Note 4 – New Accounting Pronouncements

Not Yet Adopted

In January 2017, the FASB, issued ASU 2017-04, “Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment.” This guidance provides for a single-step quantitative test to identify and measure impairment, requiring an entity to recognize an impairment charge for the amount by which the goodwill carrying amount exceeds the reporting unit’s fair value. This guidance will be effective for us in fiscal 2021, with early adoption permitted. This guidance must be applied on a prospective basis. We do not expect the adoption of this guidance to have a material impact on our financial position, results of operations or cash flows.

In October 2016, the FASB issued ASU 2016-16, “Accounting for Income Taxes: Intra-Entity Asset Transfers of Assets Other Than Inventory.” ASU 2016-16 amends accounting guidance for intra-entity transfers of assets other than inventory to require the recognition of taxes when the transfer occurs. The amendment will be effective for us in fiscal 2019 with early adoption permitted as of the beginning of an annual reporting period for which financial statements have not been issued or made available for issuance. A modified retrospective approach will be required for transition to the new guidance, with a cumulative-effect adjustment consisting of the net impact from (1) the write-off of any unamortized expense previously deferred and (2) recognition of any previously unrecognized deferred tax assets, net of any valuation allowance. The new guidance does not include any specific new disclosure requirements. The new guidance may impact our effective tax rate, after adoption. We are currently evaluating the impact this guidance may have on our consolidated financial position, results of operations and cash flows.

In February 2016, the FASB issued ASU 2016-02, “Leases.” ASU 2016-02 will require lessees to recognize on their balance sheets “right-of-use assets” and corresponding lease liabilities, measured on a discounted basis over the lease term. Virtually all leases will be subject to this treatment except leases that meet the definition of a “short-term lease.” For expense recognition, the dual model requiring leases to be classified as either operating or finance leases has been retained from the prior standard. Operating leases will result in straight-line expense while finance leases will result in a front-loaded expense pattern. Classification will use criteria very similar to those applied in current lease accounting, but without explicit bright lines. The new lease guidance will essentially eliminate off-balance sheet financing. The guidance is effective for us in fiscal 2021. The new standard must be adopted using a modified retrospective transition and requires the new guidance to be applied at the beginning of the earliest comparative period presented. We are currently evaluating the effect this new accounting guidance may have on our consolidated financial position, results of operations and cash flows.

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers”, issued as a new Topic, ASC Topic 606. The new revenue recognition standard provides a five-step analysis of transactions to determine when and how revenue is recognized. The core principle of the guidance is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. We will be required to adopt the new standard in fiscal 2019 and can adopt either retrospectively or as a cumulative effect adjustment as of the date of adoption. We are currently evaluating the effect of this new accounting guidance. Therefore, we have not yet selected a transition method nor have we determined the impact that the new standard may have on our consolidated financial position, results of operations and cash flows.

Adopted

In March 2016, the FASB issued ASU 2016-09, “Improvements to Employee Share-Based Payment Accounting,” which changes the accounting for certain aspects of share-based payments to employees. The provisions of the new guidance affecting us require excess tax benefits and tax deficiencies to be recorded in the income statement when the awards vest or are settled; remove the requirement to include hypothetical excess tax benefits in the application of the treasury stock method when computing earnings per share; and provided for a new policy election to either: (1) continue applying forfeiture rate estimates in the determination of compensation cost, or (2) account for forfeitures as a reduction of share-based compensation cost as they occur. The new guidance also requires cash flows related to excess tax benefits to be classified as an operating activity in the cash flow statement and requires shares withheld for tax withholding purposes to be classified as a financing activity. We elected to early adopt the new guidance in the first quarter of fiscal 2017. This required us to reflect adjustments as of March 1, 2016. The primary impact of adoption was the recognition of excess tax benefits in our provision for income taxes rather than additional paid-in capital for all periods after fiscal 2016. We elected to change our accounting policy regarding forfeitures. Previously, we estimated forfeitures expected to occur in the determination of compensation costs. Going forward we will now recognize forfeitures in the period they occur. The cumulative effect adjustments made upon adoption were not material. For fiscal 2017 we recognized additional share-based compensation expense of $1.8 million from the change in accounting for forfeitures of share-based awards, and we recognized $1.8 million of excess tax benefits in income tax expense rather than additional paid-in capital. The excess tax benefits were reported as an increase to cash provided by operations in the statement of cash flows.

