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REVENUE RECOGNITION | 3 Months Ended
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Mar. 31, 2018
Revenue from Contract with Customer [Abstract] |
REVENUE RECOGNITION | NOTE 3: REVENUE RECOGNITION In May 2014, the Financial Accounting Standards Board (“FASB”) issued new guidance related to revenue recognition, which outlines a comprehensive revenue recognition model and supersedes most current revenue recognition guidance. ASC 606 requires a company to recognize revenue as control of goods or services transfers to a customer at an amount that reflects the expected consideration to be received in exchange for those goods or services. It defines a five-step approach for recognizing revenue, which may require a company to use more judgment and make more estimates than under the prior guidance. The Company adopted ASC 606 on January 1, 2018 for all open contracts at the date of initial application, and applied the standard using modified retrospective approach, with the cumulative effect of applying ASC 606 recognized as an adjustment to the opening retained earnings balance. Results for reporting periods beginning after January 1, 2018 are presented under ASC 606, while prior period amounts are not adjusted and continue to be reported under the accounting standards in effect for the prior period. The Company recorded a net increase to opening retained earnings of $8,555 as of January 1, 2018 due to the cumulative impact of adopting ASC 606. The impact to revenues for the three months ended March 31, 2018 was a decrease of $1,963 as a result of adopting ASC 606. In respect to the Company’s licensing business, under ASC 606, certain deliverables may now be considered as distinct performance obligations separate from other performance obligations, and will be measured using the relative standalone selling price basis, and recognized as revenue accordingly. Nevertheless, the adoption of ASC 606 for licensing and related revenues did not have a significant impact on the Company’s financial statements. In respect to the Company’s royalty business, ASC 606 did have a significant impact. Under the accounting standards in effect during prior periods, the Company recognized sales-based royalties as revenues during the quarter which such royalties were reported by licensees, which reflected the licensees’ prior quarter sales and when all other revenue recognition criteria were met. Under ASC 606, the Company is required to estimate and recognize sales-based royalties during the period which the associated sales occur. Accordingly, the Company has an increase in accrued revenues of $6,611 in the statement of financial position. Under ASC 606, an entity recognizes revenue when or as it satisfies a performance obligation by transferring IP license or services to the customer, either at a point in time or over time. The Company recognizes most of its revenues at a point in time upon delivery of its IPs. The Company recognizes revenue over time on significant license customization contracts that are covered by contract accounting standards using cost inputs to measure progress toward completion of its performance obligations, which is similar to the method prior to the adoption of ASC 606. The following table includes estimated revenue expected to be recognized in future periods related to performance obligations that are unsatisfied or partially unsatisfied at the end of the reporting period. The estimated revenues do not include amounts of royalties or unexercised contract renewals:
|  | Remainder of 2018 |  |  | 2019 |  |  | 2020 |  |  | 2021 |
License and related revenues |  | $ | 7,340 |  |  | $ | 5,067 |  |  | $ | 3,000 |  |  | $ | 1,500 |
In connection with the adoption of ASC 606, the Company is required to capitalize incremental costs that are related to sales during the period, consisting primarily of sales commissions earned when contracts are signed. As of January 1, 2018, the date the Company adopted ASC 606, the Company capitalized $239 in contract acquisition costs related to contracts that were not completed. For contracts that have a duration of less than one year, the Company follows ASC 606’s practical expediency, and expenses these costs when incurred; for contracts with life exceeding one year, the Company records these costs in proportion to each completed contract performance obligation. For the three months ended March 31, 2018, the amount of amortization was $11 and there was no impairment loss in relation to costs capitalized. Disaggregation of revenue: The following table provides information about disaggregated revenue by primary geographical market, major product line and timing of revenue recognition (in thousands):
|  | Three months ended March 31, 2018 (unaudited) |
|  | Licensing and related revenues |  |  | Royalties |  |  | Total |
Primary geographical markets |  |  |  |  |  |  |  |  |  |  |  |
United States |  | $ | 1,360 |  |  | $ | 347 |  |  | $ | 1,707 |
Europe and Middle East |  |  | 1,338 |  |  |  | 1,115 |  |  |  | 2,453 |
Asia Pacific |  |  | 7,385 |  |  |  | 6,024 |  |  |  | 13,409 |
Total |  | $ | 10,083 |  |  | $ | 7,486 |  |  | $ | 17,569 |
Major product/service lines |  |  |  |  |  |  |  |  |  |  |  |
DSP products (DSP cores and platforms) |  | $ | 7,375 |  |  | $ | 6,878 |  |  | $ | 14,253 |
