Recently Issued Accounting Pronouncements

9 Months Ended

Apr. 02, 2022

Accounting Changes and Error Corrections [Abstract]

Recently Issued Accounting Pronouncements

Note 2. Recently Issued Accounting Pronouncements

Accounting Pronouncements Recently Adopted

In December 2019, the Financial Accounting Standard Board (“FASB”) issued Accounting Standards Update (“ASU”) 2019-12, Simplifying the Accounting for Income Taxes (Topic 740), which is intended to simplify various aspects related to accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and which also clarifies and amends existing guidance to improve consistent application. ASU 2019-12 was effective for us at the beginning of fiscal year 2022, including interim periods within that reporting period. We adopted ASU 2019-12 in our first quarter of fiscal year 2022 on a prospective basis with no material impact to our condensed consolidated financial statements.

Accounting Pronouncements Not Yet Effective

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805)—Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. This ASU clarifies that an acquirer of a business should recognize and measure contract assets and contract liabilities in a business combination in accordance with Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers. This ASU is expected to improve comparability for both the recognition and measurement of acquired revenue contracts with customers at the date of and after a business combination. The new guidance is effective for fiscal years beginning after December 15, 2022, with early adoption permitted. ASU 2021-08 is effective for us in our first quarter of fiscal year 2024. The impact of the adoption of ASU 2021-08 will depend on the contract assets and liabilities acquired in a business combination after that date, unless early adopted.

In August 2020, FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies the accounting for convertible instruments by removing the separation models for (i) convertible debt with a cash conversion feature and (ii) convertible instruments with a beneficial conversion feature. As a result, a convertible debt instrument will be accounted for as a single liability measured at its amortized cost. Also, ASU 2020-06 requires the application of the if-converted method for calculating diluted earnings per share and the treasury stock method will be no longer available. The new guidance is effective for fiscal years beginning after December 15, 2021, with early adoption permitted no earlier than fiscal years beginning after December 15, 2020. ASU 2020-06 is effective for us in our first quarter of fiscal year 2023. We intend to adopt ASU 2020-06 on a modified retrospective basis. ASU 2020-06 will impact our accounting treatment for our convertible notes (as defined in Note 9). We currently separate our convertible notes into their liability and equity components. Following our adoption of ASU 2020-06, the previously bifurcated equity component may be recombined with the liability component, resulting in a single liability classified instrument. The carrying value of our convertible notes at transition will be determined by recalculating the basis of the convertible notes as if the convertible notes had not been bifurcated at issuance. Issuance costs related to the convertible notes that was initially allocated to the equity component will be reclassified from additional paid-in capital to the liability component, and the amortization of the debt issuance and debt discount will be recalculated through the transition date. The adoption of this guidance will result in a reduction in our additional paid-in capital, an increase in our convertible note liability balance, and a reduction to our accumulated deficit as of the transition date. In addition, we estimate that our diluted share count will increase and interest expense will decrease upon adoption of this standard.