SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

Our consolidated financial statements include the accounts of our wholly owned subsidiaries. All intercompany balances and transactions have been eliminated.

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclose contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues, expenses, and impairments during the reporting period. Actual results could differ from those estimates, and such differences could be material.

Reclassifications

Certain previously reported financial information has been reclassified to conform to the current year's presentation. The impact of such reclassifications was not significant to the prior year's overall presentation.

Cash Equivalents

We consider all highly liquid cash investments with maturities of three months or less when purchased to be cash equivalents.

Financial Instruments

The fair values of our financial instruments, which may include cash, accounts receivable, amounts outstanding under our variable rate bank credit facility, accounts payable and accrued liabilities, approximate their carrying amounts. Financial instruments that subject us to concentrations of credit risk consist principally of trade accounts receivable, which are primarily due from companies of varying size engaged in oil and gas activities in the United States, Canada, Mexico, and Argentina. Our policy is to review the financial condition of customers before extending credit and periodically update customer credit information. Payment terms are on a short-term basis. The risk of loss from the inability to collect trade receivables is heightened during prolonged periods of low oil and natural gas commodity prices.

We have currency exchange rate risk exposure related to transactions denominated in a foreign currency as well as to investments in certain of our international operations. Our risk management activities include the use of foreign currency forward purchase and sale derivative contracts as part of a program designed to mitigate the currency exchange rate risk exposure on selected international operations.

As a result of the outstanding balances under our variable rate revolving credit facility, we face market risk exposure related to changes in applicable interest rates. Although we have no interest rate swap contracts outstanding to hedge this potential risk exposure, we have entered into certain fixed interest rate notes, which are scheduled to mature in 2022 and which mitigate this risk on our total outstanding borrowings.

Significant Customers

During 2017 and 2016, ConocoPhillips accounted for approximately 11.0% of our revenues. During 2015, no individual customer accounted for 10% or more of our revenues.

Foreign Currencies

We have designated the Canadian dollar and Argentine peso as the functional currencies for our operations in Canada and Argentina, respectively. We are exposed to fluctuations between the U.S. dollar and certain foreign currencies, including the Canadian dollar, the Mexican peso, and the Argentine peso, as a result of our international operations. Foreign currency exchange gains and (losses) are included in other expense and totaled $48,000, $(1.6) million, and $(2.0) million during the years ended December 31, 2017, 2016, and 2015, respectively.

Allowances for Doubtful Accounts

Allowances for doubtful accounts are determined on a specific identification basis when we believe that the collection of specific amounts owed to us is not probable. The changes in allowances for doubtful accounts are as follows:



	Year Ended December 31,
	2017			2016			2015
	(In Thousands)
At beginning of period	$	2,253		$	1,973		$	1,496
Activity in the period:
Provision for doubtful accounts	968			1,704			508
Account (chargeoffs) recoveries, net	(2,399		)	(1,424		)	(31		)
At end of period	$	822		$	2,253		$	1,973

Inventories

Inventories consist primarily of compressor package parts and supplies and work in process and are stated at the lower of cost or market value. For parts and supplies, cost is determined using the weighted average cost method. The cost of work in progress is determined using the specific identification method. Work in progress inventories consist primarily of new compressor packages located at our fabrication facility in Midland, Texas. We write down the value of inventory by an amount equal to the difference between its cost and its estimated market value. Components of inventories as of December 31, 2017, and December 31, 2016, are as follows:



	December 31, 2017		December 31, 2016
	(In Thousands)
Parts and supplies	$	31,703	$	25,932
Work in progress	10,580		5,510
Total inventories	$	42,283	$	31,442

Property, Plant, and Equipment

Property, plant, and equipment are stated at cost. Expenditures that increase the useful lives of assets are capitalized. The cost of repairs and maintenance is charged to cost of revenues as incurred. Compressors include compressor packages currently placed in service and available for service. Depreciation is computed using the straight-line method based on the following estimated useful lives:



Buildings	15 – 30 years
Compressors	12 – 20 years
Other equipment	2 – 8 years
Vehicles	3 – 5 years
Information systems	7 years

Leasehold improvements are depreciated over the shorter of the remaining term of the associated building lease or their useful lives. Depreciation expense for the years ended December 31, 2017, 2016, and 2015 was $66.0 million, $68.8 million, and $71.7 million, respectively.

