Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2017

Basis of Accounting, Policy [Policy Text Block]

(a) Basis of presentation

These consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany balances and transactions have been eliminated on consolidation.

The Company has reclassified certain prior period income statement amounts and related notes to conform to the financial statement presentation adopted in the current year. As a result of these reclassifications, there were

changes to previously reported Income from operations, Net income, Earnings per share, or on previously reported Consolidated Balance Sheets or Consolidated Statements of Cash Flows.

Use of Estimates, Policy [Policy Text Block]

(b) Use of estimates

The preparation of the consolidated financial statements in accordance with U.S.

GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, management evaluates its estimates, including those related to amounts recognized for carrying values of revenues, bad debts, goodwill and intangible assets which require estimates of future cash flows and discount rates, income taxes, contingencies and litigation, and estimates of credit spreads for determination of the fair value of derivative instruments. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances at the time they are made. Under different assumptions or conditions, the actual results will differ, potentially materially, from those previously estimated. Many of the conditions impacting these assumptions and estimates are outside of the Company’s control.

Cash and Cash Equivalents, Policy [Policy Text Block]

All highly liquid investments, with an original term to maturity of

three

months or less are classified as cash and cash equivalents. Cash and cash equivalents are stated at cost which approximates market value.

Inventory, Policy [Policy Text Block]

(d) Inventory

Inventory primarily consists of mobile devices

, mobile sim cards and related accessories, and Internet optical network terminals and are stated at the lower of cost or net realizable value. Cost is determined based on actual cost of the mobile device, accessory shipped or optical network terminals.

The net realizable value of inventory is analyzed on a regular basis. This analysis includes assessing obsolescence, sales forecasts, product life cycle, marketplace and other considerations. If assessments regarding the above factors adversely change, we

may

be required to write down the value of inventory.

Property, Plant and Equipment, Policy [Policy Text Block]

(e) Property and equipment

Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is provided on a straight-line basis so as to depreciate the cost of depreciable assets over their estimated useful lives at the following rates:

Rate

Asset

Computer equipment

30%

Computer software

1/3

100%

Furniture and equipment

20%

Vehicles and tools

20%

Fiber network (years)

Customer equipment and installations (years)

Leasehold improvements

Over term of lease

Assets under construction

N/A

The Company reviews the carrying values of its property and equipment for potential impairment whenever events or changes in circumstances indicate that the carrying amount of an asset

may

not

be recoverable. If the estimated undiscounted future cash flows expected to result from the use of the group of assets and their eventual disposition is less than their carrying amount, they are considered to be impaired. The amount of the impairment loss recognized is measured as the amount by which the carrying value of the asset exceeds the fair value of the asset, with fair value being determined based upon discounted cash flows or appraised values, depending on the nature of the assets.

Additions to the fiber network are recorded at cost, including all material, labor, vehicle and installation and construction costs and certain indirect costs associated with the construction of cable transmission and distribution facilities. While the Company

’s capitalization is based on specific activities, once capitalized, costs are tracked by fixed asset category at the fiber network level and

not

on a specific asset basis. For assets that are retired, the estimated historical cost and related accumulated depreciation is removed.

Derivatives, Policy [Policy Text Block]

(f) Derivative Financial Instruments

The Company uses derivative financial instruments to manage foreign currency exchange risk. The Company accounts for these instruments in accordance with

Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic

815,

“Derivatives and Hedging” ("Topic

815"

), which requires that every derivative instrument be recorded on the balance sheet as either an asset or liability measured at its fair value as of the reporting date. Topic

815

also requires that changes in our derivative financial instruments’ fair values be recognized in earnings, unless specific hedge accounting and documentation criteria are met (i.e. the instruments are accounted for as hedges). The Company recorded the effective portions of the gain or loss on derivative financial instruments that were designated as cash flow hedges in accumulated other comprehensive income in our accompanying Consolidated Balance Sheets. Any ineffective or excluded portion of a designated cash flow hedge, if applicable, is recognized in net income.

For certain contracts, the Company has

not

complied with the documentation standards required for its forward foreign exchange contracts to be accounted for as hedges and has, therefore, accounted for such forward foreign exchange contracts at their fair values with the changes in fair value recorded in net income.

