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Revenue | 6 Months Ended
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Jul. 31, 2018
Revenue From Contract With Customer [Abstract] |
Revenue | NOTE 17 – REVENUE In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606) which supersedes nearly all existing revenue recognition guidance. Subsequent to the issuance of Topic 606, the FASB clarified the guidance through several Accounting Standard Updates; hereinafter the collection of revenue guidance is referred to as “ASC 606”. On February 1, 2018, the Company adopted ASC 606 using the modified retrospective method and recognized the cumulative effect of initially applying the new revenue standard as an adjustment to the opening retained earnings. Under the modified retrospective method, the Company recognized a reduction of $0.7 million to opening retained earnings as the cumulative effect of adopting the new revenue standard. This adjustment did not have a material impact on the Company’s Consolidated Financial Statements. Results for reporting periods beginning after February 1, 2018 are presented under Topic 606, while prior period amounts are not adjusted. The impact of the adoption of the standard on the Company’s July 31, 2018 Consolidated Balance Sheet and for the three and six months ended July 31, 2018 Consolidated Statement of Operations were as follows (in thousands):
|  | As of July 31, 2018 |
|  | As reported |  |  | Balances Without Adoption |  |  | Impact of Adoption |
Assets |  |  |  |  |  |  |  |  |  |  |  |
Trade Receivables, net |  | $ | 83,818 |  |  | $ | 82,760 |  |  | $ | 1,058 |
Inventories |  | $ | 171,417 |  |  | $ | 171,965 |  |  | $ | (548 | )
Deferred and non-current income taxes |  | $ | 8,074 |  |  | $ | 8,099 |  |  | $ | (25 | )
Liabilities |  |  |  |  |  |  |  |  |  |  |  |
Accrued liabilities |  | $ | 50,054 |  |  | $ | 49,893 |  |  | $ | 161 |
Income taxes payable |  | $ | 5,996 |  |  | $ | 5,957 |  |  | $ | 39 |
Deferred and non-current income taxes |  | $ | 29,718 |  |  | $ | 29,706 |  |  | $ | 12 |
|  | Three months ended July 31, 2018 |
|  | As reported |  |  | Amounts Without Adoption |  |  | Impact of Adoption |
Net sales |  | $ | 144,093 |  |  | $ | 145,210 |  |  | $ | (1,117 | )
Gross profit |  | $ | 77,834 |  |  | $ | 78,323 |  |  | $ | (488 | )
Net income |  | $ | 9,140 |  |  | $ | 9,384 |  |  | $ | (244 | )
|  | Six months ended July 31, 2018 |
|  | As reported |  |  | Amounts Without Adoption |  |  | Impact of Adoption |
Net sales |  | $ | 271,242 |  |  | $ | 270,184 |  |  | $ | 1,058 |
Gross profit |  | $ | 145,358 |  |  | $ | 144,848 |  |  | $ | 510 |
Net income |  | $ | 17,255 |  |  | $ | 16,982 |  |  | $ | 273 |
The above adoption impact relates principally to timing of the recognition of markdowns and returns in the wholesale segment. Revenue Recognition As presented in the disaggregated revenue table below, wholesale revenue is recognized and recorded when a contract is in place, obligations under the terms of a contract with the customer are satisfied, control is transferred to the customer and is measured as the ultimate amount of consideration the Company expects to receive in exchange for transferring goods including variable consideration. Direct to consumer and after-sales service revenue is recognized at time of register receipt or delivery to customer. The Company records estimates of variable consideration, which includes sales returns, markdowns, volume-based programs and sales and cash discount allowances as a reduction of revenue in the same period that the sales are recorded. These estimates are based upon the expected value method considering all reasonably available information including historical analysis, customer agreements and/or currently known factors that arise in the normal course of business. Returns, discounts and allowances have historically been within the Company’s expectations and the provisions established. The future provisional rates may differ from those experienced in the past. The Company considers transfer of control to take place either when the goods ship or when goods are delivered depending on the shipping terms in the contract. Factors considered in the transfer of control include the right to payment, transfer of legal title, physical possession and customer acceptance of the goods and whether the significant risks and rewards for the goods belong with the customer. Taxes imposed by governmental authorities on the Company's revenue-producing activities with customers, such as sales taxes and value added taxes, are excluded from net sales. The Company’s sale of smart watches contains multiple performance obligations. The Company allocates revenue to each performance obligation using the relative standalone