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Organization and Significant Accounting Policies (Policies)
6 Months Ended
Jun. 30, 2016
Accounting Policies [Abstract]  
Basis of Presentation
Basis of Presentation
Our condensed consolidated financial statements include the financial position and results of operations of Omeros Corporation (Omeros) and our wholly owned subsidiaries. All inter-company transactions have been eliminated and we have determined we operate in one segment. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. The information as of June 30, 2016 and for the three and six months ended June 30, 2016 and 2015 includes all adjustments, which include normal recurring adjustments, necessary to present fairly our interim financial information. The Condensed Consolidated Balance Sheet at December 31, 2015 has been derived from our audited financial statements but does not include all of the information and footnotes required by GAAP for audited annual financial information.
The accompanying unaudited condensed consolidated financial statements and related notes thereto should be read in conjunction with the audited consolidated financial statements and related notes thereto that are included in our Annual Report on Form 10-K for the year ended December 31, 2015, which was filed with the U.S. Securities and Exchange Commission (SEC) on March 15, 2016.
The accompanying unaudited condensed consolidated financial statements have been prepared on a going-concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The accompanying unaudited condensed consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from uncertainty related to our ability to continue as a going concern.
Revenue Recognition
Product Sales, Net
We record revenue from OMIDRIA sales when the product is delivered to our wholesalers.
Product sales are recorded net of estimated chargebacks and rebates, wholesaler distribution fees and estimated product returns. Accruals or allowances are established for these deductions when revenue is recognized, and actual amounts incurred are offset against the applicable accruals and allowances. We reflect each of these accruals or allowances as either a reduction in the related accounts receivable or as an accrued liability, depending on how the accrual or allowance is settled.
Use of
Use of Estimates
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Significant items subject to such estimates include revenue recognition, fair market value of investments, stock-based compensation expense and accruals for clinical trials and contingencies. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances; however, actual results could differ from these estimates.
Recent Accounting Pronouncements
Recently Adopted Accounting Pronouncements
For the year ended December 31, 2015 we adopted and applied retrospectively Financial Accounting Standards Board (FASB) Accounting Standards Update, or ASU, No. 2015-03, related to simplifying the presentation of debt issuance costs. This standard requires debt issuance costs related to a recognized debt liability to be presented in the balance sheet as a direct deduction to the liability.
Recent Accounting Pronouncements
In August 2014, FASB issued ASU No. 2014-15 related to disclosure of an entity’s ability to continue as a going concern. This standard requires management to evaluate whether substantial doubt exists regarding the entity’s ability to continue as a going concern at each reporting period for a duration of one year after the date the financial statements are issued or available to be issued and to provide related footnote disclosures. This standard must be applied prospectively and is effective for interim and annual periods ending after December 15, 2016. We are monitoring for any conditions and events that could raise substantial doubt about our ability to continue as a going concern. The evaluation of the significance of those conditions and events and the related impact upon our disclosures, if applicable, will be disclosed in our annual financial statements for the year ended December 31, 2016.
In February 2016, FASB issued ASU 2016-02 related to lease accounting. This standard requires lessees to recognize a right-of-use asset and a lease liability for most leases. This standard must be applied using a modified retrospective transition and is effective for all annual and interim periods beginning after December 15, 2018. Earlier adoption is permitted. We are evaluating how this new standard will impact the presentation of our financial statements and related disclosures.
In March 2016, FASB issued ASU 2016-08 related to revenue recognition. This standard is an amendment to ASU 2014-09 relating to revenue from contracts with customers. This amendment clarifies an entity’s revenue recognition for a performance obligation based on principal versus agent considerations. This standard has the same effective date and transition requirements as ASU 2014-09, as amended, which requires that the guidance must be applied retroactively to each prior reporting period presented or retrospectively with the cumulative effect of applying the standard recognized in the period adopted. As amended, the standard is effective for interim and annual periods beginning after December 15, 2017 and cannot be adopted before the original effective date, which was for periods beginning after December 15, 2016. We are currently evaluating the impact that this standard may have on our financial statements once it is adopted.
In March 2016, FASB issued ASU 2016-09 that changes the accounting for certain aspects of share-based payments to employees. The guidance requires the recognition of the income tax effects of awards in the income statement when the awards vest or are settled, thus eliminating additional paid in capital pools. The guidance also allows for the employer to repurchase more of an employee’s shares for tax withholding purposes without triggering liability accounting and for making a policy election to account for forfeitures as they occur rather than on an estimated basis. The guidance is effective for interim and annual periods beginning after December 15, 2016 with early adoption permitted. We are currently evaluating the impact that this standard may have on our financial statements once it is adopted and the timing of adoption.
In April and May 2016, FASB issued ASU 2016-10 and ASU 2016-12, respectively. Both standards are amendments to ASU 2014-09 related to revenue from contracts with customers. ASU 2016-10 clarifies an entity’s revenue recognition when identifying performance obligations and licensing. ASU 2016-12 clarifies the objective of the collectibility criterion, one of the five steps of ASU 2014-09. This amendment also establishes practical expedients for sales-tax considerations and contract modifications. Both standards have the same effective date and transition requirements as ASU 2014-09, as amended. We are currently evaluating the impact that these standards may have on our financial statements once they are adopted.