Construction in progress as of December 31, 2017 consists primarily of new compressor packages under fabrication and capital expenditures that sustain the capacity of our existing fleet. Construction in progress as of December 31, 2016 consists primarily of capitalized system software development costs incurred during 2016. Interest capitalized for the years ended December 31, 2017, 2016, and 2015 was $0.6 million, $0.2 million, and $0.0 million, respectively.

Intangible Assets other than Goodwill

Trademarks/trade names, customer relationships, and other intangible assets are recorded on the basis of cost and are amortized on a straight-line basis over their estimated useful lives, ranging from 2 to 15 years. Amortization expense related to intangible assets was $3.2 million, $3.4 million, and $6.8 million for the years ended December 31, 2017, 2016, and 2015, respectively, and is included in depreciation and amortization. The estimated future annual amortization expense of trademarks/trade names, customer relationships, and other intangible assets is $2.9 million for 2018, $2.9 million for 2019, $2.9 million for 2020, $2.9 million for 2021, and $2.9 million for 2022.

Intangible assets are tested for recoverability whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable. In such an event, we will determine the fair value of the asset using an undiscounted cash flow analysis of the asset at the lowest level for which identifiable cash flows exist. If an impairment has occurred, we will recognize a loss for the difference between the carrying value and the estimated fair value of the intangible asset. See "Impairments of Long-Lived Assets" section below.

Goodwill

Goodwill represents the excess of cost over the fair value of the net assets of businesses acquired in purchase transactions. Prior to the impairment of remaining goodwill as of March 31, 2016, we performed a goodwill impairment test on an annual basis or whenever indicators of impairment were present. We performed the annual test of goodwill impairment following the fourth quarter of each year. The assessment for goodwill impairment begins with a qualitative assessment of whether it is “more likely than not” that the fair value of our business is less than its carrying value. This qualitative assessment requires the evaluation, based on the weight of evidence, of the significance of all identified events and circumstances. During 2015, and continuing into 2016, global oil and natural gas commodity prices, particularly crude oil, were significantly reduced. These low commodity prices had a negative impact on industry drilling and capital expenditure activity, which affected the demand for a portion of our products and services. The accompanying decrease in the price of our common units during the last half of 2015 and early 2016 also resulted in an overall reduction in our market capitalization. Based on this qualitative assessment, we determined that, due to the decline in the price of our common units that resulted in our market capitalization being less than the book value of our consolidated partners' capital balance as of December 31, 2015 and March 31, 2016, it was “more likely than not” that the fair value of our business was less than its carrying value as of these dates.

When the qualitative analysis indicates that it is “more likely than not” that our business’ fair value is less than its carrying value, the resulting goodwill impairment test consists of a two-step accounting test being performed. The first step of the impairment test is to compare the estimated fair value with the recorded net book value (including goodwill) of our business. If the estimated fair value is higher than the recorded net book value, no impairment is deemed to exist and no further testing is required. If, however, the estimated fair value is below the recorded net book value, an impairment loss is calculated by comparing the recorded net book value of goodwill to our estimated implied fair value of that goodwill. Our estimates of our fair value, when required, are based on a combination of an income and market approach. These estimates are imprecise and are subject to our estimates of our future cash flows and our judgment as to how these estimated cash flows translate into our estimated fair value. These estimates and judgments are affected by numerous factors, including the general economic environment at the time of our assessment, which affects our overall market capitalization.

Our management must apply judgment in determining the estimated fair value for purposes of performing the goodwill impairment test. Management uses all available information to make these fair value determinations, including the present value of expected future cash flows using discount rates commensurate with the risks involved in the assets. The resultant fair values calculated are then compared to observable metrics for other companies in our industry or on mergers and acquisitions in our industry, to determine whether those valuations, in our judgment, appear reasonable.

The accounting principles regarding goodwill acknowledge that the observed market prices of individual trades of a company’s stock (and thus its computed market capitalization) may not be representative of the fair value of the company as a whole. Substantial value may arise from the ability to take advantage of synergies and other benefits that flow from control over another entity. Consequently, measuring the fair value of a collection of assets and liabilities that operate together in a controlled entity is different from measuring the fair value of a single share of that entity’s common stock. Therefore, once the fair value of the reporting units was determined, we also added a control premium to the calculations. This control premium is judgmental and is based on observed mergers and acquisitions in our industry.

