Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2017

Consolidation, Policy [Policy Text Block]

Basis of Presentation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates, Policy [Policy Text Block]

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and reported amounts of revenue and expenses during the reporting period. Significant estimates and assumptions used in these consolidated financial statements primarily include those related to revenue recognition, inventory valuation, valuation of share-based awards, valuation of goodwill and acquisition-related intangible assets, contingencies and tax valuation allowances.

Actual results could differ from those estimates.

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

Certain Significant Risks and Uncertainties

Financial instruments which potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents, short-term and long-term investments and accounts receivable. The Company

’s cash consists of checking and savings accounts. The Company’s cash equivalents include short-term, highly liquid investments purchased with remaining maturities at the date of purchase of

three

months or less. The Company’s short-term investments consist of corporate debt securities and government agency bonds and treasuries, and the long-term investments consist of government-backed student loan auction-rate securities. The Company generally does

not

require its customers to provide collateral or other security to support accounts receivable. To manage credit risk, management performs ongoing credit evaluations of its customers’ financial condition. The Company requires cash in advance for certain customers in addition to ongoing credit evaluations. The Company did

not

record any allowance for doubtful accounts as of

December 31, 2017

and

2016.

The Company participates in the dynamic high technology industry and believes that changes in any of the following areas could have a material adverse effect on its future financial position, results of operations or cash flows: advances and trends in new technologies and industry standards; competitive pressures in the form of new products or price reductions on current products; changes in product mix; changes in the overall demand for products offered by the Company; changes in

third

-party manufacturers; changes in key suppliers; changes in certain strategic relationships or customer relationships; litigation or claims against the Company based on intellectual property, patent, product, regulatory or other factors; fluctuations in foreign currency exchange rates; risk associated with changes in government policies and regulations on trade restrictions and corporate taxes; availability of necessary components or sub-assemblies; availability of foundry capacity; ability to integrate acquired companies; and the Company

’s ability to attract and retain employees necessary to support its growth.

Foreign Currency Transactions and Translations Policy [Policy Text Block]

Foreign Currency

In general, the functional currency of the Company

’s international subsidiaries is the local currency. The primary subsidiaries are located in China and Taiwan, which utilize the Renminbi and the New Taiwan Dollar as their currencies, respectively. Accordingly, assets and liabilities of the foreign subsidiaries are translated using exchange rates in effect at the end of the period. Revenue and costs are translated using average exchange rates for the period. The resulting translation adjustments are presented as a separate component of accumulated other comprehensive income (loss) in stockholders’ equity in the Consolidated Balance Sheets. In addition, the Company incurs foreign currency exchange gain or loss related to certain intercompany transactions between the U.S. and its foreign subsidiaries that are denominated in a currency other than the functional currency. In connection with the settlement and remeasurement of the balances, the Company recorded foreign currency exchange gain (loss) of $(

0.6

) million,

$0.1

million and

$0.6

million for the years ended

December 31, 2017,

2016

and

2015,

respectively, which were reported in interest and other income, net, in the Consolidated Statements of Operations.

Cash and Cash Equivalents, Policy [Policy Text Block]

Cash and Cash Equivalents

The Company classifies all highly liquid investments with stated maturities of

three

months or less from date of purchase as cash equivalents.

Fair Value of Financial Instruments, Policy [Policy Text Block]

Fair Value of Financial Instrument

Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into

three

levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:

Level

Quoted prices (unadjusted) for identical assets or liabilities in active markets

Level

Inputs other than the quoted prices in active markets that are observable either directly or indirectly

Level

Significant unobservable inputs

The Company

’s financial instruments include cash and cash equivalents, and short-term and long-term investments. Cash equivalents are stated at cost, which approximates fair market value. The Company’s short-term and long-term investments are classified as available-for-sale securities and are stated at their fair market value. Premiums and discounts are amortized or accreted over the life of the related available-for-sale securities. Interest income is recognized when earned.

The Company determines whether an impairment is temporary or other-than temporary. Unrealized gains or losses that are deemed to be temporary are recorded as a component of accumulated other comprehensive income (loss) in stockholders

’ equity in the Consolidated Balance Sheets, and changes in unrealized gains or losses are recorded in the Consolidated Statements of Comprehensive Income. The Company records an impairment charge in interest and other income, net, in the Consolidated Statements of Operations when an available-for-sale investment has experienced a decline in value that is deemed to be other-than-temporary. Other-than-temporary impairment exists when the Company either has the intent to sell the security, it will more likely than

not

be required to sell the security before anticipated recovery, or it does

not

expect to recover the entire amortized cost basis of the security.

