Note 1 - Basis of Presentation and Accounting Policies

9 Months Ended

Sep. 30, 2020

Notes to Financial Statements

Basis of Presentation and Significant Accounting Policies [Text Block]

1. BASIS OF PRESENTATION AND ACCOUNTING POLICIES

The condensed consolidated balance sheets and statements of operations, comprehensive income (loss), stockholders’ equity and cash flows for the periods presented herein have been prepared by the Company and are unaudited. In the opinion of management, all adjustments (consisting solely of normal recurring adjustments) necessary to present fairly the consolidated financial position, results of operations and cash flows for all periods presented have been made.  The results for the three and nine months ended September 30, 2020 are not necessarily indicative of the results to be expected for the full year.  These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto included in the Bel Fuse Annual Report on Form 10-K for the year ended December 31, 2019.

Certain information and footnote disclosures required under accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted from these condensed consolidated financial statements pursuant to the rules and regulations, including the interim reporting requirements, of the U.S. Securities and Exchange Commission (“SEC”).  The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts and the disclosure of contingent amounts in our condensed consolidated financial statements and accompanying notes. Actual results could differ from these estimates.

The Company’s significant accounting policies are summarized in Note 1 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.  There were no significant changes to these accounting policies during the nine months ended September 30, 2020, except as discussed in “Recently Adopted Accounting Standards” below.

Reclassifications - During the fourth quarter of 2019, the Company changed its financial statement presentation of research and development costs.  These costs were previously included within cost of sales and were a factor in arriving at gross profit.  Research and development costs in the amount of $6.2 million and $20.2 million have been reclassified from cost of sales to a separate line item below gross profit in the accompanying condensed consolidated statements of operations for the three and nine months ended September 30, 2019, respectively.  Also during the fourth quarter of 2019, the Company changed its financial statement presentation related to gain/loss on foreign currency exchange.  These gains/losses were previously included within selling, general and administrative expense.  Gains on foreign currency exchange in the amount of $0.6 million and $0.5 million have been reclassified from selling, general and administrative expense and are now included within other (expense) income, net on the accompanying condensed consolidated statements of operations for the three and nine months ended September 30, 2019, respectively. These changes in presentation are consistent with that of our peers.  The Company also implemented a change to its reportable segments during the fourth quarter of 2019.  In the past, the Company's reportable operating segments were geographic in nature: North America, Europe and Asia.  In connection with the Company's migration to its new ERP system and with the acquisition of CUI, management is now assessing the business on a product group basis, and making decisions based on the profitability of three product segments, Cinch Connectivity Solutions, Power Solutions and Protection, and Magnetic Solutions, in addition to a Corporate segment.  The segment disclosures in Note 14 for the three and nine months ended September 30, 2019 have been recast to reflect the new reportable operating segments.

All amounts included in the tables to these notes to condensed consolidated financial statements, except per share amounts, are in thousands.

Recently Adopted Accounting Standards

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement.  The updated guidance improves the disclosure requirements on fair value measurements.  The updated guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019.  The Company adopted the updated provisions effective January 1, 2020.  The adoption did not have a material impact on the Company's consolidated financial position or consolidated results of operations.

In August 2018, the FASB issued ASU 2018-15, Intangibles – Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Cost.  This guidance aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software.  This guidance is effective for interim and annual reporting periods beginning after December 15, 2019.  The Company adopted this guidance effective January 1, 2020 and it did not have a material impact on its consolidated financial position or consolidated results of operations.

Accounting Standards Issued But Not Yet Adopted

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), as amended.  The new guidance will broaden the information that an entity must consider in developing its expected credit loss estimates related to its financial instruments and adds to U.S. GAAP an impairment model that is based on expected losses rather than incurred losses.  The amendment is effective for the Company for annual reporting periods beginning after December 15, 2022, with early adoption permitted.  Management is currently assessing the impact of ASU 2016-13, but it is not expected to have a material impact on the Company’s consolidated financial statements.

In August 2018, the FASB issued ASU 2018-14, Compensation-Retirement Benefits-Defined Benefit Plans-General (Subtopic 715-20): Disclosure Framework – Changes to the Disclosure Requirements for Defined Benefit Plans ("ASU 2018-14").  This guidance removes certain disclosures that are not considered cost beneficial, clarifies certain required disclosures and adds additional disclosures.  The standard is effective for fiscal years ending after December 15, 2020.  The amendments in ASU 2018-14 would need to be applied on a retrospective basis.  The Company is currently assessing the impact the new guidance will have on the Company's disclosures.

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes ("ASU 2019-12"), which modifies ASC 740 to reduce complexity while maintaining or improving the usefulness of the information provided to users of financial statements. ASU 2019-12 is effective for the Company for interim and annual reporting periods beginning after December 15, 2020. The Company is currently assessing the impact of ASU 2019-12, but it is not expected to have a material impact on the Company’s consolidated financial statements.