Connectivity products (Bluetooth, Wi-Fi and SATA/SAS) |  |  | 2,708 |  |  |  | 608 |  |  |  | 3,316 |
Total |  | $ | 10,083 |  |  | $ | 7,486 |  |  | $ | 17,569 |
Timing of revenue recognition |  |  |  |  |  |  |  |  |  |  |  |
Products transferred at a point in time |  | $ | 7,524 |  |  | $ | 7,486 |  |  | $ | 15,010 |
Products and services transferred over time |  |  | 2,559 |  |  |  | — |  |  |  | 2,559 |
Total |  | $ | 10,083 |  |  | $ | 7,486 |  |  | $ | 17,569 |
Contract balances: The following table provides information about trade receivables, contract assets and contract liabilities from contracts with customers (in thousands):
|  | March 31, 2018 (unaudited) |
Trade receivables |  | $ | 13,902 |
Accrued revenues (short-term contract assets) |  |  | 2,455 |
Accrued revenues (royalties) |  |  | 6,970 |
Deferred revenues (short-term contract liabilities) |  |  | 4,973 |
The Company receives payments from customers based upon contractual payment schedules; trade receivable are recorded when the right to consideration becomes unconditional, and an invoice is issued to the customer. Contract assets include amounts related to the Company’s contractual right to consideration for completed performance objectives not yet invoiced. Accrued revenues associated with royalties are recorded as the Company recognizes revenues from royalties earned during the quarter, not yet invoiced, either by actual sales data received from the customers, or, when applicable, by estimation. Contract liabilities (deferred revenue) include payments received in advance of performance under the contract, and are realized with the associated revenue recognized under the contract. During the three months ended March 31, 2018, the Company recognized $1,295 that was included in deferred revenues (short-term contract liability) balance at January 1, 2018. In accordance with ASC 606, the disclosure of the impact of adoption to the Company’s condensed consolidated statements of income and balance sheets was as follows:
|  | Three months ended March 31, 2018 (unaudited) |
|  | As reported |  |  | Balance without adopting ASC 606 |  |  | Effect of change higher/(lower) |
Revenues: |  |  |  |  |  |  |  |  |  |  |  |
Licensing and related revenue |  | $ | 10,083 |  |  | $ | 9,564 |  |  | $ | 519 |
Royalties |  |  | 7,486 |  |  |  | 9,968 |  |  |  | (2,482 | )
Total revenues |  |  | 17,569 |  |  |  | 19,532 |  |  |  | (1,963 | )
Cost of revenues |  |  | 1,972 |  |  |  | 1,972 |  |  |  | — |
Gross profit |  |  | 15,597 |  |  |  | 17,560 |  |  |  | (1,963 | )
Operating expenses: |  |  |  |  |  |  |  |  |  |  |  |
Sales and marketing |  |  | 3,176 |  |  |  | 3,166 |  |  |  | 10 |
Other operating expenses |  |  | 15,329 |  |  |  | 15,329 |  |  |  | — |
Total operating expenses |  |  | 18,505 |  |  |  | 18,495 |  |  |  | 10 |
Operating income |  |  | (2,908 | ) |  |  | (935 | ) |  |  | (1,973 | )
Financial income, net |  |  | 927 |  |  |  | 927 |  |  |  | — |
Income (loss) before taxes on income |  |  | (1,981 | ) |  |  | (8 | ) |  |  | (1,973 | )
Income taxes |  |  | 201 |  |  |  | 464 |  |  |  | (263 | )
Net income (loss) |  | $ | (2,182 | ) |  | $ | (472 | ) |  | $ | (1,710 | )
Basic net income per share |  | $ | (0.10 | ) |  | $ | (0.02 | ) |  | $ | (0.08 | )
Diluted net income per share |  | $ | (0.10 | ) |  | $ | (0.02 | ) |  | $ | (0.08 | )
|  | March 31, 2018 (unaudited) |
|  | As reported |  |  | Balance without adopting ASC 606 |  |  | Effect of change higher/(lower) |
Assets: |  |  |  |  |  |  |  |  |  |  |  |
Trade receivables |  | $ | 13,902 |  |  | $ | 13,856 |  |  | $ | 46 |
Accrued revenues |  | $ | 9,425 |  |  | $ | 2,314 |  |  | $ | 7,111 |
Prepaid expenses and other current assets |  | $ | 4,136 |  |  | $ | 4,531 |  |  | $ | (395 | )
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |
Deferred revenues |  | $ | 4,973 |  |  | $ | 5,056 |  |  | $ | (83 | )
Stockholders’ Equity: |  |  |  |  |  |  |  |  |  |  |  |
Retained earnings |  | $ | 60,204 |  |  | $ | 53,359 |  |  | $ | 6,845 |
Practical Expediency and Exemptions: The Company generally expenses sales commissions when incurred because the amortization period would have been less than one year. The Company records these costs within sales and marketing expenses on the Company’s interim condensed consolidated statements of income. The Company does not assess whether a contract has a significant financing component if the expectation at contract inception is such that the period between payment by the customer and the transfer of the promised goods or services to the customer will be one year or less.

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- Definition The entire disclosure of revenue from contract with customer to transfer good or service and to transfer nonfinancial asset. Includes, but is not limited to, disaggregation of revenue, credit loss recognized from contract with customer, judgment and change in judgment related to contract with customer, and asset recognized from cost incurred to obtain or fulfill contract with customer. Excludes insurance and lease contracts. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -URI http://asc.fasb.org/topic&trid=2122369 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -URI http://asc.fasb.org/topic&trid=49130388 + Details
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