2. Recently Adopted Accounting Standard

In May 2014, the Financial Accounting Standards Board (“FASB”) issued new guidance for revenue recognition (“Topic 606”), which 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. The new guidance, which includes several amendments, replaces most of the prior revenue recognition guidance under U.S. Generally Accepted Accounting Principles. The Company adopted the new guidance as of January 1, 2018 using the modified retrospective method, as applied to all contracts. As a result, the Company has changed its accounting policy for revenue recognition, as detailed below. The most significant impact of the adoption was on the timing of recognition of sales to its stocking distributors and including the additional required disclosures under the new standard. Through December 31, 2017, the Company deferred revenue and the related cost of sales on shipments to stocking distributors until the distributors resold the products to their customers. Upon adoption, the Company is no longer permitted to defer revenue until sale by the stocking distributor to the end customer, but rather, is required to estimate the effects of returns and allowances provided to stocking distributors and record revenue at the time of sale to the stocking distributor. In addition, the Company modified the accounting for a contractual arrangement due to a reassessment of the number of performance obligations in the arrangement, and adjusted for the timing of certain royalty revenue. The cumulative effect of adopting this guidance, recorded as an increase to the balance of retained earnings as of January 1, 2018, was approximately $3,670,000. The comparative information for the three months ended March 31, 2017, including disclosures, has not been restated and continues to be reported under the accounting standards in effect for that period.

The following tables summarize the impacts of adopting the new revenue recognition guidance on certain components of the Company’s consolidated financial statements as of and for the three months ended March 31, 2018 (in thousands):

a) Consolidated Balance Sheet Items


	As reported		Adjustments			Balances without adoption of Topic 606
Accounts receivable, net	$	41,634	$	(74	)	$	41,560
Inventories, net		38,959		(44	)		38,915
Total assets		173,630		(118	)		173,512
Income taxes payable		298		(7	)		291
Deferred revenue		2,769		4,073			6,842
Sales allowances		384		(301	)		83
Total liabilities		27,275		3,765			31,040
Retained earnings		101,218		(3,883	)		97,335
Total equity		146,355		(3,883	)		142,472
Total liabilities and equity		173,630		(118	)		173,512

b) Consolidated Statement of Operations Items


	As reported		Adjustments			Balances without adoption of Topic 606
Net revenues	$	65,269	$	(804	)	$	64,465
Cost of revenues		35,058		(584	)		34,474

Gross margin		30,211		(220	)		29,991
Income (loss) before income taxes		4,116		(220	)		3,896
Provision for income taxes		134		(7	)		127
Consolidated net income (loss)		3,982		(213	)		3,769
Net income (loss) attributable to Vicor Corporation		3,943		(213	)		3,730

The impact of the adoption of the new revenue recognition standard on the unaudited consolidated statements of comprehensive income (loss) and cash flows for the three months ended March 31, 2018 was not material.