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Summary of significant accounting policies | 12 Months Ended
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Dec. 31, 2018
Accounting Policies [Abstract] |
Summary of significant accounting policies | Summary of significant accounting policies (a) Basis of preparation The accompanying consolidated financial statements of the Company and its wholly-owned subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States (“US GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (the "SEC"). Principles of consolidation All significant transactions among the Company and its subsidiaries have been eliminated upon consolidation. Reclassifications During the year ended December 31, 2018, the Company reviewed its classification of expenses in its consolidated statement of operations in an effort to bring added transparency and conformity to its reporting. As a result of this review, the Company made a number of changes to the way it classifies operating expenses. Expenses for prior periods have been reclassified to conform to the current-year presentation. The reclassifications had no effect on income (loss) from operations, net income (loss) from continuing operations, or net loss. The following is a summary of the reclassifications: Additional category of operating costs and expenses: The Company has segregated product development costs, previously reported as components of sales and marketing and general and administrative expenses, to provide additional clarity into these costs and become more comparable to industry peers. Reclassification of operating costs and expenses: Following the Spin-off, the Company began to operate as a standalone performance marketing business, discontinuing its former information services business activities. As the Company's new management team began to evaluate the business on a standalone basis, a review was completed to determine whether the presentation of the Company’s operating expenses were in line with industry practice and internal reporting, and determined certain movements were appropriate. Media enablement, data verification and hosting costs, which were previously included in general and administrative expenses, are presented in cost of revenue. Fulfillment costs, which were previously included in sales and marketing expense, are presented in cost of revenue. Bad debt expense, which was previously included in sales and marketing expense, is presented in general and administrative expenses. After the reclassifications, operating costs and expenses are classified in the following categories in the Consolidated Statements of Operations:
• | Cost of revenue, exclusive of depreciation and amortization includes direct costs of sales, such as media and related costs. Cost of revenue also includes indirect costs such as media enablement, data verification, hosting and fulfillment costs.
• | Sales and marketing expenses include operating expenses for the Company's sales and marketing functions, as well as advertising and marketing expenses.
• | Product development includes operating expenses for the Company's engineering and product management functions supporting research, new development and related product enhancements.
• | General and administrative expenses represent operating expenses for all corporate functions, including finance, human resources, legal, corporate IT and office overhead, as well as bad debt expense.
The following table summarizes the reclassification activity for the year ended December 31, 2017:
| Year Ended December 31, 2017
(in thousands) | As previously reported (1) |  | Category expansion |  | Operating costs and expenses reclassification |  | As currently reported
Cost of revenue (exclusive of depreciation and amortization) | $ | 140,341 |  |  | $ | — |  |  | $ | 6,041 |  |  | $ | 146,382 |
Sales and marketing expenses | 16,176 |  |  | (1,615 | ) |  | (2,588 | ) |  | 11,973 |
Product development | — |  |  | 2,578 |  |  | — |  |  | 2,578 |
General and administrative expenses | 59,510 |  |  | (963 | ) |  | (3,453 | ) |  | 55,094 |
(1) Adjusted for discontinued operations. As of and for the year ended December 31, 2017, certain amounts in the Company's consolidated financial statements and related footnotes thereto have been reclassified to conform to the current year presentation as a result of the Spin-off of Red Violet. See Note 5, Discontinued operations, for details. As of December 31, 2017, the Company has reclassified certain trade-related accruals from accounts payable (previously trade accounts payable) to accrued expenses and other current liabilities in the consolidated balance sheets. As a result of these reclassifications, accounts payable decreased by $3,258 to $7,408, and accrued expenses and other current liabilities increased by $3,258 to $14,967. Additionally, for the year ended December 31, 2017, within cash flows from operating activities on the consolidated statements of cash flows, the decrease in accounts payable decreased by $274 to $2,864, and the increase in accrued expenses and other current liabilities decreased by $274 to $5,594. Immaterial Correction of an Error During the year ended December 31, 2018, the Company identified an error in its calculation of basic and diluted weighted average shares outstanding, in which shares that had vested but were subject to deferred delivery were not included in both the basic and diluted calculations. As a result, basic and diluted loss per share as previously reported for the year ended December 31, 2017 was overstated by an immaterial amount. For the year ended December 31, 2018, the Company has properly included its vested not delivered shares within the calculation for basic and diluted shares outstanding, and for the year ended December 31, 2017, the Company has corrected the amounts previously reported. For the year ended December 31, 2017, basic and diluted weighted average shares