Interim Financial Statements (Policies)

6 Months Ended

Jun. 30, 2018

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation. The Consolidated Financial Statements and related disclosures as of June 30, 2018, and for the three and six months ended June 30, 2018 and 2017, are unaudited, pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”). The December 31, 2017, Consolidated Balance Sheet data was derived from audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America (“U.S.”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) have been condensed or omitted pursuant to such rules and regulations. In our opinion, these financial statements include all adjustments (consisting only of normal recurring adjustments) necessary for the fair statement of the results for the interim periods. These financial statements should be read in conjunction with the financial statements included in our Annual Report for the year ended December 31, 2017, filed on Form 10-K with the SEC on February 23, 2018. The results of operations for the three and six months ended June 30, 2018, are not necessarily indicative of the results to be expected for the full year. Unless the context otherwise requires, all references to “Amkor,” “we,” “us,” “our” or the “company” are to Amkor Technology, Inc. and our subsidiaries.

Accounting Standards Update, Recently Adopted Standards and Recently Issued Standards

Effective January 1, 2018, we adopted Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (Topic 606), using the full retrospective transition method as discussed in Note 2. All amounts and disclosures set forth in this Form 10-Q reflect these changes.

Recently Adopted Standards

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), which was subsequently amended and clarified. The standard is based on the principle that revenue is recognized to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers, including significant judgments and changes in judgments. The standard permits the use of either full retrospective or modified retrospective methods of adoption.

Effective January 1, 2018, we adopted the requirements of Topic 606 using the full retrospective transition method. The new standard resulted in a change to the timing of revenue recognition, whereby revenue is recognized "over time" as services are performed rather than at a "point in time", generally upon shipment. The new standard also resulted in an increase in accounts receivables, net and a related decrease in inventories and deferred revenues. In accordance with Topic 606, we applied the following principles in connection with the adoption of the new standard:


•	We do not disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or less.


•	We do not adjust the promised amount of consideration for the effects of a significant financing component when we expect, at contract inception, that the period between when the entity transfers a promised good or service to a customer and when the customer pays for that good or service will be one year or less.


•	We exclude sales, use, value-added and similar taxes from the transaction price, without performing a jurisdiction-by-jurisdiction assessment.

The adoption of the standard impacted our previously reported results as follows:



	For the Three Months Ended June 30, 2017
	As Previously Reported		New Accounting Pronouncement Adjustment		As Adjusted
	(In thousands, except per share data)
Income Statement:
Net sales	$	989,447	$	18,938	$	1,008,385
Cost of sales	817,212		14,557		831,769
Gross profit	172,235		4,381		176,616
Income tax expense	32,573		893		33,466
Net income	116,459		3,571		120,030
Net income attributable to Amkor	115,507		3,506		119,013
Net income attributable to Amkor per common share - diluted	0.48		0.02		0.50



	For the Six Months Ended June 30, 2017
	As Previously Reported		New Accounting Pronouncement Adjustment			As Adjusted
	(In thousands, except per share data)
Income Statement:
Net sales	$	1,903,047	$	4,622		$	1,907,669
Cost of sales	1,587,906		6,913			1,594,819
Gross profit	315,141		(2,291		)	312,850
Income tax expense	33,012		(871		)	32,141
Net income	107,315		(1,253		)	106,062
Net income attributable to Amkor	105,501		(1,274		)	104,227
Net income attributable to Amkor per common share - diluted	0.44		—			0.44



	December 31, 2017
	As Previously Reported			New Accounting Pronouncement Adjustment			As Adjusted
	(In thousands)
Balance Sheet:
Accounts receivable, net	$	692,287		$	105,977		$	798,264
Inventories	326,492			(112,843		)	213,649
Other assets	146,051			(6,255		)	139,796
Accrued expenses	374,598			(43,730		)	330,868
Other non-current liabilities	46,144			1,679			47,823
Accumulated deficit⁽¹⁾	(42,851		)	28,948			(13,903		)


(1)	The adjustment to accumulated deficit includes the 2017 and 2016 net income impact for the adoption of Topic 606 of $2.8 million and $11.3 million, respectively. The adjustment also includes the cumulative impact to our 2016 beginning accumulated deficit of $14.8 million.

The adoption of the standard had no impact on cash provided by or used in operating, investing, or financing activities on our consolidated cash flow statements.

In March 2017, the FASB issued ASU 2017-07, Compensation – Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. ASU 2017-07 requires that the service cost component of net periodic pension costs be presented in the same line item as other compensation costs and all other components of net periodic pension costs be presented in the statement of income as nonoperating expenses. ASU 2017-07 is effective for reporting periods beginning after December 15, 2017 and applied retrospectively. We adopted ASU 2017-07 on January 1, 2018 and estimated the impact on the prior comparative period information presented in the consolidated financial statements applying the principles permitted by the standard. For the three and six months ended June 30, 2017, the retrospective application resulted in a $(0.1) million and $0.2 million reclassification of pension costs from operating income to other (income) expense, net in the Consolidated Statements of Income for the respective periods. Refer to Note 14 for additional information.

