Significant Accounting Policies

Our significant accounting policies are as follows:

Basis of Presentation and Principles of Consolidation – The Consolidated Financial Statements are presented in accordance with GAAP. The Consolidated Financial Statements include the accounts of Joy Global Inc. and its domestic and non-U.S. subsidiaries, all of which are fully consolidated. All significant intercompany balances and transactions have been eliminated.

Prior period financial information has been adjusted to reflect the fourth quarter fiscal 2015 change in our method of accounting for actuarial gains and losses and the calculation of expected return on plan assets for all of our pension and other postretirement benefit plans, which is a voluntary change in accounting principle that is required to be adopted retrospectively. Refer to the Pension and Postretirement Benefits and Costs section of this footnote for additional information.

Use of Estimates – The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Ultimate realization of assets and settlement of liabilities in the future could differ from those estimates.

Cash Equivalents – All highly liquid investments with original maturities of three months or less when issued are considered cash equivalents. These primarily consist of money market funds and, to a lesser extent, certificates of deposit and commercial paper. Cash equivalents were $9.8 million and $20.8 million as of October 30, 2015 and October 31, 2014, respectively.

Inventories – Inventories are carried at the lower of cost or market using the first-in, first-out method for all inventories, except for inventories in those jurisdictions for which another method is required by law. Cost includes direct materials, direct labor and manufacturing overhead. We evaluate the need to record valuation adjustments for inventory on a regular basis. Inventory in excess of our estimated usage requirements is written down to its estimated net realizable value. Inherent in the estimates of net realizable value are estimates related to our future manufacturing schedules, customer demand, possible alternative uses and ultimate realization of potentially excess inventory.

Property, Plant and Equipment – Property, plant and equipment are stated at historical cost. Expenditures for major renewals and improvements are capitalized, while maintenance and repair costs that do not significantly improve the related asset or extend its useful life are charged to expense as incurred. For financial reporting purposes, these assets are depreciated primarily by the straight line method over the estimated useful lives of the assets which generally range from 5 to 50 years for land improvements, from 10 to 50 years for buildings, from 3 to 12 years for machinery and equipment and from 2 to 10 years for software. Depreciation expense was $110.9 million, $107.4 million and $99.9 million for fiscal 2015, 2014 and 2013, respectively. Depreciation claimed for income tax purposes is computed by accelerated methods.

Long-Lived Assets – Long-lived assets are depreciated or amortized to reflect the pattern of economic benefits consumed, which is principally the straight-line method. We assess the realizability of our held and used long-lived assets by evaluating such assets for impairment whenever events or circumstances indicate that the carrying amount of such assets (or group of assets) may not be recoverable. Impairment is determined to exist if the estimated future undiscounted cash flows related to such assets are less than the carrying value. If impairment is determined to exist, any related impairment loss is calculated based on the fair value of the assets compared to their carrying value.

As of July 31, 2015, we assessed our tangible and intangible finite-lived assets for impairment due to the prolonged suppressed global commodity markets and their related effect on the global mining investment environment. No impairment was identified related to our finite-lived tangible and intangible assets as of July 31, 2015. However, during the fourth quarter of fiscal 2015, we determined that there was an additional risk that certain tangible and intangible finite-lived assets may not be recoverable due to continued deterioration of our markets. Each asset group was considered and it was determined that the cash flows associated with an asset group in China and a steel mill would be insufficient to support their carrying value.

As a result of this analysis, property, plant and equipment non-cash impairment charges of $42.6 million related to an asset group in China and $19.2 million related to a steel mill were recorded in the fourth quarter of fiscal 2015 by our Underground and Surface segments, respectively. In addition, customer relationship intangible asset non-cash impairment charges of $57.9 million and $2.1 million were recorded in the fourth quarter of fiscal 2015 by our Underground and Surface segments, respectively. These charges are recorded in the Consolidated Statement of Operations under the heading Impairment charges.

No impairment was identified related to our long-lived assets in fiscal 2014 or 2013.