outstanding increased by 5,504,834 shares from 55,648,235 to 61,153,069 shares. The correction of the error resulted in a decrease in basic and diluted loss per share from continuing operations, discontinued operations, and net loss from $0.57, $0.39 and $0.96 per share to $0.52, $0.35 and $0.87 per share, respectively. (b) Use of estimates The preparation of consolidated financial statements in accordance with US GAAP requires the Company’s management to make estimates and assumptions relating to the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenue and expenses during the reporting periods. Significant items subject to such estimates and assumptions include the allowance for doubtful accounts, useful lives of intangible assets, recoverability of the carrying amounts of goodwill and intangible assets, the portion of revenue subject to estimates for variances between internally tracked conversions and those confirmed by the customer, and income tax provision. These estimates are often based on complex judgments and assumptions that management believes to be reasonable but are inherently uncertain and unpredictable. Actual results could differ from these estimates. (c) Cash, cash equivalents and restricted cash Cash and cash equivalents consist of cash on hand and bank deposits with original maturities of three months or less, which are unrestricted as to withdrawal and use. Restricted cash includes a separately maintained cash account, as required under the terms of a lease agreement the Company entered into on October 10, 2018 for office space in New York City. See Note 15, Commitments and contingencies. The Company’s cash, cash equivalents and restricted cash are held in major financial institutions located in the United States, which have high credit ratings. As of December 31, 2018 and 2017, cash and cash equivalents were available for use in servicing the Company's debt obligations and general operating purposes. As of December 31, 2018 and 2017, the Company's cash, cash equivalents and restricted cash balances consist of the following:
| Year ended December 31,
(In thousands) | 2018 |  | 2017
Cash and cash equivalents | $ | 17,769 |  |  | $ | 16,564 |
Restricted cash | 1,480 |  |  | — |
Total cash, cash equivalents and restricted cash | $ | 19,249 |  |  | $ | 16,564 |
Financial instruments and related items, which potentially subject the Company to concentrations of credit risk, consist principally of cash investments. The Company places its temporary cash instruments with highly-rated financial institutions within the United States, and, at times, may maintain balances in such institutions in excess of the $250 thousand dollar U.S. Federal Deposit Insurance Corporation insurance limit. The Company monitors the credit ratings of its financial institutions to mitigate this risk. (d) Accounts receivable and allowance for doubtful accounts Accounts receivable are due from customers, which are generally unsecured, and consist of amounts earned but not yet collected. None of the Company’s accounts receivable bear interest. The allowance for doubtful accounts is management’s best estimate of the amount of probable credit losses in the Company’s existing accounts receivable. Management determines this allowance based on reviews of customer-specific facts and circumstances. Account balances are charged off against the allowance for doubtful accounts after all customary means of collection have been exhausted and the potential for recovery is considered remote. The Company does not have off-balance sheet credit exposure related to its customers. As of December 31, 2018 and 2017, the Company's allowance for doubtful accounts was $1,751 and $1,624, respectively. The movements within the allowance for doubtful accounts consist of the following:
| Year ended December 31,
(In thousands) | 2018 |  | 2017
Beginning balance | 1,624 |  |  | 679 |
Charges to expenses | 462 |  |  | 1,733 |
Write-offs | (335 | ) |  | (788 | )
Ending balance | $ | 1,751 |  |  | $ | 1,624 |
(e) Property and equipment Property and equipment are stated at cost, net of accumulated depreciation or amortization. Expenditures for maintenance, repairs and minor renewals are charged to expense in the period incurred. Betterments and additions are capitalized. Property and equipment are depreciated on a straight-line basis over the estimated useful lives of the assets. Leasehold improvements are depreciated over the shorter of their estimated useful lives or lease terms that are reasonably assured. The estimated useful lives of property and equipment are as follows:
Computer and network equipment | 5-7 years
Furniture, fixtures and office equipment | 3-5 years
Leasehold improvements | 4-7 years
Assets to be disposed of, and for which there is a committed plan of disposal, whether through sale or abandonment, are reported at the lower of carrying value or fair value less costs to sell. When items of property and equipment are retired or otherwise disposed of, loss or income on disposal is recorded for the difference between the net book value and proceeds received therefrom. (f) Business combination The Company records acquisitions pursuant to ASC 805, Business Combinations, by allocating the fair value of purchase consideration to the tangible assets acquired, liabilities assumed and intangible assets acquired based on their estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. Such valuations require management to make significant estimates and assumptions with respect to intangible assets. Significant estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows from acquired intangible assets, useful lives and discount rates. