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Note 2 - Revenue Recognition | 12 Months Ended
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Dec. 31, 2018
Notes to Financial Statements |
Revenue from Contract with Customer [Text Block] | NOTE 2: REVENUE RECOGNITION In May 2014, the FASB issued new guidance related to revenue recognition, which outlines a comprehensive revenue recognition model and supersedes most prior 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 on 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 periods. 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 year ended December 31, 2018 was an increase of $4,078, as a result of adopting ASC 606. With respect to the Company’s licensing business, the adoption of ASC 606 had a significant impact on the Company’s financial statements as 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. Under the accounting standards in effect during prior periods, revenue earned on licensing arrangements involving multiple elements were allocated to each element based on the “residual method” when Vendor Specific Objective Evidence (“VSOE”) of fair value existed for all undelivered elements and VSOE did not exist for one of the delivered elements. If VSOE of fair value did not exist for the undelivered elements, the revenue would have been deferred until all elements of the arrangement were delivered or VSOE was developed for the undelivered elements, whichever came first. With respect to the Company’s royalty business, ASC 606 had a significant impact as well. Under the accounting standards in effect during prior periods, the Company recognized sales-based royalties as revenues during the quarter when 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 when the associated sales occurred. Accordingly, the Company has an increase in unbilled receivables of $8,597 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 IP. 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:
|  | 2019 |  |  | 2020 |  |  | 2021 |
License and related revenues |  | $ | 12,567 |  |  | $ | 3,948 |  |  | $ | 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 year ended December 31, 2018, the amount of amortization was $120, and there was no impairment loss in relation to costs capitalized. Deferred sales commission amounted to $223 as of December 31, 2018. 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):
|  | Year ended December 3 1 , 2018 (audited) |
|  | Licensing and related revenues |  |  | Royalties |  |  | Total |
Primary geographical markets |  |  |  |  |  |  |  |  |  |  |  |
United States |  | $ | 6,260 |  |  | $ | 2,094 |  |  | $ | 8,354 |
Europe and Middle East |  |  | 3,672 |  |  |  | 13,698 |  |  |  | 17,370 |
Asia Pacific |  |  | 30,514 |  |  |  | 21,639 |  |  |  | 52,153 |
Total |  | $ | 40,446 |  |  | $ | 37,431 |  |  | $ | 77,877 |
Major product/service lines |  |  |  |  |  |  |  |  |  |  |  |
DSP products (DSP cores and platforms) |  | $ | 25,369 |  |  | $ | 34,097 |  |  | $ | 59,466 |
Connectivity products (Bluetooth, Wi-Fi and SATA/SAS) |  |  | 15,077 |  |  |  | 3,334 |  |  |  | 18,411 |
Total |  | $ | 40,446 |  |  | $ | 37,431 |  |  | $ | 77,877 |
Timing of revenue recognition |  |  |  |  |  |  |  |  |  |  |  |
Products transferred at a point in time |  | $ | 30,744 |  |  | $ | 37,431 |  |  | $ | 68,175 |
Products and services transferred over time |  |  | 9,702 |  |  |  | — |  |  |  | 9,702 |
Total |  | $ | 40,446 |  |  | $ | 37,431 |  |  | $ | 77,877 |
Contract balances: The following table provides information about trade receivables, unbilled receivables and contract liabilities from contracts with customers (in thousands):
|  | December 3 1 , 2018 |
Trade receivables |  | $ | 9,971 |
Unbilled receivables (associated with licensing and other) |  |  | 6,745 |
Unbilled receivables (associated with royalties) |  |  | 9,440 |
Deferred revenues (short-term contract liabilities) |  |  | 3,593 |
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. Unbilled receivables associated with licensing and other include amounts related to the Company’s contractual right to consideration for completed performance objectives not yet invoiced. Unbilled receivables associated with royalties are recorded as the Company recognizes revenues from royalties earned during the quarter, but not yet invoiced, either by actual sales data received from customers, or, when applicable, by the Company’s 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 year ended December 31, 2018, the Company recognized $3,728 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 is as follows:
|  | Year ended December 3 1 , 2018 |
|  | As reported |  |  | Balance without adopting ASC 606 |  |  | Effect of change higher/(lower) |
Revenues: |  |  |  |  |  |  |  |  |  |  |  |
Licensing and related revenue |  | $ | 40,446 |  |  | $ | 35,873 |  |  | $ | 4,573 |
Royalties |  |  | 37,431 |  |  |  | 37,926 |  |  |  | (495 | )
Total revenues |  |  | 77,877 |  |  |  | 73,799 |  |  |  | 4,078 |
Cost of revenues |  |  | 7,951 |  |  |  | 7,951 |  |  |  | — |
Gross profit |  |  | 69,926 |  |  |  | 65,848 |  |  |  | 4,078 |
Operating expenses: |  |  |  |  |  |  |  |  |  |  |  |
Sales and marketing |  |  | 12,161 |  |  |  | 12,139 |  |  |  | 22 |
Other operating expenses |  |  | 59,010 |  |  |  | 59,010 |  |  |  | — |
Total operating expenses |  |  | 71,171 |  |  |  | 71,149 |  |  |  | 22 |
Operating loss |  |  | (1,245 | ) |  |  | (5,301 | ) |  |  | 4,056 |
Financial income, net |  |  | 3,418 |  |  |  | 3,418 |  |  |  | — |
Revaluation of investment in other company |  |  | (870 | ) |  |  | (870 | ) |  |  | — |
Income (loss) before taxes on income |  |  | 1,303 |  |  |  | (2,753 | ) |  |  | 4,056 |
Income taxes |  |  | 729 |  |  |  | 356 |  |  |  | 373 |
Net income (loss) |  | $ | 574 |  |  | $ | (3,109 | ) |  | $ | 3,683 |
Basic net income (loss) per share |  | $ | 0.03 |  |  | $ | (0.14 | ) |  | $ | 0.17 |
Diluted net income (loss) per share |  | $ | 0.03 |  |  | $ | (0.14 | ) |  | $ | 0.16 |
|  | December 3 1 , 2018 |
|  | As reported |  |  | Balance without adopting ASC 606 |  |  | Effect of change higher/(lower) |
Assets: |  |  |  |  |  |  |  |  |  |  |  |
Trade receivables |  | $ | 26,156 |  |  | $ | 12,875 |  |  | $ | 13,281 |
Prepaid expenses and other current assets |  | $ | 5,264 |  |  | $ | 6,307 |  |  | $ | (1,043 | )
Stockholders' equity: |  |  |  |  |  |  |  |  |  |  |  |
Retained earnings |  | $ | 62,853 |  |  | $ | 50,615 |  |  | $ | 12,238 |
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 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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -URI http://asc.fasb.org/topic&trid=49130388 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -URI http://asc.fasb.org/topic&trid=2122369 + Details
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