Goodwill and Indefinite-lived Intangible Assets – Indefinite-lived intangible assets are composed of certain trademarks and are not amortized but are evaluated for impairment annually or more frequently if events or changes occur that suggest an impairment in carrying value, such as a significant adverse change in the business climate. Indefinite-lived intangible assets are evaluated for impairment by comparing each asset's fair value to its book value. We first determine qualitatively whether it is more likely than not that an indefinite-lived asset is impaired. If we conclude that it is more likely than not that an indefinite-lived asset is impaired, then we determine the fair value by using the discounted cash flow model based on royalties estimated to be derived in the future use of the asset were we to license the use of the indefinite-lived asset. See Note 7, Goodwill and Intangible Assets, for details regarding the results of our indefinite-lived intangible asset impairment testing performed in fiscal 2015 and 2013. No impairment was identified related to our indefinite-lived intangible assets in fiscal 2014.

Goodwill represents the excess of the purchase price over the fair value of identifiable net assets acquired in a business combination. Goodwill is assigned to specific reporting units, which we have identified as our operating segments, and is tested for impairment at least annually, during the fourth quarter of our fiscal year, or more frequently upon the occurrence of an event or when circumstances indicate that a reporting unit’s carrying amount is greater than its fair value. Goodwill is evaluated for impairment by comparing the fair value of each of our reporting units to their book value. We generally first determine, based on a qualitative assessment, whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If we conclude that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, we then determine the fair value of the reporting unit based on a discounted cash flow model. If the fair value of the reporting unit exceeds its carrying value, goodwill is not impaired. If the carrying value of the reporting unit exceeds its fair value, the impairment test continues by comparing the carrying value of the reporting unit’s goodwill to the implied fair value of goodwill. The implied fair value of goodwill is determined by deducting the fair value of a reporting unit’s identifiable assets and liabilities from the fair value of the reporting unit as a whole, as if that reporting unit had just been acquired and the fair value of the individual assets acquired and liabilities assumed were being determined initially. If goodwill is impaired, we recognize a non-cash impairment loss based on the amount by which the book value of goodwill exceeds its implied fair value. See Note 7, Goodwill and Intangible Assets, for details regarding the results of our goodwill impairment testing performed in fiscal 2015. No impairment was identified related to our goodwill in fiscal 2014 or 2013.

The process of evaluating the potential impairment of goodwill and other intangible assets is highly subjective and requires significant judgment at many points during the analysis. Qualitative assessments regarding goodwill and other intangible assets involve a high degree of judgment and can entail subjective considerations. The discounted cash flow model involves many assumptions, including operating results forecasts and discount rates. Inherent in the operating results forecasts are certain assumptions regarding revenue growth rates, projected cost saving initiatives and projected long-term growth rates in the determination of terminal values.

Accrued Warranties – We provide for the estimated costs that may be incurred under product warranties to remedy deficiencies of quality or performance of our products. Warranty costs are accrued at the time revenue is recognized. These product warranties extend over either a specified period of time, units of production or machine hours depending on the product subject to the warranty. We accrue a provision for estimated future warranty costs based on the historical relationship of warranty costs to sales. We periodically review the adequacy of the accrual for product warranties and adjust the warranty percentage and accrued warranty reserve for actual experience as necessary.

Pension and Postretirement Benefits and Costs – In the fourth quarter of 2015, we voluntarily changed our method of accounting for actuarial gains and losses and the calculation of expected return on plan assets for all of our pension and other postretirement benefit plans. We elected to recognize actuarial gains and losses in the statement of operations immediately, as it more clearly depicts the impact of current economic conditions in our consolidated results of operations. This change has been reported through retrospective application of this new policy to all periods presented.

