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Basis of Presentation, Significant Accounting Policies and Recently-Issued Accounting Pronouncements (Policies)

3 Months Ended

Mar. 31, 2020

Use of estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the dates of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period.

The extent to which COVID-19 impacts the Company’s business and financial results will depend on numerous evolving factors including, but not limited to, the magnitude and duration of COVID-19; the impact on the Company’s employees; the extent to which it will impact worldwide macroeconomic conditions, including interest rates, employment rates, and health insurance coverage; the speed of the anticipated recovery; and governmental and business reactions to the pandemic. The Company assessed certain accounting matters that generally require consideration of forecasted financial information in context with the information reasonably available to the Company and the unknown future impacts of COVID-19 at March 31, 2020 and through the date of this report. The accounting matters assessed included, but were not limited to, the Company’s allowance for doubtful accounts and credit losses, and the carrying value of goodwill and other long-lived assets. While there was not a material impact to the Company’s consolidated financial statements at and for the quarter ended March 31, 2020, the Company’s future assessment of the magnitude and duration of COVID-19, as well as other factors could result in material impacts to the Company’s consolidated financial statements in future reporting periods.

Investments in Marketable Securities

The Company periodically assesses its portfolio of marketable securities for impairment. For debt securities in an unrealized loss position, this assessment first takes into account the Company’s intent to sell, or whether it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis. If either of these criteria are met, the debt security’s amortized cost basis is written down to fair value through other income (expense), net.

For debt securities in an unrealized loss position that do not meet the aforementioned criteria, the Company assesses whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, the Company considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and any adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss may exist, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses will be recorded through other income (expense), net, limited by the amount that the fair value is less than the amortized cost basis. Any additional impairment not recorded through an allowance for credit losses is recognized in accumulated other comprehensive loss in the statements of stockholders’ equity.

Changes in the allowance for credit losses are recorded as provision for (or reversal of) credit loss expense. Losses are charged against the allowance when the Company believes the uncollectibility of an available-for-sale security is confirmed or when either of the criteria regarding intent or requirement to sell is met. The Company has not recorded any credit losses for the quarter ended March 31, 2020. The Company has not recorded any impairment charges for unrealized losses in the periods presented.

Accounts Receivable and Allowances

Accounts receivable are recorded and carried at the original invoiced amount less an allowance for any potential uncollectible amounts. The Company makes estimates of expected credit losses for the allowance for doubtful accounts and allowance for cancellations and credits based upon its assessment of various factors, including historical experience, the age of the accounts receivable balances, credit quality of its customers, current economic conditions, reasonable and supportable forecasts of future economic conditions, and other factors that may affect its ability to collect from customers. The estimated credit loss allowance for doubtful accounts is recorded as general and administrative expenses, while the estimated credit loss allowance for cancellations and credits is recorded as a reduction in revenue on the condensed consolidated statements of operations.

Revision of Previously Issued Financial Statements

As previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, in connection with the preparation of its 2019 annual financial statements, the Company identified an error in its historical provision for income taxes, which resulted in an understatement of its tax provision and deferred tax liabilities in its previously-issued financial statements. The error resulted from the recognition of a foreign deferred tax asset that should not have been recognized for the difference in international entity income for statutory purposes and international entity income included on the consolidated income tax provision. There was no corresponding domestic benefit of this incremental foreign tax expense due to the U.S. entity being subject to a full valuation allowance. Although the Company assessed the materiality of the errors and determined the amounts were not material to previously-issued financial statements, the Company did revise its previously-issued 2018 and 2017 annual financial statements to correct for such tax error, as well as certain prior period immaterial disclosure errors, in connection with the filing of its 2019 Annual Report on Form 10-K, and disclosed that it would be revising its 2019 consolidated interim financial statements in connection with the Company’s 2020 Form 10-Q filings. In connection with the filing of this Quarterly Report on Form 10-Q, the Company has revised the accompanying consolidated condensed interim financial statements for the quarter ended March 31, 2019 to correct for the impact of such errors, which originated in periods prior to 2019. The accompanying footnotes have also been corrected to reflect the impact of the revisions of the previously-filed consolidated interim financial statements

The following tables present the effect of the revision for the financial statement line items adjusted in the affected periods.