The fair value of the forward exchange contracts is determined using an estimated credit adjusted mark-to-market valuation which takes into consideration the Company's and the counterparty's credit risk. The valuation technique used to measure the fair values of the derivative instruments is a discounted cash flow technique, with all significant inputs derived from or corroborated by observable market data, as

quoted market prices exist for the derivative instruments. The discounted cash flow techniques use observable market inputs, such as foreign currency spot and forward rates.

Goodwill and Intangible Assets, Goodwill, Policy [Policy Text Block]

(g) Goodwill and Other Intangible assets

Goodwill

Goodwill represents the excess of purchase price over the fair values assigned to the net assets acquired in business combinations. The Company does

not

amortize goodwill. Impairment testing for goodwill is performed annually in the

fourth

quarter of each year or more frequently if impairment indicators are present. Impairment testing is performed at the operating segment level. The Company has determined that it has

two

operating segments, Domain Services and Network Access services.

The Company performs a qualitative assessment to determine whether there are events or circumstances which would lead to a determination that it is more likely than

not

that goodwill has been impaired. If, after this qualitative assessment, the Company determines that it is

not

more likely than

not

that goodwill has been impaired, then

further quantitative testing is necessary. In performance of the qualitative test, an evaluation is made of the impact of various factors to the expected future cash flows attributable to its operating segments and to the assumed discount rate which would be used to present value those cash flows. Consideration is given to factors such as, macro-economic and industry and market conditions including the capital markets and the competitive environment amongst others. In the event that the qualitative tests indicate that there

may

be impairment, quantitative impairment testing is required.

In performance of the quantitative test, the Company uses a discounted cash flow or income approach in which future expected cash flows at the operating segment level are converted to present value using factors that consider the timing and risk of the future cash flows. The estimate of cash flows used is prepared on an unleveraged debt-free basis. The discount rate reflects a market-derived weighted average cost of capital. The Company believes that this approach is appropriate because it provides a fair value estimate based upon the Company

’s expected long-term operating and cash flow performance for its operating segment. The projections are based upon the Company’s best estimates of projected economic and market conditions over the related period including growth rates, estimates of future expected changes in operating margins and cash expenditures.

Other significant estimates and assumptions include terminal value growth rates, terminal value margin rates, future capital expenditures and changes in future working capital. If assumptions and estimates used to allocate the purchase price or used to assess impairment prove to be inaccurate, future asset impairment charges could be required.

Intangibles Assets

not

subject to amortization

Intangible assets

not

subject to amortization consist of surname domain names and direct navigation domain names. While the domain names are renewed annually, through payment of a renewal fee to the applicable registry, the Company has the exclusive right to renew these names at its option. Renewals occur routinely and at a nominal cost. Moreover, the Company has determined that there are currently

legal, regulatory, contractual, economic or other factors that limit the useful life of these domain names on an aggregate basis and accordingly treat the portfolio of domain names as indefinite life intangible assets. The Company re

-evaluates the useful life determination for domain names in the portfolio each year to determine whether events and circumstances continue to support an indefinite useful life.

The Company reviews individual domain names in the portfolio for potential impairment throughout the fiscal year in determining whether a particular name should be renewed. Impairment is recognized for names that are

not

renewed. The Company performs a qualitative assessment of the portfolio of domain names on an aggregate basis in the

fourth

quarter of each year, to determine whether it is more likely than

not

that the fair market value of the portfolio of domain names was less than the carrying amount. As part of the assessment, certain qualitative factors are considered, including macro-economic conditions, industry and market conditions, levels of advertising revenue generated by the names in the portfolio, non-renewal of names, as well as other factors. If there are indications of impairment following the qualitative impairment testing, further quantitative impairment testing would be necessary. The fair value of the intangibles in the operating segment is determined using an income approach consistent with that utilized for goodwill impairment testing outlined above. Where the fair value of the aggregated portfolio of domain names is less than the aggregated carrying amount of the portfolio, impairment is recognized.

Intangible Assets subject to amortization

Intangible assets subject to amortization, consist of brand, customer relationships, technology and network rights and are amortized on a straight-line basis over their estimated useful lives as follows:

	(in years)

Technology			2

Brand			7

Customer relationships		4	-	7

Network rights			15

The Company continually evaluates whether events or circumstances have occurred that indicate the remaining estimated useful lives of its intangible assets subject to amortization

may

warrant revision or that the remaining balance of such assets

may

not

be recoverable. The Company uses an estimate of the related undiscounted cash flows over the remaining life of the asset in measuring whether the asset is recoverable.