Historically, we deferred actuarial gains and losses from these plans and recognized the financial impact in the statement of operations over future years using a method commonly referred to as the corridor method. Specifically, the net loss (gain) in excess of 10% of the greater of the projected benefit obligation or the market related value of plan assets was amortized on a straight line basis over the average remaining service period of active employees expected to receive benefits under the plan (or over the average life of the participants if all or almost all of the plan participants are inactive). With the immediate recognition of actuarial gains and losses, actuarial gains and losses from these plans are immediately recognized in our results of operations in an annual adjustment that is recorded in the fourth quarter of each year, or more frequently should a re-measurement event occur. The remaining components of net periodic benefit costs, primarily service and interest costs and the expected return on plan assets, will continue to be recorded on a quarterly basis.

In addition, for purposes of calculating the expected return on plan assets, we will no longer use an averaging technique for the market-related value of plan assets, but we are voluntarily changing to the actual fair value of plan assets to adjust for changes in actual versus expected rates of return. The impact of this change will be recorded annually as part of the adjustment described above. Collectively, the immediate recognition of actuarial gains and losses and the immediate recognition of actual versus expected rates of return on plan assets are referred to herein as the "mark to market pension and postretirement plan adjustment."

The mark to market method is preferable to our prior method in that it reflects changes in assumptions and market conditions in the year that they occur versus recognizing them over an extended period of time. The adoption of immediate recognition of actuarial gains and losses and the use of the fair value of plan assets are voluntary changes in accounting principle that are required to be adopted retrospectively. Therefore, all periods presented have been adjusted to reflect these changes adopted by the Company as of the October 30,2015 annual measurement date. The Company also considered the impact of the revised pension expense on its capitalized inventory balances, and has retrospectively adjusted such balances accordingly.

The cumulative effect of the change on retained earnings as of October 27, 2012, was a pre-tax reduction of $716.3 million, with an offset to accumulated other comprehensive income, and therefore, no net impact to shareholders’ equity. The impact of all adjustments made to the financial statements presented is summarized below (amounts in thousands, except per share data):



	2014						2013
	Previously Reported		Adjusted		Effect of Change		Previously Reported		Adjusted		Effect of Change
Consolidated Statements of Operations:
Cost of sales	2,667,158		2,654,233		(12,925	)	3,389,484		3,399,568		10,084
Product development, selling and administrative expenses	606,347		608,886		2,539		680,001		656,148		(23,853	)
Operating income	517,140		527,526		10,386		821,661		835,430		13,769
Income from continuing operations before income taxes	461,792		472,178		10,386		764,157		777,926		13,769
Provision for income taxes	130,755		134,060		3,305		230,219		241,167		10,948
Income from continuing operations	331,037		338,118		7,081		533,938		536,759		2,821
Net income	331,037		338,118		7,081		533,713		536,534		2,821
Basic earnings per share:
Income from continuing operations	3.31		3.38		0.07		5.03		5.06		0.03
Net income	3.31		3.38		0.07		5.03		5.06		0.03
Diluted earnings per share:
Income from continuing operations	3.28		3.35		0.07		4.99		5.02		0.03
Net income	3.28		3.35		0.07		4.99		5.02		0.03

Consolidated Statements of Comprehensive Income:
Net income	331,037		338,118		7,081		533,713		536,534		2,821
Change in unrecognized prior service costs on pension and postretirement benefit obligations, net of tax	10,806		234		(10,572	)	19,336		793		(18,543	)

Consolidated Balance Sheets:
Deferred income taxes	70,181		71,897		1,716		41,532		44,399		2,867
Inventories	1,108,308		1,101,955		(6,353	)	1,139,744		1,133,820		(5,924	)
Retained earnings	3,645,527		3,111,888		(533,639	)	3,390,459		2,849,740		(540,719	)
Accumulated other comprehensive loss	(535,282	)	(6,280	)	529,002		(507,634	)	30,028		537,662