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. During the measurement period, the Company may record adjustments to acquired assets and assumed liabilities, with corresponding offsets to goodwill. Upon the conclusion of a measurement period, any subsequent adjustments are recorded to earnings. (g) Intangible assets other than goodwill The Company’s intangible assets are initially capitalized based on actual costs incurred, acquisition cost, or fair value if acquired as part of a business combination. These intangible assets are amortized on a straight-line basis over their respective estimated useful lives, which are the periods over which these assets are expected to contribute directly or indirectly to the future cash flows of the Company. The Company’s intangible assets represent purchased intellectual property, software developed for internal use, acquired proprietary technology, customer relationships, trade names, domain names, databases and non-competition agreements, including those resulting from acquisitions. Intangible assets have estimated useful lives of 2-20 years. In accordance with ASC 350-40, Software - Internal-Use Software, the Company capitalizes eligible costs, including applicable salaries and benefits, share-based compensation expense, travel expenses, and other direct costs of developing internal-use software that are incurred in the application development stage, when developing or obtaining software for internal use. Once the internal-use software is ready for its intended use, it is amortized on a straight-line basis over its useful life. Finite-lived intangible assets are evaluated for impairment periodically, or whenever events or changes in circumstances indicate that their related carrying amounts may not be recoverable in accordance with ASC 360-10-15, Impairment or Disposal of Long-Lived Assets. In evaluating intangible assets for recoverability, the Company uses its best estimate of future cash flows expected to result from the use of the asset and eventual disposition in accordance with ASC 360-10-15. To the extent that estimated future undiscounted net cash flows are less than the carrying amount, an impairment loss is recognized in an amount equal to the difference between the carrying value of such asset and its fair value. Asset recoverability is an area involving management judgment, requiring assessment as to whether the carrying values of assets are supported by their undiscounted future cash flows. In calculating the future cash flows, certain assumptions are required to be made in respect of highly uncertain matters such as revenue growth rates, operating expenses and terminal growth rates. For the year ended December 31, 2018, the Company determined the value of certain intangible assets were not recoverable, as discussed in Note 7, Intangible Assets. As of December 31, 2018 and 2017, the Company reviewed the indicators for impairment and concluded that no additional impairment of its finite-lived intangible assets existed. (h) Goodwill Goodwill represents the difference between the purchase price and the estimated fair value of net assets acquired, when accounted for by the acquisition method of accounting. As of December 31, 2018 and 2017, the goodwill balance relates to the October 2, 2014 acquisition of Interactive Data, LLC by IDI Holdings, LLC (the "Interactive Data Acquisition"), the acquisition of Fluent, LLC (the "Fluent Acquisition") effective on December 8, 2015, and the Q Interactive Acquisition. In accordance with ASC 350, Intangibles - Goodwill and Other, goodwill is tested at least annually for impairment, or when events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable, by assessing qualitative factors or performing a quantitative analysis in determining whether it is more likely than not that its fair value exceeds the carrying value. A quantitative step one assessment involves determining the fair value of each reporting unit using market participant assumptions. Effective, October 1, 2017, the Company early adopted ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which eliminated step two from the goodwill impairment test. Under ASU 2017-04, an entity should recognize an impairment charge for the amount by which the carrying value of a reporting unit exceeds its fair value, up to the amount of goodwill allocated to that reporting unit. For purposes of reviewing impairment and the recoverability of goodwill, the Company makes certain assumptions regarding estimated future cash flows and other factors in determining the fair values, including market multiples and discount rates, among others. Prior to the Spin-off, the Company had two reportable segments, Information Services and Performance Marketing, which corresponded with two reporting units. As of October 1, 2017, the Company performed a quantitative step one assessment of its reporting units, the results of which evidenced that the estimated fair values of the reporting units substantially exceeded their respective carrying values. Subsequent to the Spin-off of Red Violet and the associated change in the Company's management team, the composition of the reportable segments changed. As of March 31, 2018, the Company determined that it had one reportable segment corresponding with one reporting unit. As of October 1, 2018, the Company performed a quantitative step one assessment of its reporting unit. The results of this step one assessment evidenced that the estimated fair value of the reporting unit substantially exceeded its carrying value. As of December 31, 2018 and 2017, the Company concluded no impairment of its goodwill existed. (i) Fair value of financial instruments ASC 820, Fair Value Measurements and Disclosures, establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value based on the extent to which inputs used in measuring fair value are observable in the market. These tiers include:
• | Level 1 – defined as observable inputs, such as quoted prices in active markets;
• | Level 2 – defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and
• | Level 3 – defined as unobservable inputs, for which little or no market data exists, therefore requiring an entity to develop its own assumptions.