As part of our internal annual business outlook that we performed during 2015 and 2016, we considered changes in the global economic environment that affected our common unit price and market capitalization. As a result of the annual goodwill impairment test process described above, we recorded impairments of goodwill of $92.3 million as of December 31, 2015 and $92.4 million as of March 31, 2016. As of December 31, 2015, as a result of decreased demand for our products and services due to decreased oil and natural gas commodity prices, and due to decrease in the price of our common units, we determined that it was "more likely than not" that our fair value was less than our net book value as of December 31, 2015. With regard to the 2016 impairment, due to the decrease in the price of our common units during the first three months of 2016, our market capitalizations as of March 31, 2016, was again below our recorded net book value, including remaining goodwill. In addition, the continuing low oil and natural gas commodity price environment resulted in a further negative impact on demand for the products and services for each of our reporting units. As a result of these factors, we determined that it was “more likely than not” that our fair value was less than our net book value as of March 31, 2016.

As of December 31, 2017, the carrying amount of goodwill is $0.0 million, after giving effect to the $233.5 million of accumulated impairment losses.

The changes in the carrying amount of goodwill are as follows:



	Year Ended December 31,
	2017		2016			2015
	(In Thousands)
Balance, beginning of year	$	—	$	92,402		$	233,548
Goodwill acquired during the year	—		—			—
Goodwill adjustments	—		(92,402		)	(141,146		)
Balance, end of year	$	—	$	—		$	92,402

Impairments of Long-Lived Assets

Impairments of long-lived assets, including identified intangible assets, are determined periodically, when indicators of impairment are present. If such indicators are present, the determination of the amount of impairment is based on our judgments as to the future undiscounted operating cash flows to be generated from these assets throughout their remaining estimated useful lives. If these undiscounted cash flows are less than the carrying amount of the related asset, an impairment is recognized for the excess of the carrying value over its fair value. Fair value of intangible assets is generally determined using the discounted present value of future cash flows using discount rates commensurate with the risks inherent with the specific assets. Assets held for disposal are recorded at the lower of carrying value or estimated fair value less estimated selling costs.

During the first quarter of 2016, as a result of continuing decreased demand as a result of current market conditions, we recorded impairments of approximately $7.9 million associated with certain identified intangible assets. During the fourth quarter of 2016, as a result of fire damage to compressor packages, we recorded impairments of approximately $2.4 million associated with certain identified compressor units. This amount was charged to Long-Lived Asset Impairment expense in the accompanying consolidated statement of operations.

Revenue Recognition

We recognize revenue using the following criteria: (a) persuasive evidence of an exchange arrangement exists; (b) delivery has occurred or services have been rendered; (c) the buyer’s price is fixed or determinable; and (d) collectability is reasonably assured. The majority of our compression services are provided pursuant to contract terms ranging from one month to twenty-four months. Monthly agreements are generally cancellable with 30 days written notice by the customer. Collections associated with progressive billings to customers for the construction of compression equipment is included in unearned income in the consolidated balance sheets.

Compression and Related Services Revenues and Costs

Our compression and related services revenues include revenues from our U.S. corporate subsidiaries' operating lease agreements with customers. For the three years in the period ended December 31, 2017, the following operating lease revenues and associated costs were included in compression and related service revenues and cost of compression and related services, respectively, in the accompanying consolidated statements of operations. As a result of our customers entering into compression service contracts, our revenues from rental contracts have decreased during the year ended December 31, 2017 compared to the prior years.



	Year Ended December 31,
	2017		2016		2015
	(In Thousands)
Rental revenue	$	38,720	$	42,644	$	117,540
Rental expenses	$	17,560	$	25,039	$	66,040

Equity-Based Compensation

We have an equity incentive compensation plan which provides for the granting of phantom units and performance phantom units to the executive officers, key employees, nonexecutive officers, consultants, and directors of our general partner. Total equity-based compensation expense for the three years ended December 31, 2017, 2016, and 2015, was $1.2 million, $3.0 million, and $2.2 million, respectively. For further discussion of equity-based compensation, see Note I - Equity-Based Compensation.