As of

December 31, 2017

and

2016,

the fair value of the Company

’s holdings in auction-rate securities was

$5.3

million and

$5.4

million, respectively, all of which was classified as long-term available-for-sale investments. The valuation of the auction-rate securities is subject to fluctuations in the future, which will depend on many factors, including the quality of the underlying collateral, estimated time to liquidity including potential to be called or restructured, underlying final maturity, insurance guaranty and market conditions, among others.

Inventory, Policy [Policy Text Block]

Inventories

Inventories are stated at the lower of standard cost (which approximates actual cost determined on a

first

-in

first

-out

basis) and estimated net realizable value. The Company writes down excess and obsolete inventory based on its age and forecasted demand, which includes estimates taking into consideration the Company’s outlook on market and economic conditions, technology changes, new product introductions and changes in strategic direction. Actual demand

may

differ from forecasted demand, and such differences

may

have a material effect on recorded inventory values. When the Company records a write-down on inventory, it establishes a new, lower cost basis for that inventory, and subsequent changes in facts and circumstances will

not

result in the restoration or increase in that newly established cost basis.

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

Property and Equipment

Property and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Buildings and building improvements have estimated useful lives of

years. Leasehold improvements are amortized over the shorter of the estimated useful lives or the lease period.

Production equipment and software have estimated useful lives of

three

seven

years. Transportation equipment has estimated useful lives of

years. Furniture and fixtures have estimated useful lives of

three

five

years. Land is

not

depreciated.

Goodwill and Intangible Assets, Policy [Policy Text Block]

Goodwill and Acquisition-Related Intangible Assets

Goodwill represents the excess of the fair value of purchase consideration over the fair value of net tangible and identified intangible assets as of the date of acquisition. In-process research and development (“IPR&D”) assets represent the fair value of incomplete R&D projects that had

not

reached technological feasibility as of the date of acquisition. The IPR&D assets

are initially capitalized at fair value as intangible assets with indefinite lives and assessed for impairment at each reporting period. When the IPR&D projects are completed, they are reclassified as amortizable intangible assets and are amortized over their estimated useful lives. Alternatively, if the IPR&D projects are abandoned, they are impaired and expensed to research and development.

Acquisition-related intangible assets with finite lives consist of know-how and developed technologies. These assets are amortized on a straight-line basis over the estimated useful lives of

three

five

years and the amortization expense is recorded in cost of revenue in the Consolidated Statements of Operations.

Impairment or Disposal of Long-Lived Assets, Policy [Policy Text Block]

Impairment of Long-Lived Assets

The Company evaluates its long-lived assets other than goodwill for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset

may

not

be recoverable. An impairment loss would be recognized when the sum of the undiscounted future net cash flows expected to result from the use of the asset and its eventual disposition is less than its carrying amount. Such impairment loss would be measured as the difference between the carrying amount of the asset and its fair value based on the present value of estimated future cash flows.

The Company tests goodwill for impairment at least annually in the

fourth

quarter of the year, or whenever events or changes in circumstances indicate that goodwill

may

be impaired. The Company has elected to

first

assess the qualitative factors to determine whether it is more likely than

not

that the fair value of the reporting unit is less than its carrying amount. If the Company determines that it is more likely than

not

that its fair value is less than the carrying amount, then the

two

-step goodwill impairment test is performed. The

first

step compares the fair value of the reporting unit with its carrying amount. If the carrying amount exceeds its fair value, the

second

step measures the impairment loss by comparing the implied fair value of the goodwill with the carrying amount.

impairment of goodwill has been identified in any of the periods presented.

Other Assets, Policy [Policy Text Block]

Other Long-Term Assets

Other assets primarily consist of investments related to the employee deferred compensation plan, intangible assets for the land use rights in Cheng

du, China, and certain prepaid expenses. The Company amortizes the land use rights over

years.

Deferred Compensation Plan, Policy [Policy Text Block]

Deferred Compensation Plan

The Company has a non-qualified, unfunded deferred compensation plan,

which provides certain key employees, including executive management, with the ability to defer the receipt of compensation in order to accumulate funds for retirement on a tax deferred basis. The Company does

not

make contributions to the plan or guarantee returns on the investments. The Company is responsible for the plan’s administrative expenses. Participants’ deferrals and investment gains and losses remain as the Company’s liabilities and the underlying assets are subject to claims of general creditors.