The fair value of the Company’s cash, cash equivalents, restricted cash, accounts receivable, accounts payable and accrued liabilities approximate their carrying values because of the short-term nature of these instruments. As of December 31, 2018, the Company regards the fair value of the long-term debt to approximate its carrying value, based on the variable interest rate associated with the Refinanced Term Loan. This fair value assessment represents a Level 2 measurement. See Note 9, Long-term Debt, net. (j) Revenue recognition Effective January 1, 2018, the Company adopted ASU 2014-09, Revenue from Contracts with Customers (ASC 606), using the modified retrospective method applied to all contracts that were not completed contracts at the date of initial application. There was no impact on the opening balance of accumulated deficit on the consolidated balance sheet and statement of changes in shareholders' equity as of January 1, 2018 due to the adoption of ASC 606. Revenue is recognized when control of goods or services is transferred to customers, in amounts that reflect the consideration the Company expects to be entitled to in exchange for those goods or services. The Company's performance obligation is typically to (a) deliver data records, based on predefined qualifying characteristics specified by the customer or (b) generate conversions, based on predefined user actions (for example, a click, a registration or the installation of an app) and subject to certain qualifying characteristics specified by the customer. The Company applied the practical expedient related to the review of a portfolio of contracts in reviewing the terms of customer contracts as one collective group, rather than by individual contract. Based on historical knowledge of the contracts contained in this portfolio and the similar nature and characteristics of the customers, the Company has concluded the financial statement effects are not materially different than accounting for revenue on a contract-by-contract basis. Revenue is recognized upon satisfaction of the associated performance obligations. The Company's customers simultaneously receive and consume the benefits provided as the Company satisfies its performance obligations. Furthermore, the Company elected the "right to invoice" practical expedient available within ASC 606-10-55-18 as the measure of progress, since the Company has a right to payment from a customer in an amount that corresponds directly with the value of the performance completed to date. The Company's revenue arrangements do not contain significant financing components. The Company has further concluded that revenue does not require disaggregation. If a customer pays consideration before the Company's performance obligations are satisfied, such amounts are classified as deferred revenue. As of December 31, 2018 and 2017, the balances of deferred revenue were $444 and $265, respectively. The deferred revenue balance as of December 31, 2017 was fully recognized into revenue during the first quarter of 2018. If there is a delay between the period in which revenue is recognized and when customer invoices are issued, revenue is recognized and related amounts are recorded as unbilled revenue in accounts receivable. As of December 31, 2018 and 2017, unbilled revenue included in accounts receivable totaled $25,545 and $16,238, respectively. In line with industry practice, the unbilled revenue balance is recorded based on the Company's internally-tracked conversions, net of estimated variances between this amount and the corresponding amount tracked and subsequently confirmed by customers. The majority of invoices included within the unbilled revenue balance are issued within the month directly following the period of service. Historical estimates related to unbilled revenue are not materially different from actual revenue billed. Sales commissions are recorded at the time revenue is recognized and recorded in sales and marketing expenses. The Company has elected to utilize a practical expedient to expense incremental costs incurred related to obtaining a contract. In addition, the Company elected the practical expedient to not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which revenue is recognized at the amount to which the Company has the right to invoice for services performed. (k) Cost of revenue (exclusive of depreciation and amortization) Cost of revenue primarily includes media and related costs, which consist of the cost to acquire traffic through the purchase of impressions, clicks or actions from publishers or third-party intermediaries, such as advertising exchanges, and technology costs that enable media acquisition.These media costs are used primarily to drive user traffic to the Company's and its clients' media properties. Cost of revenue additionally consists of indirect costs such as data verification, hosting and fulfillment costs. Cost of revenue is presented exclusive of depreciation and amortization expenses. (l) Advertising costs Advertising costs are charged to operations as incurred. For the years ended December 31, 2018 and 2017, advertising costs, included in sales and marketing expenses, were $1,471 and $1,420, respectively. (m) Share-based compensation The Company accounts for share-based compensation in accordance with ASC 718, Compensation - Stock Compensation. Under ASC 718, the Company measures the cost of services received in exchange for an award of equity instruments based on the grant-date fair value of the award and generally recognizes such costs on a straight-line basis over the period the recipient is required to provide service in exchange for the award, which generally is the vesting period. For awards with performance conditions, the