In November 2015, the FASB issued ASU 2015-17, “Balance Sheet Classification of Deferred Taxes”, which eliminates the requirement for companies to present deferred tax liabilities and assets as current and non-current in a classified balance sheet. Instead, upon adoption, companies are required to classify all deferred tax assets and liabilities as non-current. We elected to early adopt the new guidance in the first quarter of fiscal 2017 and have made the necessary conforming reclassifications to the accompanying February 29, 2016 consolidated balance sheet. The application of the provisions of ASU 2015-17 did not have a material effect on our consolidated financial position, results of operations or cash flows.

In April 2015, the FASB issued ASU 2015-03, “Simplifying the Presentation of Debt Issuance Costs”. ASU 2015-03 changes the presentation of debt issuance costs in financial statements. ASU 2015-03 requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability rather than as an asset. We adopted the new guidance in the first quarter of fiscal 2017 and have made the necessary conforming reclassifications to the accompanying February 29, 2016 consolidated balance sheet and related footnote disclosures. The application of the provisions of ASU 2015-03 did not have a material effect on our consolidated financial position, results of operations or cash flows.

We have provided the table below, which summarizes the impact of each of the adopted accounting changes to the accompanying consolidated financial statements.

IMPACT OF ACCOUNTING CHANGES


			Increase (Decrease)
(in thousands)	Standard	Transition Method	February 28, 2017		February 29, 2016
Consolidated Balance Sheets
Current deferred tax assets, net	ASU 2015-17	Retrospective	$	(23,131)	$	(17,636)
Long-term deferred tax assets, net	ASU 2015-17	Retrospective	$	1,038	$	879
Long-term deferred tax assets, net	ASU-2016-09	Modified retrospective	$	(232)	$	-
Other assets - debt issuance costs	ASU 2015-03	Retrospective	$	(14,917)	$	(12,618)
Other assets - accumulated amortization	ASU 2015-03	Retrospective	$	(9,824)	$	(8,625)

Long-term debt, current maturities	ASU 2015-03	Retrospective	$	(1,296)	$	(1,156)
Current deferred tax liabilities, net	ASU 2015-17	Retrospective	$	168	$	-
Long-term deferred tax liabilities, net	ASU 2015-17	Retrospective	$	(21,925)	$	(16,757)
Long-term debt, excluding current maturities	ASU 2015-03	Retrospective	$	(3,796)	$	(2,837)

Additional paid-in capital	ASU-2016-09	Modified retrospective	$	588	$	-
Retained earnings	ASU-2016-09	Modified retrospective	$	(856)	$	-

IMPACT OF ACCOUNTING CHANGES


			Increase (Decrease)
			Fiscal Year Ended
(in thousands)	Standard	Transition Method	February 28, 2017		February 29, 2016
Consolidated Statements of Income
Share-based compensation expense	ASU-2016-09	Modified retrospective	$	1,754	$	-
Current income tax expense	ASU-2016-09	Modified retrospective	$	(1,844)	$	-

Consolidated Statements of Cash Flows
Cash provided by operating activities:
Accrued income taxes	ASU-2016-09	Retrospective	$	1,844	$	989

Cash provided by financing activities:
Share-based compensation tax benefit	ASU-2016-09	Retrospective	$	(1,844)	$	(989)

Unless otherwise disclosed above, we believe that the impact of other recently issued standards that are not yet effective will not have a material impact on its consolidated financial position, results of operations and cash flows upon adoption.