Recently Issued Standards

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which was subsequently amended and clarified. ASU 2016-02 requires a dual approach for lease accounting under which a lessee would account for leases as finance leases or operating leases. Both finance leases and operating leases will result in the lessee recognizing a right-of-use asset and a corresponding lease liability. For finance leases the lessee would recognize interest expense and amortization of the right-of-use asset, and for operating leases the lessee would recognize a straight-line lease expense. ASU 2016-02 is effective for reporting periods beginning after December 15, 2018 and requires either a modified retrospective transition approach with application in all comparative periods presented, or an alternative transition method, which permits a company to use its effective date as the date of initial application without restating comparative period financial statements. Early adoption is permitted. We are currently evaluating the impact that this guidance may have on our financial statements and disclosure, and have not yet selected a transition method.

Use of Estimates

Use of Estimates. The Consolidated Financial Statements have been prepared in conformity with U.S. GAAP, using management’s best estimates and judgments where appropriate. These estimates and judgments affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. The estimates and judgments will also affect the reported amounts for certain revenues and expenses during the reporting period. Actual results could differ materially from these estimates and judgments.

Goodwill

Goodwill. The balance of goodwill in our Consolidated Balance Sheets reflects adjustments for foreign currency translation.

Revenue Recognition

Revenue Recognition. We recognize revenue, net of sales, use, value-added and other similar taxes, after the following:


–	A contract with a customer has been identified


–	All performance obligations within the customer contract have been identified


–	The transaction price attributable to the contract has been determined and allocated to each performance obligation, and


–	The performance obligations have been determined to be satisfied. Performance obligations are deemed to be satisfied when, or as, control of services has been transferred to the customer.

Our packaging and test services are our performance obligations to our customers. Our packaging services include wafer bump, probe and assembly. We provide packaging and test services to our customers either individually or as part of a combined offering. In a combined offering, we account for the individual services separately if they are determined to be distinct. We determine a service to be distinct if it is separately identifiable from other services in the combined offering and if a customer can benefit from the unique service on its own or with other resources that are readily available to the customer.

The consideration, including variable consideration, is allocated between the distinct services in a combined offering based upon the stand-alone selling prices of the individual services. Our services involve a high degree of specialization which are unique based on the design and purpose of the customer’s wafers. Accordingly, our negotiated pricing reflects the customized nature of our services and represents a customer-specific stand-alone selling price. We recognize revenue as services are rendered, which generally occurs over the course of two to three weeks. Services are generally billed at completion of each individual packaging or test service or in some instances at the completion of all services in a combined offering.

We recognize revenue over time as services are rendered because our services create or enhance the customer’s wafer. We utilize an input method (cost incurred plus estimated margin) to determine the amount of revenue to recognize for in-process, but incomplete customer orders at a reporting date. During the period of providing our services, we generally do not control or take ownership of customers' wafers, nor do we include the cost of the wafer in our cost calculations. We believe that a cost-based input method is the most appropriate manner to measure how we satisfy our performance obligations to customers because the effort and costs incurred to package and/or test customer wafers are not linear over the duration of these services.

Shipping and handling costs are accounted for as a cost to fulfill our performance obligations to customers. Accordingly, we record customer payments of shipping and handling costs as a component of net sales, and the costs incurred for shipping and handling are then charged to cost of sales.

Unbilled Receivables

Unbilled Receivables. Unbilled receivables are revenues that have been recognized for performance obligations that have been satisfied, or partially satisfied, in advance of billing the customer. Revenue may be recognized in advance of billing as our contracts provide us with an unconditional right to consideration for work that is performed. Total unbilled receivables as of June 30, 2018 and December 31, 2017 were $106.6 million and $101.9 million, respectively. These amounts are included in accounts receivable, net of allowances in our Consolidated Balance Sheets.

Inventories

Inventories. Inventories consist of raw materials and purchased components, and are stated at the lower of cost and net realizable value. Cost is principally determined by standard cost or the weighted moving average method, both of which approximate actual cost. We review and set our standard costs as needed, but at a minimum on an annual basis. We reduce the carrying value of our inventories for the cost of inventory we estimate is excess and obsolete based on the age of our inventories. When a determination is made that the inventory will not be utilized in production or is not saleable, it is written-off.

Income Taxes

We monitor on an ongoing basis our ability to utilize our deferred tax assets and whether there is a need for a related valuation allowance. In evaluating our ability to recover our deferred tax assets in the jurisdictions from which they arise, we consider all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax-planning strategies and results of recent operations. Except for deferred tax assets in Portugal, we consider it more likely than not that we will have sufficient taxable income to allow us to realize most of our foreign deferred tax assets.

We maintain a valuation allowance on a portion of our U.S. net deferred tax assets, for net operating loss carryforwards not expected to be realized due to Global Intangible Low-Taxed Income ("GILTI") and foreign tax credit carryforwards expected to expire unused. Such valuation allowances are released as the related tax benefits are realized or when sufficient evidence exists to conclude that it is more likely than not that the deferred tax assets will be realized.

Commitments and Contingencies

In accordance with the accounting guidance for loss contingencies, including legal proceedings, lawsuits, pending claims and other legal matters, we accrue for a loss contingency when we conclude that the likelihood of a loss is probable and the amount of the loss can be reasonably estimated. We adjust our accruals from time to time as we receive additional information, but the loss we incur may be significantly greater than or less than the amount we have accrued. We disclose loss contingencies if we believe they are material and there is at least a reasonable possibility that a loss has been incurred. Attorney fees related to legal matters are expensed as incurred.