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Description of Business and Basis of Presentation | 9 Months Ended
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Oct. 31, 2019
Organization Consolidation And Presentation Of Financial Statements [Abstract] |
Description of Business and Basis of Presentation | Note 1. Description of Business and Basis of Presentation Description of Business We were incorporated in the state of Washington in April 2005, and were reincorporated in the state of Delaware in March 2008. We changed our name from Box.Net, Inc. to Box, Inc. in November 2011. Box provides a leading cloud content management platform that enables organizations of all sizes to securely manage cloud content while allowing easy, secure access and sharing of this content from anywhere, on any device. Basis of Presentation The accompanying condensed consolidated balance sheet as of October 31, 2019 and the condensed consolidated statements of operations, the condensed consolidated statements of comprehensive loss, the condensed consolidated statements of stockholders’ equity, and the condensed consolidated statements of cash flows for the three and nine months ended October 31, 2019 and 2018, respectively, are unaudited. The condensed consolidated balance sheet data as of January 31, 2019 was derived from the audited consolidated financial statements that are included in our Annual Report on Form 10-K for the fiscal year ended January 31, 2019 (the “Form 10-K”), which was filed with the Securities and Exchange Commission (the “SEC”) on March 20, 2019. The accompanying statements should be read in conjunction with the audited consolidated financial statements and related notes contained in our Form 10-K. Other than items discussed under Use of Estimates, Recently Adopted Accounting Pronouncements, and Summary of Significant Accounting Policies, there have been no other material changes to our critical accounting policies and estimates during the nine months ended October 31, 2019 from those disclosed in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Form 10-K. The accompanying condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information. Accordingly, they do not include all of the financial information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of our management, the unaudited condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements in the Form 10-K, and include all adjustments necessary for the fair presentation of our balance sheet as of October 31, 2019, and our results of operations, including our comprehensive loss, our stockholders’ equity, and our cash flows for the three and nine months ended October 31, 2019 and 2018. All adjustments are of a normal recurring nature. The results for the three and nine months ended October 31, 2019 are not necessarily indicative of the results to be expected for any subsequent quarter or for the fiscal year ending January 31, 2020. Certain prior period amounts reported in our condensed consolidated financial statements and notes thereto have been reclassified to conform to the current year presentation. Such reclassifications did not affect total revenues, operating income, or net income. Use of Estimates The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make, on an ongoing basis, estimates and assumptions that affect the amounts reported and disclosed in the financial statements and the accompanying notes. Actual results could differ from these estimates. Such estimates include, but are not limited to, the determination of the allowance for accounts receivable, fair value of acquired intangible assets and goodwill, useful lives of acquired intangible assets and property and equipment, timing and costs associated with our asset retirement obligations, the nature and timing of satisfaction of performance obligations, estimate of standalone selling price allocation included in contracts with multiple performance obligations, the estimated expected benefit period for deferred commissions, the estimated useful life of capitalized internal-use software costs, observable price changes of non-marketable equity securities, the incremental borrowing rate we use to determine our lease liabilities, fair values of stock-based awards, legal contingencies, the valuation of deferred income tax assets, and unrecognized tax benefits, among others. Management bases its estimates on historical experience and on various other assumptions which management believes to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Certain Risks and Concentrations Our financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable. Although we deposit our cash with multiple financial institutions, our deposits, at times, may exceed deposit insurance coverage limits. We sell to a broad range of customers. Our revenue is derived substantially from the United States across a multitude of industries. Accounts receivable are derived from the delivery of our services to customers primarily located in the United States. We accept and settle our accounts receivable using credit cards, electronic payments and checks. A majority of our lower dollar value invoices are settled by credit card on or near the date of the invoice. We do not require collateral from customers to secure accounts receivable. We maintain an allowance for doubtful accounts based upon the expected collectability, which takes into consideration specific customer creditworthiness and current economic trends. We believe collections of our accounts receivable are probable based on the size, industry diversification, financial condition and past transaction history of our customers. As of October 31, 2019 and January 31, 2019, one reseller, which