Consolidated Statements of Cash Flows:
Operating activities:
Net income	331,037		338,118		7,081		533,713		536,534		2,821
Changes in deferred income taxes	(6,117	)	(2,812	)	3,305		12,184		23,134		10,950
Defined benefit employee pension plan expense	14,470		3,309		(11,161	)	19,632		(18,494	)	(38,126	)
Other adjustments to continuing operations, net	(160	)	11,008		11,168		6,754		44,905		38,151
Changes in inventories	2,584		3,013		429		199,530		225,305		25,775
Changes in other accrued liabilities	(82,288	)	(93,110	)	(10,822	)	(29,210	)	(68,781	)	(39,571	)

Consistent with prior periods, pension and other postretirement benefit costs and liabilities are still dependent on assumptions used in calculating such amounts. The primary assumptions include discount rates, expected returns on plan assets, mortality rates and rates of compensation increases, as discussed below:

Discount rates: We generally estimate the discount rate for pension and other postretirement benefit obligations using a process based on a hypothetical investment in a portfolio of high-quality bonds that approximates the estimated cash flows of the pension and other postretirement benefit obligations. We believe this approach permits a matching of future cash outflows related to benefit payments with future cash inflows associated with bond coupons and maturities.

Expected returns on plan assets: Our expected return on plan assets is derived from reviews of asset allocation strategies and anticipated future long-term performance of individual asset classes, weighted by the allocation of our plan assets. Our analysis gives appropriate consideration to recent plan performance and historical returns; however, the assumptions are primarily based on long-term, prospective rates of return.

Mortality rates: Fiscal 2014 mortality rates are based on the IRS prescribed annuitant and non-annuitant mortality for 2014 under the Pension Protection Act of 2006. Fiscal 2015 mortality rates are based on the annuitant and non-annuitant mortality tables (RP-2014) released by the Society of Actuaries late in fiscal 2014, adjusted for the mortality improvement scale (MP-2014), as well as for the Company’s historical plan experience levels. Adoption of these modified tables had a $35.0 million expense impact to our pension and postretirement plans, which was recognized as part of our fourth quarter fiscal 2015 mark to market adjustment. Further, we considered the recently released updates to the 2014 mortality improvement scale, noting that the modifications would not be significant to our assumptions.

Rates of compensation increases: The rates of compensation increases reflect our long-term actual experience and its outlook, including consideration of expected rates of inflation.

As mentioned above, actual results that differ from these assumptions are immediately recognized in our results of operations in an annual adjustment that is recorded in the fourth quarter of each year, or more frequently should a re-measurement event occur. While we believe that the assumptions used are appropriate, differences in actual experience or changes in assumptions may affect our pension and other postretirement plan obligations and future expense.

Foreign Currency Transactions – Assets and liabilities of international operations that have a functional currency that is not the U.S. dollar are translated into U.S. dollars at year-end exchange rates and revenue and expense items are translated using weighted average exchange rates. Any adjustments arising on translation are included in shareholders’ equity as an element of accumulated other comprehensive income (loss).

Assets and liabilities of operations which have the U.S. dollar as their functional currency, but which maintain their accounting records in local currency, have their values remeasured into U.S. dollars at year-end exchange rates, except for non-monetary items for which historical rates are used. Exchange gains or losses arising on remeasurement of the values into U.S. dollars are recognized in Cost of sales in our Consolidated Statements of Operations.

Exchange gains or losses incurred on transactions conducted by one of our subsidiaries in a currency other than the subsidiary’s functional currency are normally reflected in Cost of sales in our Consolidated Statements of Operations. An exception is made when the transaction is a long-term intercompany loan that is not expected to be repaid in the foreseeable future, in which case the exchange gains or losses are included in shareholders’ equity as an element of accumulated other comprehensive income (loss).

The pre-tax foreign exchange impact included in operating income was a loss of $5.2 million, a gain of $1.1 million and a loss of $4.4 million in fiscal 2015, 2014 and 2013, respectively.

