Summary of Significant Accounting Policies

Recently Adopted Accounting Standards

Revenue Recognition

In May 2014, the Financial Accounting Standards Board ("FASB") issued ASU No. 2014-09, "Revenue from Contracts with Customers: Topic 606" ("ASC 606"), to supersede nearly all existing revenue recognition guidance under U.S. GAAP. We adopted ASC 606 on October 1, 2018 using modified retrospective approach, with a cumulative adjustment to retained earnings as opposed to retrospectively adjusting prior periods.

Results for reporting periods beginning after October 1, 2018 are presented under ASC 606, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting policies ASC 605. For contracts that were modified before the effective date, the Company aggregated the effect of all contract modifications prior to identifying performance obligations and allocating transaction price in accordance with the practical expedient ASC 606-10-65-1-(f)-4.

Upon adoption of ASC 606 on October 1, 2018, we recorded a decrease to accumulated deficit of approximately $230 million as a result of the transition. The impact of the adoption primarily relates to the cumulative effect of 1) approximately $70 million decrease in deferred revenue from the upfront recognition of term licenses and the general requirement to allocate the transaction price on a relative stand-alone selling price, 2) approximately $180 million increase in contract assets, 3) approximately $30 million decrease in accounts receivable, 4) approximately $30 million increase in deferred costs, and 5) approximately $20 million increase in deferred tax liabilities related to the above items.

The following tables summarize the impact of adopting ASC 606 on the Company’s condensed consolidated statement of operations for the three months ended December 31, 2018 and the condensed consolidated balance sheet as of December 31, 2018 (dollars in thousands):



	For the Three Months ended December 31, 2018
	As reported, ASC 606		Effect of Implementation			As adjusted, ASC 605
Revenues:
Hosting and professional services	$	259,588	$	8,036		$	267,624
Product and licensing	157,997		(22,728		)	135,269
Maintenance and support	76,069		(15,330		)	60,739
Total revenues	$	493,654	$	(30,022	)	$	463,632

Cost of revenues:
Hosting and professional services	$	163,170	$	(3,938	)	$	159,232
Product and licensing	32,750		(18,030		)	14,720
Maintenance and support	7,761		766			8,527
Amortization of intangible assets	9,757		—			9,757
Total cost of revenues	$	213,438	$	(21,202	)	$	192,236

Sales and marketing	$	75,359	$	1,522		$	76,881

Provision (benefit) for income taxes	$	986	$	(410	)	$	576



	As of December 31, 2018
	As reported, ASC 606			Effect of Implementation			As adjusted, ASC 605
Assets:
Accounts receivable	$	337,829		$	31,567		$	369,396
Prepaid and expenses and other current assets	$	197,414		$	(65,205	)	$	132,209
Other assets	$	260,228		$	(139,529	)	$	120,699

Liabilities:
Deferred revenue, current	$	287,242		$	86,097		$	373,339
Deferred revenue, noncurrent	$	441,283		$	1,376		$	442,659
Deferred tax liabilities	$	66,386		$	(25,916	)	$	40,470
Other long-term liabilities	$	103,797		$	(8,742	)	$	95,055

Stockholders' Equity:
Accumulated deficit	$	(488,332	)	$	(245,441	)	$	(733,773	)

Statements of Cash Flows

In August 2016, the FASB issued ASU 2016-15, "Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments" ("ASU 2016-15"), which is effective for fiscal years beginning after December 15, 2017 and the interim periods therein. We adopted this guidance on October 1, 2018 and applied it retrospectively. The adoption did not have a material impact on our condensed consolidated statements of cash flows.

Financial Instruments

In January 2016, the FASB issued ASU No. 2016-01, "Recognition and Measurement of Financial Assets and Financial Liabilities" ("ASU 2016-01"). ASU 2016-01 amends the guidance on the classification and measurement of financial instruments. We adopted ASU 2016-01 as of January 1, 2018 using the modified retrospective method. The adoption did not have a material impact on our consolidated financial statements.

Issued Accounting Standards Not Yet Adopted

Leases

In February 2016, the FASB issued ASU No. 2016-02, "Leases" ("ASU 2016-02"). ASU 2016-02 requires lessees to recognize on the balance sheet a right-of-use asset, representing its right to use the underlying asset for the lease term, and a lease liability for all leases with terms greater than 12 months. The guidance also requires qualitative and quantitative disclosures designed to assess the amount, timing, and uncertainty of cash flows arising from leases. The standard requires the use of a modified retrospective transition approach, which includes a number of optional practical expedients that entities may elect to apply. ASU 2016-02 is effective for us in the first quarter of fiscal year 2020, and early application is permitted. In July 2018, the FASB issued ASU 2018-10, Codification Improvements to Topic 842, Leases and ASU 2018-11, Leases Topic 842 Target improvements, which provides an additional (and optional) transition method whereby the new lease standard is applied at the adoption date and recognized as an adjustment to retained earnings. We are currently evaluating the impact of our pending adoption of ASU 2016-02 on our condensed consolidated financial statements, and we currently expect that most of our operating lease commitments will be subject to the new standard and recognized as operating lease liabilities and right-of-use assets upon our adoption of ASU 2016-02, which will increase our total assets and total liabilities that we report relative to such amounts prior to adoption.

Other Accounting Pronouncements

In January 2018, the FASB issued ASU 2018-02, "Income Statement — Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income ("AOCI"), which is effective for fiscal years beginning after December 15, 2018 and interim periods therein, with early adoption permitted. The guidance gives entities the option to reclassify to retained earnings the tax effects resulting from the Tax Cuts and Jobs Act ("TCJA") related to items in AOCI. The new guidance may be applied retrospectively to each period in which the effect of TCJA is recognized in the period of adoption. We do not expect the implementation to have a material impact on our consolidated financial statements.