Income Taxes

Our operations are not subject to U.S. federal income tax other than the operations that are conducted through taxable subsidiaries. We incur state and local income taxes in certain of the United States in which we conduct business. We incur income taxes and are subject to withholding requirements related to certain of our operations in Latin America, Canada, and other foreign countries in which we operate. Furthermore, we also incur Texas Margin Tax, which, in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 740, is classified as an income tax for reporting purposes. Beginning in 2015, a portion of the carrying value of certain deferred tax assets is subjected to a valuation allowance. See Note G - Income Taxes for further discussion.

Accumulated Other Comprehensive Income (Loss)

Certain of our international operations maintain their accounting records in the local currencies that are their functional currencies. For these operations, the functional currency financial statements are converted to United States dollar equivalents, with the effect of the foreign currency translation adjustment reflected as a component of accumulated other comprehensive income (loss). Accumulated other comprehensive income (loss) is included in partners' capital in the accompanying audited consolidated balance sheets and consists of the cumulative currency translation adjustments associated with such international operations. Activity within accumulated other comprehensive income (loss) during the three years ended December 31, 2017, December 31, 2016, and December 31, 2015 is as follows:



	Year Ended December 31,
	2017			2016			2015
	(In Thousands)
Balance, beginning of year	$	(10,411	)	$	(8,393	)	$	(3,336	)
Foreign currency translation adjustment, net of tax of $0 in 2017, 2016, and 2015	(1,078		)	(2,018		)	(5,057		)
Balance, end of year	$	(11,489	)	$	(10,411	)	$	(8,393	)

Activity within accumulated other comprehensive income includes no reclassifications to net income.

Allocation of Net Income

Our net income is allocated to partners’ capital accounts in accordance with the provisions of the Partnership Agreement.

Fair Value Measurements

Fair value is defined as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date” within an entity’s principal market, if any. The principal market is the market in which the reporting entity would sell the asset or transfer the liability with the greatest volume and level of activity, regardless of whether it is the market in which the entity will ultimately transact for a particular asset or liability or if a different market is potentially more advantageous. Accordingly, this exit price concept may result in a fair value that may differ from the transaction price or market price of the asset or liability.

Under U.S. generally accepted accounting principles ("GAAP"), the fair value hierarchy prioritizes inputs to valuation techniques used to measure fair value. Fair value measurements should maximize the use of observable inputs and minimize the use of unobservable inputs, where possible. Observable inputs are developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs may be needed to measure fair value in situations where there is little or no market activity for the asset or liability at the measurement date and are developed based on the best information available in the circumstances, which could include the reporting entity’s own judgments about the assumptions market participants would utilize in pricing the asset or liability.

We utilize fair value measurements to account for certain items and account balances within our consolidated financial statements. Fair value measurements are utilized in the determination of the carrying value of our Preferred Units (a Level 3 fair value measurement), which were issued in August and September 2016. We also utilize fair value measurements on a recurring basis in the accounting for our foreign currency forward purchase and sale derivative contracts. For these fair value measurements, we utilize the quoted value as determined by our counterparty financial institution (a level 2 fair value measurement). Fair value measurements are also utilized on a nonrecurring basis, such as in the allocation of purchase consideration for acquisition transactions to the assets and liabilities acquired, including intangible assets and goodwill (a Level 3 fair value measurement), and for the impairment of long-lived assets, including goodwill (a level 3 fair value measurement). The fair value of certain of our financial instruments, which may include cash, accounts receivable, short-term borrowings, and variable-rate long-term debt pursuant to our bank credit agreement, approximate their carrying amounts. The fair values of our publicly traded long-term 7.25% Senior Notes at December 31, 2017 and December 31, 2016, were approximately $279.7 million and $278.2 million (a level 2 fair value measurement). Those fair values compared to an aggregate principal amount of such notes at December 31, 2017 and 2016 of $295.9 million.