is also a customer, accounted for more than 10% of total accounts receivable. One reseller, which is also a customer, represented 10% of our revenue for the three and nine months ended October 31, 2019. One reseller, which is also a customer, represented 12% of our revenue for the three and nine months ended October 31, 2018. We serve our customers and users from data center facilities operated by third parties. In order to reduce the risk of down time of our subscription services, we have established data centers and third-party cloud computing and hosting providers in various locations in the United States and abroad. We have internal procedures to restore services in the event of disaster at any one of our current data center facilities. Even with these procedures for disaster recovery in place, our cloud services could be significantly interrupted during the implementation of the procedures to restore services. Geographic Locations For both the three and nine months ended October 31, 2019, revenue attributable to customers in the United States was 75%. For the three and nine months ended October 31, 2018, revenue attributable to customers in the United States was 75% and 76%, respectively. For the three months ended October 31, 2019, revenue attributable to customers in Japan was 10%. No country outside of the United States comprised 10% or greater of our revenue for any of the other periods presented. Substantially all of our net assets are located in the United States. As of October 31, 2019 and January 31, 2019, property and equipment located in the United States was approximately 94% and 91%, respectively. Recently Adopted Accounting Pronouncements In February 2016, the FASB issued ASU 2016-02, Leases, and since that date has issued several additional accounting standard updates to further clarify certain aspects of ASU 2016-02 and to provide certain practical expedients entities can elect upon adoption (collectively, “ASC Topic 842”). ASC Topic 842 states that for most leases, a lessee would recognize a lease liability for the obligation to make lease payments and a right-of-use asset for the right to use the underlying asset for the lease term while recognizing expense in a manner similar to legacy guidance ASC Topic 840. We adopted ASC Topic 842, effective February 1, 2019 using the modified retrospective method for leases that existed as of February 1, 2019. The comparative periods presented and disclosed in the year of adoption are based on legacy ASC Topic 840 guidance. We elected the practical expedients which allow us to carry forward our assessment on whether a contract is or contains a lease, our historical lease classification, and our initial direct costs for any leases that expired or existed prior to adoption of ASC Topic 842. In addition, we elected the short-term lease exception and the practical expedient to not separate lease and non-lease components. Adoption Impact of ASC Topic 842 on th e Opening Balance Sheet as of February 1, 2019 In connection with the adoption of ASC Topic 842, we recognized operating lease right-of-use assets and operating lease liabilities on our condensed consolidated balance sheet primarily related to our office and data center facilities of $206.6 million and $255.0 million, respectively, out of which $218.6 million was the non-current portion of operating lease liabilities. The difference between the operating lease right-of-use assets and operating lease liabilities primarily represents the existing deferred rent liability balance as of the adoption date. Our accounting for finance leases remains substantially unchanged from the legacy ASC Topic 840 except for the impacts of applying the practical expedient to not separate lease and non-lease components. As a result of recognizing the non-lease components as part of our finance leases, we recognized finance lease right-of-use assets and corresponding finance leases liabilities of $5.2 million, out of which $2.9 million represented the non-current portion of the additional finance lease liabilities. As a sub-lessor, accounting for our subleases is largely unchanged from the legacy ASC Topic 840. The adoption of ASC Topic 842 did not have a material effect on our condensed consolidated statements of operations and cash flows, however, it did materially increase our assets and liabilities on the condensed consolidated balance sheet. The adoption of ASC Topic 842 resulted in changes to our accounting estimates and accounting policy for leases. Please see Summary of Significant Accounting Policies for a discussion of the updated policy. Ongoing ASC Topic 842 Financial Statement Impact as of and for the three and nine months ended October 31, 2019 Refer to “Note 4. Balance Sheet Components” and “Note 5. Leases” for the ongoing ASC Topic 842 impact on the condensed consolidated financial statements as of and for the three and nine months ended October 31, 2019. Recently Issued Accounting Pronouncements In June 2016, the FASB issued ASU 2016-13, Financial Instruments- Credit Losses. ASU 2016-13 replaces the incurred loss impairment methodology in current U.S. GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. For trade receivables, loans, and other financial instruments, we will be required to use a forward-looking expected loss model rather than the incurred loss model for recognizing credit losses which reflects losses that are probable. The new standard is effective for us beginning February 1, 2020; we have elected not to adopt the standard earlier. Application of the amendments is through a cumulative-effect adjustment to retained earnings as of the effective date. We are in the process of evaluating appropriate changes to our business