Company begins recording share-based compensation when achievement of the performance criteria is probable. During the first quarter of 2017, the Company adopted ASU 2016-09, Compensation - Stock Compensation (ASC 718): Improvement to Employee Share-based Payment Accounting, which simplifies the accounting for share-based payment transactions, including income tax consequences. In connection with the adoption of this guidance, the Company made an accounting policy election to recognize forfeitures as they occur, on a retrospective basis, noting no material impact. During the second quarter of 2018, the Company adopted ASU 2018-07, Compensation - Stock Compensation (ASC 718): Improvements to Nonemployee Share-Based Payment Accounting, on a modified retrospective basis. This guidance expands the scope of employee share-based payment guidance under ASC 718, Compensation - Stock Compensation, to include share-based payments to non-employees for goods and services. Prior to the adoption of ASU 2018-07, the Company accounted for share-based compensation for non-employees in accordance with ASC 505-50, Equity-Based Payments to Non-Employees. Under ASC 505-50, share-based payment transactions related to non-employees were measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever was more reliably measurable, and fair value of the consideration was updated each reporting period until the performance required to receive the award was complete. The Company recognized the fair value as expense on a straight-line basis over the expected service period. (n) Income taxes The Company accounts for income taxes in accordance with ASC 740, Income Taxes, which requires the use of the asset and liability method of accounting for 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 and tax credit 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 or laws is recognized in income in the period that the change in tax rates or laws is enacted. A valuation allowance is provided to reduce the amount of deferred tax assets if it is considered more likely than not that some portion or all of the deferred tax assets will not be realized based on management's review of historical results and forecasts. On December 22, 2017, the tax reform legislation commonly known as the Tax Cuts and Jobs Act of 2017 (the “Tax Act”) was enacted, which resulted in significant modifications to existing tax law. As of December 31, 2018 and 2017, a full valuation allowance was recognized against the net deferred tax assets, and thus the Tax Act did not have a material impact on the Company's consolidated financial statements; however, certain income tax disclosures, including the re-measurement of deferred tax assets and liabilities and related valuation allowance, and the effective income tax rate reconciliation, were affected. For the year ended December 31, 2017, the Company followed the guidance in SEC Staff Accounting Bulletin ("SAB") 118, which provided additional clarification regarding the application of ASC 740 in situations where a Company did not have the necessary information available, prepared, or analyzed in reasonable detail to complete the accounting for certain income tax effects of the Tax Act for the reporting period in which the Tax Act was enacted. SAB 118 provided for a measurement period beginning in the reporting period that includes the Tax Act’s enactment date and ending when the Company has obtained, prepared and analyzed the information needed in order to complete the accounting requirements, but in no circumstances should the measurement period extend beyond one year from the enactment date. The Company completed all the accounting for the effects of the Tax Act within the measurement period ended December 22, 2018, which resulted in no changes to the amounts originally estimated. ASC 740 clarifies the accounting for uncertain tax positions. This interpretation requires that an entity recognize in its financial statements the impact of a tax position, if that position is more likely than not of being sustained upon examination, based on the technical merits of the position. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Company’s accounting policy is to accrue interest and penalties related to uncertain tax positions, if and when required, as interest expense and a component of other expenses, respectively, in the consolidated statements of operations. (o) Income (loss) per share Basic income (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the periods, in addition to RSUs and restricted common stock that are vested not delivered. Diluted income (loss) per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock, and is calculated using the treasury stock method for stock options and unvested shares. Common equivalent shares are excluded from the calculation in loss periods, as their effects would be anti-dilutive. (p) Segment data The Company identifies operating segments as components of an entity for which discrete financial information is available and is regularly reviewed by the chief operating decision maker(s) in making decisions regarding resource allocation and performance assessment. The Company defines the term “chief operating decision makers” to be its chief executive officer and its president. The Company has determined it operates in one operating segment and one reportable segment, as its chief operating decision makers review financial information presented on a consolidated basis for purposes of allocating resources and evaluating financial performance. (q) Contingencies In the ordinary course of business, the Company is subject to loss contingencies that cover a range of matters. An estimated loss from a loss contingency, such as a legal proceeding or claim, is accrued if