The liabilities for compensation deferred under the plan are recorded at fair value in each reporting period. Changes in the fair value of the liabilities are included in operating expense in the Consolidated Statements of Operations. The Company manages the risk of changes in the fair value of the liabilities by electing to match the liabilities with investments in corporate-owned life insurance policies and mutual funds that offset a substantial portion of the exposure. The investments are recorded at the cash surrender value of the corporate-owned life insurance policies and at the fair value of the mutual funds, which are classified as trading securities. Changes in the cash surrender value of the corporate-owned life insurance policies and the fair value of mutual fund investments are included in interest and other income, net in the Consolidated Statements of Operations.

The following table summarizes the deferred compensation plan balances in the Consolidated Balance Sheets (in thousands):

	December 31,
	2017		2016
Deferred compensation plan asset components:
Cash surrender value of corporate-owned life insurance policies	$	11,455	$	8,180
Fair value of mutual funds		16,625		12,108
Total	$	28,080	$	20,288

Deferred compensation plan assets reported in:
Other long-term assets	$	28,080	$	20,288

Deferred compensation plan liabilities reported in:
Accrued compensation and related benefits (short-term)	$	356	$	479
Other long-term liabilities		28,087		19,836
Total	$	28,443	$	20,315

Standard Product Warranty, Policy [Policy Text Block]

Warranty Reserves

The Company generally provides a

one

two

-year warranty against defects in materials and workmanship and will either repair the goods or provide replacement products at

charge to the customer for defective products. Reserve requirements are recorded in the period of sale and are based on an assessment of the products sold with warranty and historical warranty costs incurred. Historically, the warranty expenses have

not

been material to the Company

’s consolidated financial statements.

Revenue Recognition, Policy [Policy Text Block]

Revenue Recognition

The Company

’s revenue consists primarily of product sales of assembled and tested integrated circuits and dies in wafer form to the consumer, computing and storage, industrial, automotive and communications markets. The remaining revenue has

not

been significant historically and primarily includes royalties from licensing arrangements and revenue from wafer testing services for

third

parties.

he Company recognizes revenue based on the following

four

criteria: (

) persuasive evidence of an arrangement exists; (

) delivery has occurred or services have been rendered; (

) the fee is fixed or determinable; and (

) collectability is reasonably assured. Determination of criteria (

) and (

) is based on management’s judgment regarding the fixed nature of the fees charged for products delivered and the collectability of those fees. The application of these criteria has resulted in the Company generally recognizing revenue upon shipment or delivery (when title and risk of loss have transferred to customers), including to most of the distributors, original equipment manufacturers and electronic manufacturing service providers.

For

each of the years ended

December 31, 2017,

2016

and

2015,

88%

of the Company’s sales, respectively, were made through distribution arrangements with

third

parties. The Company generally recognizes revenue upon shipment or delivery of products to the distributors based on the following considerations:

	( 1 )	The price is fixed or determinable at the date of sale. The Company does not offer special payment terms (the Company’s normal payment terms are 30 - 45 days for its distributors) or price adjustments to distributors when the Company recognizes revenue upon shipment or delivery.
	( 2 )	The distributors are obligated to pay the Company and this obligation is not contingent on the resale of the Company ’s products.
	( 3 )	The distributors ’ obligation is unchanged in the event of theft or physical destruction or damage to the products.
	( 4 )	The distributors has stand-alone economic substance apart from the Company’s relationship.
	( 5 )	The Company does not have any obligations for future performance to directly bring about the resale of its products by the distributors.
	( 6 )	Th e amount of future returns can be reasonably estimated.

Certain of the C

ompany’s large distributors have contracts that included limited stock rotation rights that permit the return of a small percentage of the previous

six

months’ purchases. The Company maintains a sales reserve for stock rotation rights, which is based on historical experience of actual stock rotation returns on a per-distributor basis and information related to products in the distribution channel. This reserve is recorded at the time of sale. As of

December 31, 2017

and

2016,

the reserve for stock rotation rights was

$2.6

million and

$1.9

million, respectively.

If the Company enters

into arrangements with distributors that have price adjustment or other rights that are

not

fixed or determinable, the Company recognizes revenue under such arrangements only after the distributors have sold the products to end customers, at which time the price is

longer subject to adjustment and is fixed. Three of the Company’s U.S.-based distributors have such price adjustment rights and accordingly, the Company defers revenue recognition on these shipments until the products are sold to the end customers by the distributors. As of

December 31, 2017

and

2016,

the deferred revenue balance before the price adjustments from these distributors was

$1.9

million and

$3.7

million, and the deferred costs were

$0.2

million and

$0.3

million, respectively.