The Preferred Units are valued using a lattice modeling technique that, among a number of lattice structures, includes significant unobservable items (a level 3 fair value measurement). These unobservable items include (i) the volatility of the trading price of our common units compared to a volatility analysis of equity prices of comparable peer companies, (ii) a yield analysis that utilizes market information related to the debt yields of comparable peer companies, and (iii) a future conversion price analysis. The fair valuation of our Preferred Units liability is increased by, among other factors, projected increases in our common unit price, and by increases in the volatility and decreases in the debt yields of comparable peer companies. Increases (or decreases) in the fair value of our Preferred Units will increase (decrease) the associated liability and result in future adjustments to earnings for the associated valuation losses (gains).

A summary of these recurring fair value measurements as of December 31, 2017 and 2016, is as follows:



				Fair Value Measurements Using
Description	Total as of December 31, 2017			Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
	(In Thousands)
Series A Preferred Units	$	(70,260	)	$	—	$	—		$	(70,260	)
Asset for foreign currency derivative contracts	130			—		130			—
Liability for foreign currency derivative contracts	(10		)	—		(10		)	—
	$	(70,140	)



				Fair Value Measurements Using
Description	Total as of December 31, 2016			Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(In Thousands)
Series A Preferred Units	$	(88,130	)	$	—	$	—	$	(88,130	)
Asset for foreign currency derivative contracts	$	57		$	—	$	57	$	—
	$	(88,073	)

During 2016, we recorded total impairment charges of $102.6 million, reflecting the decreased fair value for certain assets. Assets that were partially impaired included certain of our intangible assets. The fair values used in these impairment calculations were estimated based on discounted estimated future cash flows, which is based on significant unobservable inputs (Level 3) in accordance with the fair value hierarchy. A summary of these nonrecurring fair value measurements during the year ended December 31, 2016, using the fair value hierarchy is as follows:



				Fair Value Measurements Using
				Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Year-to-Date Impairment Losses
Description	Total Fair Value					Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Year-to-Date Impairment Losses
	(In Thousands)
Tangible compressor assets	$	—		$	—	$	—	$	—	$	2,357
Identified intangible assets	20,600		⁽¹⁾	—		—		20,600		7,866
Goodwill	—			—		—		—		92,402
Total	$	20,600		$	—	$	—	$	20,600	$	102,625

⁽¹⁾Fair value as of March 31, 2016 date of impairment.

Recently Issued Accounting Pronouncements

In May 2014, the FASB issued Accounting Standards Update ("ASU") 2014-09, "Revenue from Contracts with Customers." ASU 2014-09 supersedes the revenue recognition requirements in ASC 605, Revenue Recognition, and most industry-specific guidance. The core principle of the guidance is that an entity should recognize revenue 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 is effective for annual periods beginning after December 15, 2017, and interim periods within those years, under either full or modified retrospective adoption. During 2016, in preparation for the adoption of ASU No. 2014-09, we began a review of the various types of customer contract arrangements for our compression services, aftermarket services, and equipment sales operations. These reviews include 1) accumulating all customer contractual arrangements; 2) identifying individual performance obligations pursuant to each arrangement; 3) quantifying consideration under each arrangement; 4) allocating consideration among the identified performance obligations; and 5) determining the timing of revenue recognition pursuant to each arrangement. During 2017, we completed these contract reviews and have implemented revised accounting system processes in order to capture information required to be disclosed under ASU 2014-09. We will adopt this new guidance using the modified retrospective method on January 1, 2018. We have substantially completed our analysis of the new guidance and have not identified any material changes to the timing or amount of revenue to be recognized in future periods. The disclosures related to revenue recognition will be significantly expanded under ASU 2014-09, specifically around the quantitative and qualitative information about performance obligations, changes in contract assets and liabilities, and disaggregation of revenue. We continue to evaluate these requirements.

In March 2016, the FASB issued ASU 2016-08,"Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net)" to clarify the guidance on principal versus agent considerations. This ASU does not change the effective date or adoption method under ASU 2014-09 which is noted above.

In April 2016, the FASB issued ASU 2016-10,"Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing" to clarify the guidance on identifying performance obligations and the licensing implementation guidance. This ASU does not change the effective date or adoption method under ASU 2014-09, which is noted above.

Additionally, in May 2016, the FASB issued ASU 2016-12,"Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients". This ASU addresses and amends several aspects of ASU 2014-09, but does not change the core principle of the guidance. This ASU does not change the effective date or adoption method under ASU 2014-09 which is noted above.