it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. In determining whether a loss should be accrued, the Company evaluates, among other factors, the degree of probability and the ability to reasonably estimate the amount of any such loss. (r) Recently issued and adopted accounting standards In May 2014, FASB issued ASU No. 2014-9, Revenue from Contracts with Customers (ASC 606), and additional changes, modifications, clarifications or interpretations thereafter. The standard's core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The guidance includes indicators to assist an entity in evaluating whether it controls the good or service before it is transferred to the customer. The new revenue recognition standard is effective for public entities for annual reporting periods beginning after December 15, 2017, and interim periods therein. The new standard also permits two methods of adoption: retrospectively to each prior reporting period presented (full retrospective method), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (the modified retrospective method). Effective January 1, 2018, the Company adopted ASC 606 using the modified retrospective method. The adoption of ASC 606 did not have a material impact on the consolidated balance sheets, statements of operations, cash flows or disclosures. In February 2016, FASB issued ASU No. 2016-2, Leases (ASC 842), and additional changes, modifications, clarifications or interpretations thereafter, which require a reporting entity to recognize right-of-use assets and lease liabilities on the balance sheet for operating leases to increase transparency and comparability. The Company will adopt this guidance on a modified retrospective basis as of January 1, 2019, utilizing transition guidance introduced in ASU 2018-11, Leases: Targeted Improvements, and expects to elect the ‘package of practical expedients,’ which permits the Company not to reassess prior conclusions about lease identification, classification and initial direct costs. The Company has not yet finalized its review of ASC 842, however, the Company expects that this standard will have a material effect on the Company’s consolidated balance sheets related to the recognition of new right-of-use assets and lease liabilities for real estate operating leases and will require additional disclosures about leasing activities. The Company does not expect the adoption to have an impact on its consolidated statements of operations or consolidated statements of cash flows. The accounting for capital leases is expected to remain substantially unchanged. Upon adoption of ASC 842, the Company will recognize, on a discounted basis, its minimum commitments under noncancelable operating leases on its consolidated balance sheets. ASC 842 also provides practical expedients for an entity’s ongoing accounting. The Company will elect the short-term lease recognition exemption for all leases that qualify. Accordingly, the Company will not recognize right-of-use assets or lease liabilities for qualifying leases, including existing short-term leases in effect at the transition date, and will recognize those payments on the consolidated statements of operations on a straight-line basis over the lease term. Additionally, the Company will elect the practical expedient to not separate lease and non-lease components for all its leases. In January 2016, FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses, and additional changes, modifications, clarifications or interpretations thereafter, which require a reporting entity to estimate credit losses on certain types of financial instruments, and present assets held at amortized cost and available-for-sale debt securities at the amount expected to be collected. The new guidance is effective for annual and interim periods beginning after December 15, 2019, and early adoption is permitted. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements. In August 2016, FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, which provides guidance for certain cash flow issues, including contingent consideration payments made after a business combination and debt prepayment or debt extinguishment costs, among other areas. The guidance is effective for public entities for fiscal years beginning after December 15, 2017 and interim periods therein, and early adoption is permitted. Effective January 1, 2018, the Company adopted ASU 2016-15, with such adoption having no material impact to the consolidated financial statements and related disclosures. In March 2018, the FASB issued ASU No. 2018-05, Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118. ASU 2018-5 amended ASC 740 to reflect SEC Staff Accounting Bulletin No. 118 ("SAB 118"), which provides guidance on accounting for the impact of the Tax Act. The amendments in ASU 2018-05 are effective upon issuance. The Company adopted SAB 118 in the fourth quarter of 2017, and therefore the Company's subsequent adoption of ASU 2018-05 in the first quarter of 2018 had no impact on its accounting for income taxes in the first quarter of 2018. In June 2018, the FASB issued ASU 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which expands the scope of employee share-based payment guidance under ASC Topic 718, to include share-based payments to nonemployees for goods and services. The guidance is effective for public entities for fiscal years beginning after December 15, 2018 and interim periods therein, and early adoption is permitted. Effective April 1, 2018, the Company adopted ASU 2018-07 on a modified retrospective basis. The adoption of ASU 2018-07 did not have a material impact on the Company's consolidated financial statements and related disclosures.

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