Condensed Consolidated Statements of Operations
	Quarter Ended March 31, 2019
	As Previously Reported			Adjustments			As Revised
	(in thousands, except per share data)
Provision for income taxes	$	205		$	198		$	403
Net loss	$	(8,833	)	$	(198	)	$	(9,031	)
Net loss attributable to BlackLine, Inc.	$	(8,583	)	$	(198	)	$	(8,781	)

Condensed Consolidated Statements of Comprehensive Loss
	Quarter Ended March 31, 2019
	As Previously Reported			Adjustments			As Revised
	(in thousands)
Net loss	$	(8,833	)	$	(198	)	$	(9,031	)
Comprehensive loss	$	(8,661	)	$	(198	)	$	(8,859	)
Comprehensive loss attributable to BlackLine, Inc.	$	(8,449	)	$	(198	)	$	(8,647	)

Condensed Consolidated Statements of Stockholders' Equity
	Quarter Ended March 31, 2019
	As Previously Reported			Adjustments			As Revised
Accumulated Deficit	(in thousands)
Balance at December 31, 2018	$	(130,594	)	$	(2,302	)	$	(132,896	)
Net loss attributable to BlackLine, Inc.	$	(8,583	)	$	(198	)	$	(8,781	)
Balance at March 31, 2019	$	(139,177	)	$	(2,500	)	$	(141,677	)
Total Equity
Balance at December 31, 2018	$	321,569		$	(2,302	)	$	319,267
Net loss attributable to BlackLine, Inc.	$	(8,583	)	$	(198	)	$	(8,781	)
Balance at March 31, 2019	$	320,536		$	(2,500	)	$	318,036

Condensed Consolidated Statements of Cash Flows
	Quarter Ended March 31, 2019
	As Previously Reported			Adjustments			As Revised
	(in thousands)
Net loss attributable to BlackLine, Inc.	$	(8,583	)	$	(198	)	$	(8,781	)
Net loss	$	(8,833	)	$	(198	)	$	(9,031	)
Deferred income taxes	$	—		$	320		$	320
Accrued expenses and other current liabilities	$	(6,240	)	$	(122	)	$	(6,362	)

Recently Issued Accounting Pronouncements Not Yet Adopted

Recently-issued accounting pronouncements not yet adopted

In March 2020, the Financial Accounting Standards Board (“FASB”) issued guidance, which provides temporary optional guidance to ease the potential burden in accounting for reference rate reform. The new guidance provides optional expedients and exceptions for applying generally accepted accounting principles to transactions affected by reference rate reform if certain criteria are met. These transactions include contract modifications, hedging relationships, and sale or transfer of debt securities classified as held-to-maturity. Entities may apply the provisions of the new standard as of the beginning of the reporting period when the election is made (i.e., as early as the first quarter of 2020). Unlike other topics, the provisions of this update are only available until December 31, 2022, when the reference rate replacement activity is expected to have completed. The Company has not adopted the provisions of the new standard and is currently assessing the impact of adoption.

Recently Adopted Accounting Pronouncements

Recently adopted accounting pronouncements

In June 2016, the FASB issued Accounting Standard Update (“ASU”) 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 replaced the incurred loss impairment methodology under current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. ASU 2016-13 requires use of a forward-looking expected credit loss model for accounts receivables, loans, and other financial instruments. Adoption of the standard requires using a modified retrospective approach through a cumulative-effect adjustment to retained earnings as of the effective date to align existing credit loss methodology with the new standard. In November 2019, the FASB issued ASU 2019-11, Codification Improvements to Topic 326, Financial Instruments—Credit Losses. ASU 2019-11 requires entities that did not adopt the amendments in ASU 2016-13 as of November 2019 to adopt ASU 2019-11. This ASU contains the same effective dates and transition requirements as ASU 2016-13. The Company adopted this guidance effective January 1, 2020, and the adoption of this standard did not have a material impact on the Company’s condensed consolidated financial statements.

In August 2018, the FASB issued guidance which modifies the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement, based on the concepts in FASB Concepts Statement, Conceptual Framework for

Financial Reporting—Chapter 8: Notes to Financial Statements, including the consideration of costs and benefits. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. The Company adopted this guidance effective January 1, 2020, and the adoption of this standard did not have a material impact on the Company’s condensed consolidated financial statements.