Revenue Recognition, Policy [Policy Text Block]

(h) Revenue recognition

The Company

’s revenues are derived from domain name registration fees on both a wholesale and retail basis, the sale of domain names, the provisioning of other Internet services and advertising revenue. Amounts received in advance of meeting the revenue recognition criteria described below are recorded as deferred revenue.

(i)

Domain Services

The Company earns registration fees in connection with each new, renewed and transferred-in registration and from providing provisioning of other Internet services to resellers and registrars on a monthly basis. Service has been provided in connection with registration fees once the Company has confirmed that the requested domain name has been appropriately recorded in the registry under contractual performance standards.

Domain names are generally purchased for terms of

one

ten

years. Registration fees charged for domain name registration and provisioning services are recognized on a straight-line basis over the life of the contracted term. Other Internet services that are provisioned for annual periods or longer, are recognized on a straight-line basis over the life of the contracted term. Other Internet services that are provisioned on a monthly basis are recognized as services are provided.

The Company is an ICANN accredited registrar. Thus, the Company is

the primary obligor with our reseller and retail registrant customers and are responsible for the fulfillment of our registrar services to those parties. As a result, the Company reports revenue in the amount of the fees we receive directly from our reseller and retail registrant customers. Our reseller customers maintain the primary obligor relationship with their retail customers, establish pricing and retain credit risk to those customers. Accordingly, the Company does

not

recognize any revenue related to transactions between our reseller customers and their ultimate retail customers.

For arrangements with multiple deliverables, the Company allocates revenue to each deliverable if the delivered item(s) has value to the customer on a standalone basis and, if the arrangement includes a general right of return relative to the delivered item, delivery or performance of the undelivered item(s) is considered probable and substantially in the control of the Company. The fair value of the selling price for a deliverable is determined using a hierarchy of (

) Company specific objective and reliable evidence, then (

)

third

-party evidence, then (

) best estimate of selling price. The Company allocates any arrangement fee to each of the elements based on their relative selling prices.

Revenue generated from the sale of domain names, earned from transferring the rights to domain names under the Company

’s control, are recognized once the rights have been transferred and payment has been received in full, except where a fixed contract has been negotiated, in which case revenues are recognized once all the terms of the contract have been satisfied.

The Company also generates advertising and other revenue through its online libraries of shareware, freeware and online services presented on its website. Advertising revenue includes revenue derived from cost per action advertising links we display on

third

party websites who provide syndicated pay-per-click advertising on Domain Expiry Stream domains and the Company

’s Portfolio Domains. In addition, the Company uses

third

party partners to derive pay-per-click advertising on the Tucows.com website. Advertising revenue is recognized on a monthly basis based on the number of cost-per-action services that were provided in the month.

Impression based advertising revenue and other revenues are recognized ratably over the period in which it is presented. To the extent that minimum guaranteed impressions are

not

met, the Company defers recognition of the corresponding revenues until the guaranteed impressions are achieved.

(ii)

Network Access Services

The Company derives revenues from the provisioning of mobile phone and fixed Internet access services primarily through its Ting website. These revenues are recognized once services have been provided. Revenues for wireless services are billed based on the actual amount of monthly services utilized by each customer during their billing cycle on a postpaid basis. Revenues for fixed Internet access services are billed on a fixed monthly basis based on the service plan selected. The Company

’s billing cycle for each customer is computed based on the customer’s activation date. As a result, the Company estimates the amount of revenues earned but

not

billed from the end of each billing cycle to the end of each reporting period. In addition, revenues associated with the sale of wireless devices and accessories and Internet hardware to subscribers are recognized when title and risk of loss is transferred to the subscriber and shipment has occurred. Incentive marketing credits given to customers are recorded as a reduction of revenue.

In those cases, where payment is

not

received at the time of sale, additional conditions for recognition of revenue are that the collection of the related accounts receivable is reasonably assured and the Company has

further performance obligations. The Company records costs that reflect expected refunds, rebates and credit card charge-backs as a reduction of revenues at the time of the sale based on historical experiences and current expectations.

The Company establishes provisions for possible uncollectible accounts receivable and other contingent liabilities which

may

arise in the normal course of business. Historically, credit losses have been within the Company

’s expectations and the provisions the Company has established have been appropriate. However, the Company has, on occasion, experienced issues which have led to accounts receivable

not

being fully collected. Should these issues occur more frequently, additional provisions

may

be required.

