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Accounting Standards | 9 Months Ended
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Sep. 30, 2018
Accounting Changes and Error Corrections [Abstract] |
Accounting Standards | Accounting Standards Accounting Pronouncements Adopted Effective January 1, 2018, the company adopted ASU No. 2017-07 Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost issued by the Financial Accounting Standards Board (FASB) which requires employers to present the service cost component of net periodic benefit cost in the same income statement line item(s) as other employee compensation costs arising from services rendered during the period. The other components of net periodic benefit cost are presented separately from the line items that include service cost and outside the subtotal of operating income. ASU No. 2017-07 allows a practical expedient that permits an entity to use amounts disclosed in its pension and other postretirement benefit plan footnote for the prior comparative periods as the estimation basis for applying the retrospective presentation requirements. The new guidance has been applied on a retrospective basis, using the practical expedient, whereby prior-period financial statements have been adjusted to reflect the adoption of the new guidance, as required by the FASB. For the three and nine months September 30, 2017, $24.1 million and $69.9 million, respectively, of net periodic benefit cost, other than service costs, was reclassified from cost of revenue, selling, general and administrative expense and research and development expense to other income (expense), net in the company’s consolidated results of operations (see Note 5). Effective January 1, 2018, the company adopted ASU No. 2014-09 Revenue from Contracts with Customers (Topic 606) issued by the FASB which establishes principles that an entity shall apply to report useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows from a contract with a customer. Topic 606 allows for either “full retrospective” adoption, meaning the standard is applied to all periods presented, or “modified retrospective” adoption, meaning the standard is applied only to the most current period presented in the financial statements. Topic 606 requires the company to recognize revenue for certain transactions, including extended payment term software licenses and short-term software licenses, sooner than the prior rules would allow and requires the company to recognize software license extensions and renewals (the most significant impact upon adoption), later than the prior rules would allow. Topic 606 also requires significantly expanded disclosure requirements. The company has adopted the standard using the modified retrospective method and applied the standard to all contracts that were not completed as of January 1, 2018. The cumulative effect of the adoption was recognized as an increase in the company’s accumulated deficit of $21.4 million on January 1, 2018. The following table summarizes the effects of adopting ASU No. 2014-09 on the company’s consolidated financial statements as of and for the three and nine months ended September 30, 2018.
|  | As Reported |  |  | Adjustments |  |  | Balances Without Adoption of Topic 606
For the three months ended September 30, 2018 |  |  |  |  |  |
Statement of Income |  |  |  |  |  |
Revenue |  |  |  |  |  |
Services |  | $ | 605.6 |  |  | $ | (3.1 | ) |  | $ | 602.5 |
Technology |  | 82.7 |  |  | (8.1 | ) |  | 74.6 |
Costs and expenses |  |  |  |  |  |
Cost of revenue |  |  |  |  |  |
Services |  | 504.9 |  |  | (0.9 | ) |  | 504.0 |
Technology |  | 29.6 |  |  | 0.2 |  |  | 29.8 |
Selling, general and administrative expenses |  | 90.9 |  |  | 0.3 |  |  | 91.2 |
Operating income |  | 55.8 |  |  | (10.7 | ) |  | 45.1 |
Income before income taxes |  | 22.2 |  |  | (10.7 | ) |  | 11.5 |
Provision for income taxes |  | 15.2 |  |  | (5.3 | ) |  | 9.9 |
Consolidated net income |  | 7.0 |  |  | (5.4 | ) |  | 1.6 |
Net income attributable to Unisys Corporation |  | 6.1 |  |  | (5.4 | ) |  | 0.7 |
For the nine months ended September 30, 2018 |  |  |  |  |  |
Statement of Income |  |  |  |  |  |
Revenue |  |  |  |  |  |
Services |  | $ | 1,760.8 |  |  | $ | (5.6 | ) |  | $ | 1,755.2 |
Technology |  | 303.3 |  |  | (101.1 | ) |  | 202.2 |
Costs and expenses |  |  |  |  |  |
Cost of revenue |  |  |  |  |  |
Services |  | 1,460.0 |  |  | (2.2 | ) |  | 1,457.8 |
Technology |  | 96.2 |  |  | (0.5 | ) |  | 95.7 |
