Recently Issued Accounting Pronouncements

3 Months Ended

Sep. 30, 2023

Accounting Changes and Error Corrections [Abstract]

Recently Issued Accounting Pronouncements

Note 2. Recently Issued Accounting Pronouncements

Accounting Pronouncements Recently Adopted

In October 2021, the Financial Accounting Standards Board (“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 ASC Topic 606, Revenue from Contracts with Customers. This ASU is expected to improve comparability for both 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. We early adopted the new standard in the first quarter of fiscal 2023 in connection with the merger with NeoPhotonics. There was no material impact to our condensed consolidated financial statements as of and for the three months ended September 30, 2023 and October 1, 2022.

In August 2020, the 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 is accounted for as a single liability measured at its amortized cost. ASU 2020-06 also requires the application of the if-converted method for calculating diluted earnings per share. We adopted the standard as of July 3, 2022, using the modified retrospective approach. Upon adoption, our 2026 Notes and 2028 Notes (as defined below) were accounted for as a single liability measured at amortized cost, resulting in: (i) an increase to the convertible notes liability balance of $433.0 million to reflect the full principal amount of the convertible notes outstanding, net of issuance costs; (ii) a reduction to additional paid-in capital, net of estimated income tax effects, of $426.5 million, to remove the equity component separately recorded for the conversion features associated with the convertible notes; (iii) an increase to deferred tax assets, net of $92.1 million; and (iv) a cumulative-effect adjustment of $85.6 million, net of estimated income tax effects, to decrease the accumulated deficit. In addition, the adoption requires the use of the if-converted method for all convertible notes in the diluted net income per share calculation and the inclusion of the effect of potential share settlement of the convertible notes, if the effect is more dilutive. There was no impact to diluted earnings per share for the three months ended September 30, 2023 and October 1, 2022, as the inclusion of potential shares of common stock related to the convertible notes was anti-dilutive. Refer to “Note 9. Debt” for further information.

The following table sets forth the impact upon adoption of ASU 2020-06 as of July 3, 2022 (in millions):

	Short Term Debt - 2024 Notes		Long Term Debt - 2026 Notes		Long Term Debt - 2028 Notes		Additional Paid-In Capital		Accumulated Deficit		Deferred Tax Asset, Net
Balances pre-adoption of ASC 2020-06	$	409.9	$	831.4	$	634.7	$	2,003.6	$	129.1	$	12.9
Reclassify amounts from equity to debt	—		312.9		229.3		(542.2)		—		—
Adjustment for interest accretion	—		(99.5)		(9.7)		—		(109.2)		—
Tax effect	—		—		—		115.7		23.6		92.1
Balances upon adoption of ASC 2020-06	$	409.9	$	1,044.8	$	854.3	$	1,577.1	$	43.5	$	105.0