Foreign Currency Hedging and Derivative Financial Instruments – We are exposed to certain foreign currency risks in the normal course of our global business operations. We enter into derivative contracts that are foreign currency forward contracts to hedge the risks of certain identified and anticipated transactions in currencies other than the functional currency of the respective operating unit. The types of risks hedged are those arising from the variability of future earnings and cash flows caused by fluctuations in foreign currency exchange rates. These contracts are for forecasted transactions and committed receivables and payables denominated in foreign currencies and are not entered into for speculative purposes. Consequently, any market-related loss on the forward contract would be offset by changes in the value of the hedged items, and, as a result, we are generally not exposed to net market risk associated with these instruments.

Each derivative is designated as either a cash flow hedge, a fair value hedge or an undesignated instrument. All derivatives are recorded at fair value on the Consolidated Balance Sheets under the heading Other current assets or under the heading Other current liabilities, as appropriate. Cash flows from fair value and cash flow hedges are classified within the same category as the item being hedged on the Consolidated Statements of Cash Flows. Cash flows from undesignated derivative instruments are included in operating activities on the Consolidated Statements of Cash Flows.

For derivative contracts that are designated and qualify as a cash flow hedge, the effective portion of the gain or loss of the derivative contract is recorded as a component of other comprehensive income, net of tax. This amount is reclassified into the statement of operations on the line associated with the underlying transaction for the periods in which the hedged transaction affects earnings. Ineffectiveness related to these derivative contracts is recorded in the Consolidated Statements of Operations. For derivative contracts that are designated and qualify as a fair value hedge and for derivative contracts entered into to hedge revaluation of net balance sheet exposures in non-functional currency that are not designated as a fair value hedge or a cash flow hedge, the gain or loss is recorded in the Consolidated Statements of Operations under the heading Cost of sales. This gain or loss is offset by foreign exchange fluctuations of the underlying hedged item.

Revenue Recognition – We recognize revenue on products and services when the following criteria are satisfied: persuasive evidence of a sales arrangement exists, product delivery and transfer of title and risk and rewards has occurred or services have been rendered, the price is fixed and determinable and collectability is reasonably assured. We recognize revenue on long-term contracts, such as contracts to manufacture mining shovels, draglines, roof support systems and conveyor systems, using the percentage-of-completion method. When using the percentage-of-completion method, sales and gross profit are recognized as work is performed based on the relationship between actual costs incurred and total estimated costs at completion. Sales and gross profit are adjusted prospectively for revisions in estimated total contract costs and contract values. Estimated losses are recognized in full when identified.

We have life cycle management arrangements with customers to supply parts and service for terms of 1 to 17 years. These arrangements are established based on the conditions in which the equipment will be operating, the time horizon that the arrangements will cover and the expected operating cycle that will be required for the equipment. Based on this information, a model is created representing the projected costs and revenues of servicing the respective machines over the specified arrangement terms. Accounting for these arrangements requires us to make various estimates, including estimates of the relevant machine’s long-term maintenance requirements. Under these arrangements, customers are generally billed monthly based on hours of operation or units of production achieved by the equipment, with the respective deferred revenues recorded when billed. Revenue is recognized in the period in which parts are supplied or services provided. These arrangements are reviewed quarterly by comparison of actual results to original estimates or most recent analysis, with revenue recognition adjusted appropriately for future estimated costs. If a loss is expected at any time, the full amount of the loss is recognized immediately.

We have certain customer agreements that are considered multiple element arrangements. These agreements primarily consist of the sale of multiple pieces of equipment or equipment with subsequent installation services. These agreements are assessed for the purpose of identifying deliverables and determining whether the delivered item has value to the customer on a standalone basis and whether delivery or performance of the undelivered item is considered probable and substantially in our control. If those criteria are met, revenue is allocated to each identified unit of accounting based on our estimate of the relative selling prices of the deliverables and is recognized as the revenue recognition criteria are met for each element. The relative selling price is estimated by using recent sales transactions for similar items. The difference between the total of the separate selling prices and the total contract consideration is allocated pro-rata across each of the units of accounting included in the arrangement.