January 1, 2018,

the Company adopted Accounting Standar

ds Update (“ASU”)

No.

2014

09,

Revenue from Contracts with Customers (Topic

606

)

. The primary effects of the new standard for the Company related to the timing of revenue recognition with the

three

U.S.-based distributors with price adjustment rights. See “Recent Accounting Pronouncements

Not

Yet Adopted as of

December 31, 2017”

below for further discussion.

Share-based Compensation, Option and Incentive Plans Policy [Policy Text Block]

Stock-Based Compensation

The Company measures the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award.

The fair value of restricted stock units (“RSUs”) with service conditions or performance conditions is based on the grant date share price. The fair value of RSUs with only market conditions, as well as RSUs containing both market and performance conditions, is estimated using a Monte Carlo simulation model. The fair value of stock options, shares issued under the employee stock purchase plan and RSUs with a purchase price feature is estimated using the Black-Scholes model.

Compensation expense related to awards with service conditions is recorded on a straight-line basis over the requisite service period. Compensation expense related to awa

rds subject to market or performance conditions is recognized over the requisite service period for each separately vesting tranche. For awards with only market conditions, compensation expense is

not

reversed if the market conditions are

not

satisfied. For awards with only performance conditions, as well as awards containing both market and performance conditions, the Company recognizes compensation expense when it becomes probable that the performance criteria set bwill be achieved. Management performs the probability assessment on a quarterly basis by reviewing external factors, such as macroeconomic conditions and the analog industry forecasts, and internal factors, such as the Company’s business and operational objectives and revenue forecasts. Changes in the probability assessment of achievement of the performance conditions are accounted for in the period of change by recording a cumulative catch-up adjustment as if the new estimate had been applied since the service inception date. Any previously recognized compensation expense is reversed if the performance conditions are

not

expected to be satisfied.

Prior to

January 1, 2017,

the

Company recognized stock-based compensation expense less an estimate for forfeitures. Upon the adoption of ASU

No.

2016

09,

Compensation—Stock Compensation (Topic

718

): Improvements to Employee Share-Based Payment Accounting

January 1, 2017,

the Company elected to account for forfeitures when they occur. See “Recently Adopted Accounting Pronouncement” below for further discussion.

Research and Development Expense, Policy [Policy Text Block]

Research and Development

Costs incurred in research and devel

opment are expensed as incurred.

Income Tax, Policy [Policy Text Block]

Accounting for Income Taxes

The Company recognizes federal, state and foreign current tax liabilities or assets based on its estimate of taxes payable or refundable in the current fiscal year by tax jurisdiction. The Company also recognizes federal, state and foreign deferred tax assets or liabilities for its estimate of future tax effects attributable to temporary differences and carryforwards. The Company records a valuation allowance to reduce any deferred tax assets by the amount of any tax benefits that, based on available evidence and judgment, are

not

expected to be realized.

The Company

’s calculation of current and deferred tax assets and liabilities is based on certain estimates and judgments and involves dealing with uncertainties in the application of complex tax laws. The Company’s estimates of current and deferred tax assets and liabilities

may

change based, in part, on added certainty or finality or uncertainty to an anticipated outcome, changes in accounting or tax laws in the U.S. or foreign jurisdictions where the Company operates, or changes in other facts or circumstances. In addition, the Company recognizes liabilities for potential U.S. and foreign income tax for uncertain income tax positions taken on its tax returns if it has less than a

50%

likelihood of being sustained. If the Company determines that payment of these amounts is unnecessary or if the recorded tax liability is less than its current assessment, the Company

may

be required to recognize an income tax benefit or additional income tax expense in its financial statements in the period such determination is made. The Company has calculated its uncertain tax positions which were attributable to certain estimates and judgments primarily related to transfer pricing, cost sharing and its international tax structure exposure.

December 22, 2017,

the tax legislation commonly known as the Tax Cuts and Jobs Act (the

“2017

Tax Act”) was enacted, which significantly changed U.S. corporate income tax law.

The

2017

Tax Act made the following material changes

(

) reduction of the corporate income tax rate effective

January 1, 2018; (

) replacement of the worldwide tax system with a territorial tax regime, with a

one

-time mandatory tax on previously deferred foreign earnings; (

) amendment on the deductibility of executive performance-based compensation, and (

) creation of new taxes on certain foreign-sourced earnings.