Selling, general and administrative expenses |  | 274.5 |  |  | 0.7 |  |  | 275.2 |
Operating income |  | 211.6 |  |  | (104.7 | ) |  | 106.9 |
Income before income taxes |  | 105.1 |  |  | (104.7 | ) |  | 0.4 |
Provision for income taxes |  | 50.4 |  |  | (14.7 | ) |  | 35.7 |
Consolidated net income (loss) |  | 54.7 |  |  | (90.0 | ) |  | (35.3 | )
Net income (loss) attributable to Unisys Corporation |  | 50.5 |  |  | (90.0 | ) |  | (39.5 | )
As of September 30, 2018 |  |  |  |  |  |
Balance Sheet |  |  |  |  |  |
Assets |  |  |  |  |  |
Accounts receivable, net current |  | $ | 492.2 |  |  | $ | 63.5 |  |  | $ | 555.7 |
Contract assets |  | 73.3 |  |  | (73.3 | ) |  | — |
Inventories |  | 23.0 |  |  | 4.6 |  |  | 27.6 |
Prepaid expenses and other current assets |  | 102.6 |  |  | 0.9 |  |  | 103.5 |
Deferred income taxes - long-term |  | 97.3 |  |  | 1.7 |  |  | 99.0 |
Other long-term assets |  | 193.6 |  |  | (22.5 | ) |  | 171.1 |
Total assets |  | 2,328.0 |  |  | (25.1 | ) |  | 2,302.9 |
Liabilities |  |  |  |  |  |
Deferred revenue - current |  | 254.7 |  |  | 46.5 |  |  | 301.2 |
Other accrued liabilities - current |  | 351.9 |  |  | (16.8 | ) |  | 335.1 |
Long-term deferred revenue |  | 167.4 |  |  | 8.4 |  |  | 175.8 |
Other long-term liabilities |  | 68.1 |  |  | 5.5 |  |  | 73.6 |
Equity |  |  |  |  |  |
Accumulated deficit |  | (1,725.3 | ) |  | (68.7 | ) |  | (1,794.0 | )
Total liabilities and deficit |  | 2,328.0 |  |  | (25.1 | ) |  | 2,302.9 |
Included in the Technology revenue adjustments for the nine months ended September 30, 2018 in the above table is $53.0 million of revenue from software license extensions and renewals which were contracted for in the fourth quarter of 2017 and properly recorded as revenue at that time under the revenue recognition rules then in effect (Topic 605). Upon adoption of the new revenue recognition rules (Topic 606) on January 1, 2018, and since the company adopted Topic 606 under the modified retrospective method whereby prior periods were not restated, the company was required to include this $53.0 million in the cumulative effect adjustment to retained earnings on January 1, 2018. Topic 606 requires revenue related to software license renewals or extensions to be recorded when the new license term begins, which in the case of the $53.0 million is January 1, 2018. The company has excluded revenue and related profit for these software licenses to reflect the balances without the adoption of Topic 606 in the above table. This is a one-time adjustment and it will not reoccur in future periods. There are additional adjustments being made in the above table, but they do not represent previously recorded revenue. Those additional adjustments represent other differences between Topic 605 and Topic 606, principally extended payment term software licenses and short-term software licenses both of which are recorded at the inception of the license term under Topic 606, but were required to be recognized ratably over the software license term under Topic 605. An additional adjustment is that under Topic 605, a company was not able to recognize software license revenue until the last software license is delivered due to the lack of vendor specific objective evidence, whereas under Topic 606, a company is required to use the standalone selling price for all performance obligations. This resulted in software license revenue being recognized sooner under Topic 606 compared with Topic 605. Effective July 1, 2018, the company adopted ASU No. 2018-02 Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income by applying the changes in the period of adoption. The new guidance permits companies to reclassify stranded tax effects in accumulated other comprehensive income (AOCI) caused by the U.S. Tax Cuts and Jobs Act of 2017 (TCJA) to retained earnings. Upon enactment of the TCJA, the U.S. corporate tax rate was reduced from 35% to 21% and the Company's U.S. deferred tax balances and related valuation allowances were remeasured to the lower enacted U.S. corporate tax rate. In accordance with its accounting policy, the company releases the income tax effects of deferred tax balances that have a valuation allowance from AOCI once the reason the tax effects were established cease to exist (e.g. postretirement plan is liquidated). The new guidance allows for the reclassification of stranded tax effects as a result of the change in tax rates from the TCJA to be recorded upon adoption of the guidance rather than at cessation date. On July 1, 2018, $208.7 million related to