Revenue recognition involves judgments, including assessments of expected returns, the likelihood of nonpayment and estimates of expected costs and profits on long-term contracts. In determining when to recognize revenue, we analyze various factors, including the specifics of the transaction, historical experience, creditworthiness of the customer and current market and economic conditions. Changes in judgments on these factors could impact the timing and amount of revenue recognized with a resulting impact on the timing and amount of associated income.

Comprehensive (Loss) Income – Comprehensive (loss) income includes disclosure of financial information that historically has not been recognized in the calculation of net income. Our comprehensive (loss) income encompasses net (loss) income, the change in unrecognized prior service costs on our pension and other postretirement obligations, the derivative instrument fair market value adjustment and foreign currency translation. Comprehensive (loss) income is disclosed in our Consolidated Statements of Comprehensive (Loss) Income. Accumulated other comprehensive (loss) income is disclosed in our Consolidated Balance Sheets and our Consolidated Statements of Shareholders’ Equity.

Sales Incentives – We account for cash consideration (such as sales incentives and cash discounts) given to our customers or resellers as a reduction of net sales.

Allowance for Doubtful Accounts – We establish an allowance for doubtful accounts based on the age of the receivable and the category of customer. We also establish an additional allowance on a specific account identification basis through a review of several factors, including the aging status of our customers’ accounts, the financial condition of our customers and historical collection experience.

Shipping and Handling Fees and Costs – We report shipping costs billed to a customer in a sales transaction as net sales. We report the related costs incurred for shipping as cost of sales.

Research and Development Expenses – Research and development costs are expensed as incurred. Such costs incurred in the development of new products or significant improvements to existing products amounted to $36.2 million, $40.6 million and $49.0 million for fiscal 2015, 2014 and 2013, respectively.

Share-Based Compensation – We account for awards of stock by measuring the cost of employee services received in exchange for an award of equity instruments based on the grant date fair value of the award. Compensation expense is recognized using the straight line method.

Income Taxes – Deferred taxes are accounted for under the asset and liability method whereby deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using current statutory tax rates. Deferred income tax provisions are based on changes in the deferred tax assets and liabilities from period to period. Additionally, we analyze our ability to recognize the net deferred tax assets created in each jurisdiction in which we operate to determine if valuation allowances are necessary based on the “more likely than not” criteria.

As required under the application of fresh start accounting, the release of pre-emergence tax valuation reserves was not recorded in the statement of operations but instead was treated first as a reduction of excess reorganization value until exhausted, then intangible assets until exhausted, and thereafter reported as additional paid in capital. Consequently, a net tax charge will be incurred in future years when these tax assets are utilized. We will continue to monitor the appropriateness of the existing valuation allowances and determine annually the amount of valuation allowances that are required to be maintained. All future reversals of pre-emergence valuation allowances will be recorded to additional paid in capital.

We estimate the effective tax rate expected to be applicable for the full year on an interim basis. The estimated effective tax rate contemplates the expected jurisdiction where income is earned (e.g., United States compared to non-United States), as well as tax planning strategies. If the actual results are different from these estimates, adjustments to the effective tax rate may be required in the period such determination is made. Additionally, discrete items are treated separately from the effective rate analysis and are recorded separately as an income tax provision or benefit at the time they are recognized. To the extent recognized, these items will impact the effective tax rate in the aggregate but will not adjust the amount used for future periods within the same year.

Earnings (Loss) Per Share – Basic earnings (loss) per share is computed by dividing net income (loss) attributable to the Company by the weighted average number of shares outstanding during each period. Diluted earnings (loss) per share is computed similar to basic earnings (loss) per share, except that the weighted average number of shares outstanding is increased to include additional shares from the assumed exercise of stock options, performance shares and restricted stock units, if dilutive.