Income tax effects resulting from changes in tax laws are accounted for by the Company in the period in which the law is enacted.

See Note

for further discussion.

Litigation and Contingencies, Policy [Policy Text Block]

Litigation and

Contingencies

The Company is a party to actions and proceedings in the ordinary course of business, including potential litigation regarding its shareholders and its intellectual property, challenges to the enforceability or validity of its intellectual property, claims that the Company

’s products infringe on the intellectual property rights of others, and employment matters. The pending proceedings involve complex questions of fact and law and will require the expenditure of significant funds and the diversion of other resources to prosecute and defend. In addition, from time to time, the Company becomes aware that it is subject to other contingent liabilities. When this occurs, the Company will evaluate the appropriate accounting for the potential contingent liabilities to determine whether a contingent liability should be recorded. In making this determination, management

may,

depending on the nature of the matter, consult with internal and external legal counsel and technical experts. Based on the facts and circumstances in each matter, the Company uses its judgment to determine whether it is probable that a contingent loss has occurred and whether the amount of such loss can be estimated. If the Company determines a loss is probable and estimable, the Company records a contingent loss. In determining the amount of a contingent loss, the Company takes into account advice received from experts for each specific matter regarding the status of legal proceedings, settlement negotiations, prior case history and other factors. Should the judgments and estimates made by management need to be adjusted as additional information becomes available, the Company

may

need to record additional contingent losses. Alternatively, if the judgments and estimates made by management are adjusted, for example, if a particular contingent loss does

not

occur, the contingent loss recorded would be reversed.

Litigation expense (benefit), net in the Consolidated Statements of Operations includes primarily patent infringement litigation and other business matters. The Company records litigation costs in the period in which they are incurred. Proceeds resulting from settlement of litigation or favorable judgments are recorded as a reduction against litigation expense.

Earnings Per Share, Policy [Policy Text Block]

Net Income p

er Share

Basic net income per share is computed by dividing net income by the weighted-average number of common shares outstanding for the period. Diluted net income per share reflects the potential dilution that would occur if outstanding securities or other contracts to issue common stock were exercise

d or converted into common shares, and calculated using the treasury stock method. Contingently issuable shares, including equity awards with performance conditions or market conditions, are considered outstanding common shares and included in the basic net income per share as of the date that all necessary conditions to earn the awards have been satisfied. Prior to the end of the contingency period, the number of contingently issuable shares included in the diluted net income per share is based on the number of shares, if any, that would be issuable under the terms of the arrangement at the end of the reporting period.

The Company

’s outstanding RSUs contain forfeitable rights to receive cash dividend equivalents, which are accumulated and paid to the employees when the underlying RSUs vest. Dividend equivalents accumulated on the underlying RSUs are forfeited if the employees do

not

fulfill their service requirement and the awards do

not

vest. Accordingly, these awards are

not

treated as participating securities in the net income per share calculation.

Comprehensive Income, Policy [Policy Text Block]

Comprehensive Income

Comprehensive income represents the change in the Company

’s net assets during the period from non-owner sources. Accumulated other comprehensive income (loss) presented in the Consolidated Balance Sheets primarily consists of unrealized gains or losses related to available-for-sale investments and foreign currency translation adjustments.

New Accounting Pronouncements, Policy [Policy Text Block]

Recently Adopted Accounting Pronouncement

Stock-Based Compensation:

March 2016,

the Financial Accounting Standards Board ("FASB") issued ASU

No.

2016

09,

Compensation—Stock Compensation (Topic

718

): Improvements to Employee Share-Based Payment Accounting,

which changed how entities account for certain aspects of share-based payment awards, including the accounting for excess tax benefits and tax deficiencies, forfeitures, statutory tax withholding requirements, as well as classification of excess tax benefits in the statements of cash flows. The Company adopted the standard on

January 1, 2017

and the primary impact of the adoption was as follows:

●

The

Company elected to account for forfeitures of equity awards when they occur. The change was applied on a

modified

retrospective basis and the Company recorded a cumulative-effect adjustment of

$5.1

million to retained

earnings

January 1, 2017,

with a corresponding offset to additional paid-in capital.

●

Excess tax benefits are recognized in the income tax provision in the Consolidated Statements of Operations prospectively, rather than in additional paid-in capital in the Consolidated Balance Sheets. The Company applied the modified retrospective method and there was

net impact on retained earnings on

January 1, 2017,

as the increase in deferred tax assets related to previously unrecognized excess tax benefits was fully offset by a valuation allowance.