Revenue Recognition, Deferred Revenue [Policy Text Block]

(i) Deferred revenue

Deferred revenue primarily relates to the unearned portion of revenues received in advance related to the unexpired term of registration fees from domain name registrations and other domain related Internet services, on both a wholesale and retail basis, net of external commissions.

Accreditation Fees Payable [Policy Text Block]

(j) Accreditation fees payable

In accordance with ICANN rules, the Company has elected to pay ICANN fees incurred on the registration of Generic Top-Level Domains on an annual basis. Accordingly, accreditation fees that relate to registrations completed prior to ICANN rendering a bill are accrued and reflected as accreditation fees payable.

Prepaid Domain Name Registry Fees [Policy Text Block]

(k) Prepaid domain name registry fees

Prepaid domain name registry and other Internet services fees represent amounts paid to registries, and country code domain name operators for updating and maintaining the registries, as well as to suppliers of other Internet services. Domain name registry and other Internet services fees are recognized on a straight-line basis over the life of the contracted registration term.

Foreign Currency Transactions and Translations Policy [Policy Text Block]

(l) Translation of foreign currency transactions

The Company

’s functional currency is the United States dollar. Monetary assets and liabilities of the Company and of its wholly owned subsidiaries that are denominated in foreign currencies are translated into United States dollars at the exchange rates prevailing at the balance sheet dates. Non-monetary assets and liabilities are translated at the historical exchange rates. Transactions included in operations are translated at

the rate at the date of the transactions.

Income Tax, Policy [Policy Text Block]

(m) Income taxes

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss

carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in net income in the year that includes the enactment date. A valuation allowance is recorded if it is

not

“more likely than

not”

that some portion of or all of a deferred tax asset will be realized.

The Company recognizes the impact of an uncertain income tax position at the largest amount that is more-likely-than-

not

to be sustained upon audit by the relevant taxing authority and includes consideration of interest and penalties. An uncertain income tax position will

not

be recognized if it has less than a

50%

likelihood of being sustained. The liability for unrecognized tax benefits is classified as non-current unless the liability is expected to be settled in cash within

months of the reporting date.

The Company is entitled to earn investment tax credits (“ITCs”), which are credits related to specific qualifying expenditures as prescribed by Canadian Income Tax legislation. These ITCs relate primarily to research and development expenses. The ITCs are recognized as a reduction in income tax expense once the Company has reasonable assurance that the amounts will be realized.

(n) Stock-based compensation

Stock-based compensation expense recognized during the period is based on the value of the portion of stock-based payment awards that is ultimately expected to vest, reduced for estimated forfeitures.

Earnings Per Share, Policy [Policy Text Block]

(o) Earnings per common share

Basic earnings per common share has been calculated on the basis of net income for the year divided by the weighted average number of common shares outstanding during each year. Diluted earnings per share gives effect to all dilutive potential common shares outstanding at the end of the year assuming that they had been issued, converted or exercised at the later of the beginning of the year or their date of issuance. In computing diluted earnings per share, the treasury stock method is used to determine the number of shares assumed to be purchased from the conversion of common share equivalents or the proceeds of the exercise of options.

Concentration Risk, Credit Risk, Policy [Policy Text Block]

(p) Concentration of credit risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash equivalents, accounts receivable and forward foreign exchange contracts. Cash equivalents consist of deposits with major commercial banks, the maturities of which are

three

months or less from the date of purchase. With respect to accounts receivable, the Company performs periodic credit evaluations of the financial condition of its customers and typically does

not

require collateral from them. The counterparty to any forward foreign exchange contracts is a major commercial bank which management believes does

not

represent a significant credit risk. Management assesses the need for allowances for potential credit losses by considering the credit risk of specific customers, historical trends and other information.

Fair Value Measurement, Policy [Policy Text Block]

(q) Fair value measurement

Fair value of financial assets and liabilities is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. The

three

-tier hierarchy for inputs used in measuring fair value, which prioritizes the inputs used in the methodologies of measuring fair value for assets and liabilities, is as follows:

Level

—Quoted prices in active markets for identical assets or liabilities

Level

—Observable inputs other than quoted prices in active markets for identical assets and liabilities

Level

—No

observable pricing inputs in the market

Financial assets and financial liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurements. Our assessment of the significance of a particular input to the fair value measurements requires judgment, and

may

affect the valuation of the assets and liabilities being measured and their placement within the fair value hierarchy.