processes, systems and controls to support the adoption of the new standard. We are currently evaluating the impact of the provisions of this new standard on our condensed consolidated financial statements. Summary of Significant Accounting Policies Except for the accounting policies for leases and derivative instruments and hedging detailed under Summary of Significant Accounting Policies, there have been no other material changes to our critical accounting policies during the nine months ended October 31, 2019 from those disclosed in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Form 10-K for the fiscal year ended January 31, 2019. Leases We adopted ASC Topic 842, effective February 1, 2019, using the modified retrospective method. The reported results for fiscal year 2020 reflect the application of ASC Topic 842, while the reported results for prior fiscal years are not adjusted and continue to be reported under ASC Topic 840. Refer to Recently Adopted Accounting Pronouncements regarding the adoption impact of ASC Topic 842 in fiscal year 2020. We determine whether an arrangement contains a lease at inception. A contract is or contains a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To determine whether a contract is or contains a lease, we consider all relevant facts and circumstances to assess whether the customer has both of the following:
| • | The right to obtain substantially all of the economic benefits from use of the identified asset
| • | The right to direct the use of the identified asset
We recognize lease liabilities and right-of-use assets at lease commencement. We measure lease liabilities b ased on the present value of lease payments over the lease term discounted using the rate implicit in the lease when that rate is readily determinable or our incremental borrowing rate. We estimate our incremental borrowing rate based on an analysis of pub licly traded debt securities of companies with credit and financial profiles similar to our own and adjust our incremental borrowing rate to reflect the corresponding lease term. We do not include in the lease term options to extend or terminate the lease unless it is reasonably certain at commencement that we will exercise any such options. We account for the lease and non-lease components as a single lease component for all our leases. We measure right-of-use assets based on the corresponding lease liabilities adjusted for (i) prepayments made to the lessor at or before the commencement date, (ii) initial direct costs we incur, and (iii) tenant incentives under the lease. We evaluate the recoverability of our right-of-use assets for possible impairment in accordance with our long-lived assets policy. We do not recognize right-of-use assets or lease liabilities for short-term leases, which have a lease term of twelve months or less, and recognize the associated lease payments in the condensed consolidated statements of operations on a straight-line basis over the lease term. Operating leases are reflected in operating lease right-of-use assets, operating lease liabilities, and operating lease liabilities, non-current on our condensed consolidated balance sheets. Finance leases are included in property and equipment, net, finance lease liabilities, and finance lease liabilities, non-current on our condensed consolidated balance sheets. We begin recognizing rent expense when the lessor makes the underlying asset available to us. We recognize rent expense under our operating leases on a straight-line basis. For finance leases, we record interest expense on the lease liability in addition to amortizing the right-of-use asset (generally straight-line) over the shorter of the lease term or the useful life of the right-of-use asset. Variable lease payments are expensed as incurred and are not included within the lease liabilities and right-of-use assets calculation. We generally recognize sublease income on a straight-line basis over the sublease term. Derivative Instruments and Hedging We measure derivative financial instruments at fair value and recognize them as either assets or liabilities on our condensed consolidated balance sheets. We record changes in the fair value of derivative financial instruments designated as cash flow hedges in other comprehensive income (loss). When the hedged transaction affects earnings, we subsequently reclassify the changes in fair value into the same line as the hedged item on the condensed consolidated statements of operations. The cash flow effects related to derivative financial instruments designated as cash flow hedges are included within operating activities on our condensed consolidated statements of cash flows.

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- Definition The entire disclosure for the business description and basis of presentation concepts. Business description describes the nature and type of organization including but not limited to organizational structure as may be applicable to holding companies, parent and subsidiary relationships, business divisions, business units, business segments, affiliates and information about significant ownership of the reporting entity. Basis of presentation describes the underlying basis used to prepare the financial statements (for example, US Generally Accepted Accounting Principles, Other Comprehensive Basis of Accounting, IFRS). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -URI http://asc.fasb.org/topic&trid=2122369 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -URI http://asc.fasb.org/topic&trid=2122149 Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 275 -URI http://asc.fasb.org/topic&trid=2134479 + Details
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