Revenue Recognition - Topic 606

12 Months Ended

Dec. 31, 2018

REVENUE RECOGNITION - TOPIC 606

REVENUE RECOGNITION - TOPIC 606

NOTE 2 – REVENUE RECOGNITION - TOPIC 606

Change in Revenue Accounting

Effective January 1, 2018, we adopted ASU 2014-9, Revenue from Contracts with Customers and the related amendments (Topic 606) using the modified retrospective method. Topic 606 was applied to all uncompleted contracts by recognizing the cumulative effect of initially applying Topic 606 as an adjustment to the opening balance of retained earnings at January 1, 2018. Therefore, the comparative financial information for the year ended December 31, 2018 has not been adjusted and continues to be reported under Topic 605, Revenue Recognition.

The adoption of Topic 606 caused changes for (1) the impact of volume discounts that represent a material right which will now be estimated and recognized over the contract life rather than on a prospective basis, and (2) revenue will be recognized over time as the products are manufactured under certain contracts where our product is customized rather than at shipment. These changes increased our revenues in 2018 by $81,000, when compared to revenue recognition under Topic 605. Adoption of Topic 606 increased our net income in 2018 by $64,000, or approximately $0.01 per share.

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Performance Obligations

Our revenue performance obligations under Topic 606 are satisfied at a point or over time as work progresses. The following is a summary of our revenue performance obligations for 2018: 

(In thousands)	Revenues		Percent of Revenues
Revenue recognized over time	$	4,118	6	%
Revenue recognized at a point in time		60,602	94	%
	$	64,720	100	%

See Note 12 for additional information regarding disaggregation of revenue.

Contract Balances 

Contract assets under Topic 606 consist of unbilled amounts from sales where we recognize the revenue over time and the revenue recognized exceeds the amount billed to the customer at a point in time. Accounts receivable are recorded when the right to payment becomes unconditional. Contract liabilities are recognized as revenue when we perform under the contract.

The following summarizes our contract assets and contract liabilities:

(In thousands)	December 31, 2018		January 1, 2018
Contract assets, included in other current assets	$	—	$	—
Contract liabilities, included in advance customer payments/other liabilities	$	366	$	443

Changes in contract assets in the year ended December 31, 2018 resulted from unbilled amounts under sensor product arrangements in which revenue is recognized over time. Changes in contract liabilities primarily resulted from reclassification of beginning contract liabilities to revenue as performance obligations were satisfied or for cash received in advance and not recognized as revenue. See Note 8 for changes in contractual obligations related to deferred warranty revenue. Amounts reclassified from beginning contract liabilities to revenue in the year ended December 31, 2018 totaled $354,000. Unsatisfied performance obligations are generally expected to be recognized as revenue over the next one to three years. There were no impairment losses for contract assets in the twelve months ended December 31, 2018.