Summary Of Significant Accounting Policies

6 Months Ended

Mar. 27, 2020

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

Recently Issued Accounting Standards

Adopted Standards

At the beginning of fiscal 2020, we adopted the following standards:

Leases.  In the first quarter of fiscal 2020, we adopted ASU 2016-02, Leases (ASC 842) along with all subsequent applicable ASU clarifications and improvements, which requires lessees to recognize leases on balance sheet and disclose key information about leasing arrangements. We adopted ASC 842 using the modified retrospective transition method and used the effective date as the date of initial application. Consequently, financial information is not updated and the disclosures required under ASC 842 are not provided for dates and periods prior to implementation. ASC 842 provides a number of optional practical expedients in transition. We elected the “package of practical expedients,” which permits us not to reassess under ASC 842 our prior conclusions about lease identification, lease classification and initial direct costs. In addition, we account for lease and non-lease components as a single lease component.

Operating leases are included in operating lease right-of-use assets, operating lease liabilities, and in current and non-current operating lease liabilities on our interim condensed consolidated balance sheets.

As a lessee, the adoption of ASC 842 resulted in the recording of Operating lease right-of-use ("ROU") assets and Operating lease liabilities of $62.1 million and $64.6 million, respectively, as of September 28, 2019. The difference between the operating lease assets and liabilities was recorded as an adjustment to Other non-current liabilities, primarily related to deferred rent and other lease incentives. As a lessor, the adoption of ASC 842 did not have a material impact. The adoption of ASC 842 did not impact Retained Earnings.

Income Taxes: Comprehensive Income. In the first quarter of fiscal 2020, we adopted ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects From Accumulated Other Comprehensive Income, which allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Act. We elected to not reclassify the stranded tax effects to retained earnings as they were not material to Dolby's consolidated financial statements.

Standards Not Yet Effective

Collaborative Arrangements. In November 2018, the FASB issued ASU 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606, which clarifies that certain transactions between participants in a collaborative arrangement should be accounted for under ASC 606 when the counterparty is a customer. In addition, ASU 2018-18 precludes an entity from presenting consideration from a transaction in a collaborative arrangement as revenue from contracts with customers if the counterparty is not a customer for that transaction. This standard will be effective for Dolby beginning September 26, 2020, and we do not currently plan to early adopt. We do not believe that this standard will have a material impact on our consolidated financial statements.

Financial Instruments. In June 2016, the FASB issued ASU 2016-13, Financial Instruments (Topic 326): Measurement of Credit Losses on Financial Instruments, which modifies the measurement of expected credit losses of certain financial instruments, including trade receivables, contract assets, and lease receivables. This standard will be effective for Dolby beginning September 26, 2020, and we do not currently plan to early adopt. We do not believe that this standard will have a material impact on our consolidated financial statements.

Income Taxes. In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes by removing certain exceptions for recognizing deferred taxes for investments, performing intraperiod allocation, and calculating income taxes in interim periods. In addition, the modifications simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. This standard will be effective for Dolby beginning September 26, 2020, and we do not currently plan to early adopt. We are currently evaluating the impact of the standard on our consolidated financial statements.