●

The Company is presenting excess tax benefits as an operating activity in the Consolidated Statements of Cash

Flows on

a prospective basis.

Recent Accounting Pronouncements Not Yet Adopted as of December 31, 2017

Revenue Recognition:

May 2014,

the

FASB issued ASU

No.

2014

09,

Revenue from Contracts with Customers (Topic

606

which outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. The standard’s core principle is that an entity will recognize revenue when it transfers 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. The Company adopted the standard on

January 1, 2018

using the modified retrospective method and prior-period results will

not

be restated. In the

first

quarter of

2018,

the Company will record approximately

$0.8

million, before tax, to retained earnings related to the cumulative effect of adopting Topic

606,

primarily due to the change in revenue recognition for its U.S.-based distributors as discussed below

Under Topic

606

, the Company’s product sales consist of a single performance obligation that is satisfied at a point in time. The Company recognizes product revenue from distributors and other customers when the products are shipped or delivered to the customers (based on the terms of the firm purchase orders and sales agreements), primarily because (a) the Company has transferred physical possession of the products, (b) the Company has a present right to payment, (c) the customers have legal title to the products, and (d) the customers bear significant risks and rewards of ownership of the products.

he primary change for the Company under Topic

606

relates to the timing of revenue recognition with

three

U.S.-based distributors. Sales to these distributors are transacted under the terms of agreements providing price adjustment and other rights. Prior to the adoption of Topic

606,

revenue and costs related to these sales were deferred until the Company received notification from the distributors that products have been sold to the end customers and the amount of price adjustments was fixed and finalized. As of

December 31, 2017,

the deferred revenue balance before the price adjustments was

$1.9

million and the related deferred costs were

$0.2

million. Upon adoption of Topic

606,

the transaction price takes into consideration the effect of variable consideration such as price adjustments, which are estimated and recorded at the time the promised goods are transferred to the customers. Accordingly, effective

January 1, 2018,

the Company recognizes revenue at the time of shipment or delivery to the distributors, adjusted for an estimate of the price adjustments based on management’s review of historical data and other information available at the time.

Revenue from other U.S. and non-U.S. distributors, which make up the majority of the Company

’s total sales to distributors, was already recognized at the time of shipment or delivery to the distributors prior to the adoption of Topic

606

because these arrangements do

not

contain price adjustment rights. Accordingly, revenue recognition on arrangements with these distributors remains substantially unchanged upon adoption of Topic

606.

Other

February 2016,

the FASB issued ASU

No.

2016

02,

Leases (Topic

842

which requires entities to recognize a right-of-use asset and a lease liability on the balance sheets for substantially all leases with a lease term greater than

months, including leases currently accounted for as operating leases.

In addition, the standard applies to leases embedded in service arrangements. The standard requires modified retrospective adoption and will be effective for annual reporting periods beginning after

December 15, 2018,

with early adoption permitted. The Company is evaluating the impact of the adoption on its consolidated financial position, results of operations, cash flows and disclosures.

June 2016,

the FASB issued ASU

No.

2016

13,

Financial Instruments – Credit Losses (Topic

326

): Measurement of Credit Losses on Financial Instruments,

which introduces a model based on expected losses to estimate credit losses for most financial assets and certain other instruments. In addition, for available-for-sale debt securities with unrealized losses, the losses will be recognized as allowances rather than reductions in the amortized cost of the securities. The standard will be effective for annual reporting periods beginning after

December 15, 2019,

with early adoption permitted for annual reporting periods beginning after

December 15, 2018.

Entities will apply the standard by recording a cumulative-effect adjustment to retained earnings. The Company is evaluating the impact of the adoption on its consolidated financial position, results of operations, cash flows and disclosures.

January 2017,

the FASB issued ASU

No.

2017

04,

Intangibles – Goodwill and Other (Topic

350

): Simplifying the Accounting for Goodwill Impairment,

which simplifies the accounting for goodwill impairment. The guidance removes step

two

of the goodwill impairment test, which requires a hypothetical purchase price allocation. 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. Entities will continue to have the option to perform a qualitative assessment to determine if a quantitative impairment test is necessary. The standard will be applied prospectively, and is effective for annual reporting periods beginning after

December 15, 2019.

Early adoption is permitted. The Company is evaluating the impact of the adoption on its annual goodwill impairment test.