selling price method. The Company determines the standalone selling prices based on the prices charged to customers. Amounts allocated to the delivered smart watch collections and the related essential software are recognized at the time of sale. Amounts allocated to the cloud service and app updates are deferred and recognized on a straight-line basis over the estimated two-year period the updates are expected to be provided. The Company’s smart watch collections were available in limited quantities and in limited distribution, and, as a result, these deferred amounts were immaterial to all periods presented. The Company has considered each transaction to sell goods as separate and distinct, with no additional promises made. The Company uses the understanding of what the customer expects to receive as the final product to determine whether goods or services should be combined and accounted for as a single performance obligation. The Company does not incur significant costs to obtain or fulfill its contracts. Practical Expedients and Exemptions The Company does not consider the effects of a financing component for contracts because the length of time is one year or less, between when the Company transfers goods and when the customer is expected to pay. The Company’s shipping costs are sometimes paid by the customer, while other times, the shipping costs are included in the sales price for the watches. The Company does not deem shipping as a promised service to the customer because shipping is a fulfillment activity as part of the sale of goods. Revenue The following table presents the Company’s net sales disaggregated by customer type. Sales and usage-based taxes are excluded from net sales (in thousands).
|  | Three months ended |  |  | Six months ended |
|  | July 31, 2018 |  |  | July 31, 2018 |
Customer Type |  |  |  |  |  |  |  |
Wholesale |  | $ | 117,735 |  |  | $ | 223,709 |
Direct to consumer |  |  | 25,329 |  |  |  | 45,111 |
After-sales service |  |  | 1,029 |  |  |  | 2,422 |
Consolidated |  | $ | 144,093 |  |  | $ | 271,242 |
The Company’s revenue from contracts with customers is recognized at a point in time. The Company’s net sales disaggregated by geography are based on the location of the Company’s customer, (see Note 5 Segment and Geographic Information). Wholesale Revenue The Company’s wholesale revenue consists primarily of revenues from independent distributors, and department, chain and independent jewelry stores. The Company recognizes and records its revenue when obligations under the terms of a contract with the customer are satisfied, and control is transferred to the customer. Wholesale revenue is measured as the amount of consideration the Company ultimately expects to receive in exchange for transferring goods. Wholesale revenue is included entirely within the Wholesale Segment (see Note 5 Segment and Geographic Information), consistent with how management makes decisions regarding the allocation of resources and performance measurement. Direct to Consumer Revenue The Company’s direct to consumer revenue primarily consists of revenues from the Company’s outlet stores, concession stores, ecommerce, and consumer repairs. Revenue is recognized as the end consumer obtains delivery of the merchandise. Direct to Consumer revenue derived from concession stores and ecommerce is included within the Wholesale Segment; revenue derived from outlet stores is included within the Retail Segment (see Note 5 Segment and Geographic Information). Direct to Consumer revenue is determined based on the type of customer and may be included in either the Wholesale or Retail Segments based on how the Company makes decisions about the allocation of resources and performance measurement. After-sales service All watches sold by the Company come with limited warranties covering the movement against defects in material workmanship. The Company does not sell warranties separately. The Company’s after-sales service revenues consists of out of warranty service provided to wholesale customers and authorized third party repair centers, and sale of watch parts. The Company recognizes and records its revenue when obligations under the terms of a contract with the customer are satisfied, control is transferred to the customer and is measured as the amount of consideration the Company ultimately expects to receive in exchange for transferring goods. Revenue from after sales service, including consumer repairs are included entirely within the Wholesale Segment, consistent with how management makes decisions about the allocation of resources and performance measurement.

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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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