New Accounting Pronouncements – In November 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2015-17, Balance Sheet Classification of Deferred Taxes, which will require entities to present deferred tax assets and deferred tax liabilities as noncurrent in a classified balance sheet. The ASU simplifies the current guidance, which requires entities to separately present deferred tax assets and deferred tax liabilities as current and noncurrent in a classified balance sheet. The ASU may be applied either prospectively or retrospectively. The ASU is effective for the Company on October 28, 2017, with early adoption permitted. The Company has evaluated the impact that the adoption of this guidance will have on our financial condition, results of operations and the presentation of our financial statements.

In September 2015, the FASB issued ASU No. 2015-16, Simplifying the Accounting for Measurement-Period Adjustments, which eliminates the requirement for an acquirer in a business combination to account for measurement-period adjustments retrospectively. Instead, acquirers must recognize measurement-period adjustments during the period in which they determined the amounts, including the effect on earnings of any amounts they would have recorded in previous periods if the accounting had been completed at the acquisition date. The ASU is applied prospectively to adjustments to provisional amounts that occur after the effective date. The ASU is effective for the Company on October 29, 2016, with early adoption permitted. This guidance is not expected to have a significant impact on our financial condition, results of operations or presentation of our financial statements.

In July 2015, the FASB issued ASU 2015-11, Simplifying the Measurement of Inventory, which requires most entities to measure most inventories at the lower of cost or net realizable value ("NRV"). This simplifies the evaluation from the current method of lower of cost or market, where market is based on one of three measures (i.e. replacement cost, net realizable value, or net realizable value less a normal profit margin). The ASU does not apply to inventories measured under the last-in, first-out method or the retail inventory method, and defines NRV as the "estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation." The ASU is effective on a prospective basis for the Company beginning on October 28, 2017, with early adoption permitted. This guidance is not expected to have a significant impact on our financial condition, results of operations or presentation of our financial statements.

In April 2015, the FASB issued ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs, which changes the presentation of debt issuance costs in financial statements. Under the ASU, an entity presents such costs in the balance sheet as a direct deduction from the related debt liability rather than as an asset. Amortization of the costs is reported as interest expense. Further, in June 2015, the FASB agreed to clarifying guidance from the Securities and Exchange Commission on the presentation of debt issuance costs on revolving debt arrangements, permitting entities to elect that such costs be classified as an asset. The guidance in the ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is allowed for all entities for financial statements that have not been previously issued and entities would apply the new guidance retrospectively to all prior periods. ASU 2015-03 will be effective for the Company beginning on October 29, 2016. This guidance is not expected to have a significant impact on our financial condition, results of operations or presentation of our financial statements.

In April 2015, the FASB also issued ASU 2015-04,
Practical Expedient for the Measurement Date of an Employer's Defined Benefit Obligation and Plan Assets, which permits an employer whose fiscal year-end does not coincide with a calendar month end the ability to elect to measure its defined benefit retirement obligations and related plan assets as of the month end that is closest to its fiscal year-end. If elected, this accounting policy is applied consistently on a prospective basis for all plans, with related disclosure of the alternative measurement date used. The ASU is effective for fiscal years beginning after December 15, 2015, with early adoption permitted. The Company early adopted the guidance in fiscal 2015. This guidance did not have a significant impact on our financial condition, results of operations or presentation of our financial statements.

In May 2014, the FASB issued ASU No. 2014-09 Revenue from Contracts with Customers. ASU 2014-09 provides a single principles-based, five-step model to be applied to all contracts with customers. The five steps are to (i) identify the contracts with the customer, (ii) identify the performance obligations in the contact, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract and (v) recognize revenue when each performance obligation is satisfied. Revenue will be recognized when promised goods or services are transferred to the customer in an amount that reflects the consideration expected in exchange for those goods or services. In July 2015, the FASB agreed to delay the effective date of ASU 2014-09 for one year and to permit early adoption by entities as of the original effective dates. Considering the one year deferral, ASU 2014-09 will be effective for the Company beginning on October 27, 2018 and the standard allows for either full retrospective adoption or modified retrospective adoption. The Company is continuing to evaluate the impact that the adoption of this guidance will have on our financial condition, results of operations and the presentation of our financial statements.