Quarterly report pursuant to Section 13 or 15(d)

Note 3 - Recent Accounting Pronouncements

v3.20.1
Note 3 - Recent Accounting Pronouncements
9 Months Ended
Mar. 31, 2020
Notes to Financial Statements  
Accounting Standards Update and Change in Accounting Principle [Text Block]
(
3
)
Recent Accounting Pronouncements
 
New Accounting Standards or Updates Recently Adopted
 
Leases
– In
February 2016,
the FASB issued accounting standards update (“ASU”)
2016
-
02,
 
Leases (Topic
842
),
an update related to accounting for leases. This standard requires an entity to recognize lease liabilities and a right-of-use asset for all leases on the balance sheet and to disclose key information about the entity's leasing arrangements. ASU
2016
-
02
is effective for annual reporting periods beginning after
December 15, 2018,
including interim periods within that reporting period, with earlier adoption permitted. In
July 2018,
the FASB approved an amendment to the new guidance that allows companies the option of using the effective date of the new standard as the initial application (at the beginning of the period in which it is adopted, rather than at the beginning of the earliest comparative period) and to recognize the effects of applying the new ASU as a cumulative effect adjustment to the opening balance sheet or retained earnings.
 
We adopted ASU
2016
-
02
as of
July 1, 2019
using the modified retrospective method and have
not
restated comparative periods. We elected the package of practical expedients upon adoption, which permits us (i) to
not
reassess whether any expired or existing contracts are or contain leases, (ii) to
not
reassess lease classification for any expired or existing leases, and (iii) to
not
reassess treatment of initial direct costs, if any, for any expired or existing leases. In addition, we elected
not
to separate lease and non-lease components when determining the ROU asset and lease liability for our design center real estate leases and did
not
elect the hindsight practical expedient, which would have allowed us to use hindsight when determining the remaining lease term as of the adoption date on
July 1, 2019.
Lastly, we elected the short-term lease exception policy for all leases, permitting us to exclude the recognition requirements of this standard from leases with initial terms of 
12
 months or less.
 
Upon adoption we recognized operating lease assets of
$129.7
 million and operating lease liabilities of
$149.7
million on our consolidated balance sheet. In addition,
$20.0
million of deferred rent and various lease incentives, which were reflected as other long-term liabilities as of
June 30, 2019,
were reclassified as a component of the right-of-use assets upon adoption. The Company also recognized a cumulative adjustment as of
July 1, 2019,
which decreased opening retained earnings by
$1.6
 million due to the impairment of certain right-of-use assets. The adoption of the new standard did
not
have a material impact on our consolidated statements of operations or cash flows. See Note
7
for further details on new disclosures required under ASU
2016
-
02.
 
Goodwill Impairment Test
– In
January 2017,
the FASB issued ASU
2017
-
04,
Intangibles-Goodwill and Other (Topic
350
): Simplifying the Test for Goodwill Impairment,
which removes the requirement for companies to compare the implied fair value of goodwill with its carrying amount as part of step
2
of the goodwill impairment test. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value,
not
to exceed the carrying amount of goodwill. The Company early adopted ASU
2017
-
04
during fiscal
2020.
 
Recent Accounting Standards or Updates
Not
Yet Effective
 
Credit Losses of Financial Instruments
 – In
June 2016,
the FASB issued ASU
2016
-
13,
Financial Instruments – Credit Losses (Topic
326
): Measurement of Credit Losses on Financial Instruments,
an update that requires measurement and recognition of expected credit losses for financial assets held based on historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. This accounting standards update will be effective for us beginning in the
first
quarter of fiscal
2021
and we do
not
expect the adoption to have a material impact on our consolidated financial statements.
 
Implementation Costs in a Cloud Computing Arrangement –
In
August 2018,
the FASB issued ASU
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
, an update related to a client’s accounting for implementation costs incurred in a cloud computing arrangement that is a service contract. This guidance aligns the requirements for capitalizing implementation costs in a cloud computing service contract with the guidance for capitalizing implementation costs to develop or obtain internal-use software. Capitalized implementation costs related to a hosting arrangement that is a service contract will be amortized over the term of the hosting arrangement, beginning when the module or component of the hosting arrangement is ready for its intended use. This accounting standards update will be effective for us beginning in the
first
quarter of fiscal
2021.
We are currently evaluating the impact of this accounting standards update, but do
not
expect the adoption to have a material impact on our consolidated financial statements.
 
Simplifying the Accounting for Income Taxes –
In
December 2019,
the FASB issued ASU
2019
-
12,
Income Taxes (Topic
740
): Simplifying the Accounting for Income Taxes
, an update intended to simplify various aspects related to accounting for income taxes. This guidance removes certain exceptions to the general principles in Topic
740
and also clarifies and amends existing guidance to improve consistent application. This accounting standards update will be effective for us beginning in the
first
quarter of fiscal
2022,
with early adoption permitted. We are currently evaluating the impact of this accounting standards update, but do
not
expect the adoption to have a material impact on our consolidated financial statements.
 
Reference Rate Reform on Financial Reporting
In
March 2020,
the FASB issued ASU
2020
-
04,
Reference Rate Reform
(Topic
848
):
Facilitation of the Effects of Reference Rate Reform on Financial Reporting
, an update that provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in this update apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. This accounting standards update is intended to ease the process of migrating away from LIBOR to new reference rates and will be effective for us beginning in the
first
quarter of fiscal
2021.
We are currently evaluating the impact of this accounting standards update, but do
not
expect the adoption to have a material impact on our consolidated financial statements.
 
No
other new accounting pronouncements issued or effective as of
March 31, 2020
have had or are expected to have an impact on our consolidated financial statements.