The fair value of cash and cash equivalents, accounts receivable, accounts payable, accreditation fees payable, customer deposits and accrued liabilities (level

measurements) approximate their carrying values due to the relatively short periods to maturity of the instruments.

The fair value of the derivative financial instruments

is determined using an estimated credit-adjusted mark-to-market valuation (a level

measurement) which takes into consideration the Company and the counterparty credit risk.

Investment, Policy [Policy Text Block]

(r) Investments

The Company

accounts for investment in entities over which they have ability to exert significant influence, but do

not

control and are

not

the primary beneficiary of, including NameJet, using the equity method of accounting. The Company includes the proportionate share of earnings (loss) of the equity method investees in other income in the statements of operations and comprehensive income. The proportional shares of affiliate earnings or losses accounted for under the equity method of accounting were

not

material for all periods presented.

Segment Reporting, Policy [Policy Text Block]

(

) Segment reporting

The Company operates in

two

operating segments, Domain Services and Network Access Services.

The Company

’s Domain Services revenues are attributed to the country in which the contract originates. Revenues from domain names issued under the OpenSRS brand from the Toronto, Canada location are attributed to Canada because it is impracticable to determine the country of the customer. Revenues from domain names issued under the eNom brand from the Kirkland, Washington location are attributable to the United States because it is impracticable to determine the country of the customer. The Company’s Network Access Services which consist primarily of mobile telephony services, as well as the provisioning of high speed Internet access, Internet hosting and consulting services, which are generated primarily through its business operations in the United States.

The Company

’s assets are located in Canada, the United States and Germany.

New Accounting Pronouncements, Policy [Policy Text Block]

(

) Recent Accounting Pronouncements

Recent Accounting Pronouncements Adopted

January 1, 2017,

the Company adopted Accounting Standards Updates ("ASU")

No.

2016

05,

Derivatives and Hedging (Topic

815

) and ASU

2015

16,

Simplifying the Accounting for Measurement-Period Adjustments.

The adoption of these updates did

not

have a significant impact on the consolidated financial statements.

January 2017,

the Company adopted Accounting Standards Update (“ASU”)

No.

2017

04,

Intangibles – Goodwill and Other (Topic

350

): Simplifying the Test for Goodwill Impairment

(“ASU

2017

01”

), which simplifies the current

two

-step test to determine the amount, if any, of goodwill impairment. This update removes the

second

step of the quantitative test. An entity will apply a

one

-step quantitative test and record the amount of goodwill impairment as the excess of a reporting unit’s carrying over its fair value,

not

to exceed the total amount of goodwill allocated to the reporting unit. The update was applied to the Company's goodwill impairment evaluation for the year ended

December 31, 2017.

January 1, 2017,

the Company also adopted ASU

No.

2016

09,

Stock Compensation (Topic

718

)

, which simplifies the presentation of several aspects of the accounting for employee share-based payment transactions. The areas for simplification include the income tax consequences, accounting for forfeitures, and classification on the statement of cash flows. The impacts of the adoption of ASU

2016

on our consolidated financial statements are as follows:

●

Accounting for Income Taxes

–

the standard requires that all excess tax benefits and tax deficiencies related to employee share-based payments are recognized through income tax expense

on a prospective basis, which resulted in the recognition of

$2.8

million in excess tax benefits as a reduction of tax expense related to employee share-based payments for the year ended

December 31, 2017.

●

Cash Flow Classification

– as a result of the new standard, all excess tax benefits related to employee share-based payments which have been historically shown as a financing activity, should now be presented as an operating activity along with other income tax cash flows. Additionally, the standard requires that cash paid by an employer when directly withholding shares for tax-withholding purposes should be classified as a financing activity. The Company elected to apply both changes on a retrospective basis such that the comparative period is presented on a consistent basis as the current presentation; and

●

Forfeitures

– the standard allows for an entity-wide accounting policy election to either estimate the number of awards that are

not

expected to vest because the requisite service period will

not

be rendered, or to account for forfeitures as they occur. Prior to the adoption of ASU

2016

the Company estimated forfeitures for the purpose of accounting for stock-based compensation. Beginning

January 1, 2017,

the Company utilized the election to account for forfeitures as incurred. In accordance with the provisions of the new standard, the change has been adopted on a modified retrospective basis; however, the cumulative adjustment to opening retained earnings was immaterial.

Recent Accounting Pronouncements

Not

Yet Adopted

January 2017,

the FASB issued ASU

No.