postretirement plans was reclassified from AOCI to retained earnings. In September 2018, the company adopted SEC Release No. 33-10532, Disclosure Update and Simplification which amends certain disclosure requirements that were redundant, duplicative, overlapping, outdated or superseded. In addition, the rule expands the disclosure requirements on changes in stockholders’ equity for interim periods. Under this rule, a reconciliation of changes in stockholders' equity is required for each period for which an income statement is presented. The company applied the new disclosure requirements retrospectively to all periods presented. Accounting Pronouncements Not Yet Adopted In August 2018, the FASB issued ASU No. 2018-15, Intangibles - Goodwill and Other - Internal - Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract which clarifies the accounting for implementation costs incurred in a cloud computing arrangement that is a service contract. This update is effective for fiscal years ending after December 15, 2019, with earlier adoption permitted. The new guidance can be applied retrospectively or prospectively to all implementation costs incurred after the date of adoption. The company is currently assessing when it will choose to adopt, and is currently evaluating the impact of the adoption on its consolidated financial statements. In August 2018, the FASB issued ASU No. 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20): Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans which adds, removes and clarifies disclosure requirements related to defined benefit pension and other postretirement plans. This update is effective for fiscal years ending after December 15, 2020, with earlier adoption permitted. The company plans to adopt the guidance for the fiscal year ending on December 31, 2018 and will apply the changes on a retrospective basis for all periods presented. There will be no overall impact on the company’s consolidated financial position. In June 2016, the FASB issued ASU No. 2016-13 Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments which introduces a new model for recognizing credit losses on financial instruments based on an estimate of current expected losses. This includes trade and other receivables, loans and other financial instruments. This update is effective for annual periods beginning after December 15, 2019, with earlier adoption permitted. The company is currently assessing when it will choose to adopt, and is currently evaluating the impact of the adoption on its consolidated financial statements. In February 2016, the FASB issued ASU No. 2016-02 Leases (Topic 842), which is intended to improve financial reporting about leasing transactions. The ASU requires organizations that lease assets, referred to as lessees, to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. The standard also requires disclosures to help investors and other financial statement users better understand the amount, timing and uncertainty of cash flows arising from leases. In July 2018, the FASB issued ASU No. 2018-11, Leases (Topic 842), Targeted Improvements, which provides an alternative transition method permitting the recognition of a cumulative-effect adjustment to retained earnings on the date of adoption rather than restating comparative periods in transition as originally prescribed by Topic 842. The standard is effective for annual reporting periods beginning after December 15, 2018, which for the company is January 1, 2019. The company will adopt the new guidance utilizing the alternative transition method, and is currently in the process of reviewing lease contracts, implementing new lease accounting software, establishing new processes and internal controls and evaluating the impact of certain accounting policy elections. Until this effort is completed, the company cannot fully determine the impact of adopting the new guidance. The adoption is expected to have a material impact on the consolidated financial position, and is not expected to have a material impact on the consolidated results of operations and cash flows.

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- Definition The entire disclosure of changes in accounting principles, including adoption of new accounting pronouncements, that describes the new methods, amount and effects on financial statement line items. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 250 -URI http://asc.fasb.org/topic&trid=2122394 + Details
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