  |  | $ | 1,645,166 |  |  | $ | (4,800 | )
Operating income |  | $ | 174,530 |  |  | $ | 175,530 |  |  | $ | (1,000 | )
Earnings before taxes on income |  | $ | 144,451 |  |  | $ | 145,451 |  |  | $ | (1,000 | )
Provision for taxes on income |  | $ | (41,042 | ) |  | $ | (41,295 | ) |  | $ | 253 |
Net earnings attributable to Kirby |  | $ | 102,889 |  |  | $ | 103,636 |  |  | $ | (747 | )
Statements of comprehensive income: |  |  |  |  |  |  |  |  |  |  |  |
Net earnings |  | $ | 103,409 |  |  | $ | 104,156 |  |  | $ | (747 | )
Comprehensive income attributable to Kirby |  | $ | 95,750 |  |  | $ | 96,497 |  |  | $ | (747 | )
Statements of cash flows: |  |  |  |  |  |  |  |  |  |  |  |
Net earnings |  | $ | 103,409 |  |  | $ | 104,156 |  |  | $ | (747 | )
Provision for deferred income taxes |  | $ | 36,838 |  |  | $ | 36,585 |  |  | $ | 253 |
Decrease in cash flows resulting from changes in operating assets and liabilities, net |  | $ | (66,707 | ) |  | $ | (67,201 | ) |  | $ | 494 |
The following table summarizes the balance sheet line items within the Company’s condensed consolidated financial statements as of September 30, 2018 impacted by ASU 2014-09 (in thousands):
|  | September 30, 2018 |
|  | As Reported |  |  | Balances without Adoption of ASC 606 |  |  | Effect of Change |
Balance sheets: |  |  |  |  |  |  |  |  |
Trade receivables |  | $ | 400,870 |  |  | $ | 466,599 |  |  | $ | (65,729 | )
Inventories – net |  | $ | 453,173 |  |  | $ | 395,773 |  |  | $ | 57,400 |
Total assets |  | $ | 5,854,332 |  |  | $ | 5,862,661 |  |  | $ | (8,329 | )
Deferred revenues |  | $ | 75,843 |  |  | $ | 70,372 |  |  | $ | 5,471 |
Deferred income taxes |  | $ | 544,882 |  |  | $ | 548,235 |  |  | $ | (3,353 | )
Retained earnings |  | $ | 2,748,029 |  |  | $ | 2,758,476 |  |  | $ | (10,447 | )
Total liabilities and equity |  | $ | 5,854,332 |  |  | $ | 5,862,661 |  |  | $ | (8,329 | )

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- Definition The entire disclosure of changes in accounting principles, including adoption of new accounting pronouncements, that describes the new methods, amount and effects on financial statement line items. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 250 -URI http://asc.fasb.org/topic&trid=2122394 + Details
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