2017

01,

Business Combinations (Topic

805

): Clarifying the Definition of a Business

("ASU

2017

01"

), which clarified the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of businesses. The amendment update provides a screen to determine when a series of integrated activities is

not

a business. If the screen is

not

met, it

first

requires that to be considered a business, a set must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create output and

second

removes the evaluation of whether a market participant could replace the missing elements. This ASU is effective for annual and interim reporting periods beginning after

December 15, 2017.

The Company is currently in the process of evaluating the impact that the adoption of ASU

2017

will have on its consolidated financial statements.

May 2014,

the FASB issued ASU

2014

09,

Revenue from Contracts with Customers (Topic

606

)

("ASU

2014

09"

), which amended the existing accounting standards for revenue recognition. ASU

2014

establishes principles for recognizing revenue upon the transfer of promised goods or services to customers, in an amount that reflects the expected consideration received in exchange for those goods or services. In

July 2015,

the FASB deferred the effective date for annual reporting periods beginning after

December 15, 2017 (

including interim reporting periods within those periods). The amendments

may

be applied retrospectively to each prior period (full retrospective) or retrospectively with the cumulative effect recognized as of the date of initial application (modified retrospective).

The Company will adopt ASU

2014

in the

first

quarter of

2018

and apply the modified retrospective approach. While we are continuing to assess all potential impacts of the standard, the Company currently does

not

expect any significant impact on its consolidated financial statements related to the adoption of the new standard for the following reasons:

Domain Services:

Most of the Company’s contracts related to Domain Services would individually be considered single “performance obligations” measured over the period of service, which is consistent with the revenue recognition policy under US GAAP.

Network Access

: The vast majority of revenue generated by the Network Access segment is related to mobile service contracts. Billings and “performance obligations” related to mobile service contracts are synchronized because mobile services are offered exclusively on a month-to-month basis without long-term commitments, device subsidization or financing arrangements embedded in the mobile service contract.

However, the Company does expect to recognize changes related to Contract Acquisition costs related to certain retail Domain and

Network Access sales. Topic

606

requires the deferral and amortization of “incremental” costs incurred to obtain a contract where the associated contract duration is greater than

one

year. The Company’s applicable contract acquisition costs include commissions paid to sales employees, commissions paid to marketing partners and marketing credits issued to existing customers for referring new customers. Under current U.S. GAAP, the Company expenses the aforementioned commissions and marketing credits as operating expenses.

The Company will continue to assess the impact of

Topic

606

as it works through the adoption in

2018,

and there remain areas still to be fully concluded upon. Further, there remain ongoing interpretive reviews, which

may

alter the Company's conclusions and the financial impact of Topic

606.

August 2017,

the FASB issued ASU

No.

2017

12,

Derivatives and Hedging (Topic

815

): Targeted Improvements to Accounting for Hedging Activities

("ASU

2017

12”

), which better aligns an entity’s risk management activities and financial reporting for hedging relationship through changes to both the designation and measurement guidance for qualifying hedging relationships and presentation of hedge results. The new standard expands and refines hedge accounting for both nonfinancial and financial risk components and aligns the recognition and presentation of the effects of the hedging instrument and hedged item in the financial statements. This ASU is effective for annual and interim reporting periods beginning after

December 15, 2018.

The Company is currently in the process of evaluating the impact that the adoption of ASU

2017

will have on its consolidated financial statements.

February 2016,

the FASB issued ASU

No.

2016

02,

Leases (Topic

842

)

. The standard requires lessees to recognize the assets and liabilities that arise from leases on the balance sheet. ASU

2016

requires the recognition on the balance sheet of a lease liability to make lease payments by lessees and a right-of-use asset representing its right to use the underlying asset for the lease term. The new guidance will also require significant additional disclosure about the amount, timing and uncertainty of cash flows from leases. In

January 2018,

the FASB issued an update through ASU

No.

2018

02,

Leases (Topic

842

)

which provides practical expedients for land easements that exist or expired before adoption of Topic

842.

The new lease guidance is effective for annual and interim reporting periods beginning after

December 15, 2018 (

January 1, 2019

for the Company). The amendments should be applied at the beginning of the earliest period presented using a modified retrospective approach with earlier application permitted as of the beginning of an interim or annual reporting period. The Company will adopt this guidance in the

first

quarter of fiscal

2019

and is in the process of evaluating the impact of the adoption of ASU

2016

will have on its consolidated financial statements.