In July 2015, the FASB issued ASU No. 2015-11, “Simplifying the Measurement of Inventory”, which simplifies the subsequent measurement of inventory by requiring entities to measure inventory at the lower of cost or net realizable value, except for inventory measured using the last-in, first-out (LIFO) or the retail inventory methods. The ASU requires entities to compare the cost of inventory to one measure - net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. The ASU is effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods, and is to be applied prospectively with early adoption permitted. As a result of the adoption of this standard during the first quarter of 2017, there was no material impact on our consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, "Leases (Topic 842)" to increase comparability and transparency among different organizations. Organizations are required to recognize lease assets and lease liabilities in the balance sheet and disclose key information about the leasing arrangements and cash flows. The ASU is effective for annual periods beginning after December 15, 2018, and interim periods within those annual periods, with early adoption permitted, under a modified retrospective adoption. We are currently assessing the potential effects of these changes to our consolidated financial statements.

In March 2016, the FASB issued ASU 2016-09, "Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting" as part of a simplification initiative. The update addresses and simplifies several aspects of accounting for share-based payment transactions. The ASU is effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods, with early adoption permitted, and is to be applied using either modified retrospective, retrospective, or prospective transition method based on which amendment is being applied. Upon adoption of ASU 2016-09, we elected to change our accounting policy to account for forfeitures as they occur, using a modified retrospective method and determined that a cumulative-effect adjustment to retained earnings would be immaterial at transition during the first quarter of 2017. As a result of the adoption of this ASU, there was no impact on our consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments." ASU 2016-13 amends the impairment model to utilize an expected loss methodology in place of the currently used incurred loss methodology, which will result in the more timely recognition of losses. ASU 2016-13, which has an effective date of the first quarter of fiscal 2022, also applies to employee benefit plan accounting. We are currently assessing the potential effects of these changes to our consolidated financial statements and employee benefit plan accounting.

In August 2016, the FASB issued ASU 2016-15, "Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments" to reduce diversity in practice in classification of certain transactions in the statement of cash flows. The ASU is effective for annual periods beginning after December 15, 2017, and interim periods within those annual periods, with early adoption permitted, under a retrospective transition adoption. We are currently assessing the potential effects of these changes to our consolidated financial statements.

In November 2016, the FASB issued ASU 2016-16, "Intra-Entity Transfers of Assets Other Than Inventory"

which requires companies to account for the income tax effects of intercompany transfers of assets other than

inventory when the transfer occurs. The ASU is effective for annual periods beginning after December 15, 2017,

and interim periods within those annual periods, with early adoption permitted, under a modified retrospective

transition adoption. We are currently assessing the potential effects of these changes to our consolidated financial

statements.

In May 2017, the FASB issued ASU 2017-09, "Compensation-Stock Compensation (Topic 718): Scope of

Modification Accounting" to clarify when to account for a change to the terms or conditions of a share-based

payment award as a modification. The ASU is effective for annual periods beginning after December 15, 2017, and

interim periods within those annual periods, with early adoption permitted. We do not expect the adoption of this

standard to have a material impact on our consolidated financial statements.

In July 2017, the FASB issued ASU 2017-11, "Earnings Per Share (Topic 260); Distinguishing Liabilities

from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments

with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial

Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a

Scope Exception" to consider “down round” features when determining whether certain equity-linked financial

instruments or embedded features are indexed to an entity’s own stock. Entities that present earnings per share

("EPS") under ASC 260 will recognize the effect of a down round feature in a freestanding equity-classified financial

instrument only when it is triggered. The effect of triggering such a feature will be recognized as a dividend and a

reduction to income available to common shareholders in basic EPS. The ASU is effective for annual periods

beginning after December 15, 2018, and interim periods within those annual periods. We are currently assessing

the potential effects of these changes to our consolidated financial statements.

In August 2017, the FASB issued ASU 2017-12, "Derivatives and Hedging (Topic 815): Targeted

Improvements to Accounting for Hedging Activities" to change how companies account for and disclose hedges. The ASU is effective for annual periods beginning after December 15, 2018, and interim periods within those annual

periods. We are currently assessing the potential effects of these changes to our consolidated financial statements.