Description of business and basis of presentation (Policies)

12 Months Ended

Dec. 31, 2015

Business

Business — MannKind Corporation and subsidiaries (the “Company”) is a biopharmaceutical company focused on the discovery and development of therapeutic products for diseases such as diabetes. The Company’s only approved product, AFREZZA, (insulin human [rDNA origin]) inhalation powder, is a rapid-acting inhaled insulin that was approved by the U.S. Food and Drug Administration (the “FDA”) on June 27, 2014 to improve glycemic control in adult patients with diabetes.

Basis of Presentation

Basis of Presentation — The Company’s primary activities since incorporation have been establishing its facilities, recruiting personnel, conducting research and development, business development, business and financial planning, raising capital, and commercial manufacturing. It is costly to develop therapeutic products and conduct clinical studies for these products. As of and for the year ended December 31, 2015, the Company has reported an accumulated deficit of $2.9 billion and has reported negative cash flow from operations for each year since inception, except for 2014, when the Company received the $150.0 million upfront payment from Sanofi.

At December 31, 2015, the Company’s capital resources consisted of cash and cash equivalents of $59.1 million. The Company expects to continue to incur significant expenditures to support commercial manufacturing and sales and marketing of AFREZZA and the development of other product candidates. The facility agreement (the “Facility Agreement”) with Deerfield Private Design Fund II, L.P. (“Deerfield Private Design Fund”) and Deerfield Private Design International II, L.P. (collectively, “Deerfield”) and the First Amendment to Facility Agreement and Registration Rights Agreement (the “First Amendment”) that resulted in additional sales of an additional tranche of notes (the “Tranche B notes”) (see Note 17 — Facility Agreement) requires the Company to maintain at least $25.0 million in cash and cash equivalents or available borrowings under the loan arrangement, dated as of October 2, 2007, between The Company and The Mann Group LLC (as amended, restated, or otherwise modified as of the date hereof, “the Mann Group Loan Arrangement”), as of the last day of each fiscal quarter. The Company will need to continue to incur expenses for the commercialization of AFREZZA and will need to raise additional capital to finance such activities. The Company cannot be certain that it will be able to raise additional capital on favorable terms, or at all, which raises substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

On August 11, 2014, we executed a license and collaboration agreement (the “Sanofi License Agreement”) with Sanofi-Aventis Deutschland GmbH (which subsequently assigned its rights and obligations under the agreement to Sanofi-Aventis U.S. LLC (“Sanofi”)), pursuant to which Sanofi is responsible for global commercial, regulatory and development activities for AFREZZA. The Sanofi License Agreement became effective on September 23, 2014. The Company manufactured AFREZZA at its manufacturing facility in Danbury, Connecticut to supply Sanofi’s demand for the product pursuant to a supply agreement dated August 11, 2014 (the “Sanofi Supply Agreement”).

On January 4, 2016 the Company received notification from Sanofi of its election to terminate in its entirety the Sanofi License Agreement. Sanofi’s notice indicated that the termination was pursuant to Sanofi’s right to terminate the Sanofi License Agreement upon Sanofi’s good faith determination that the commercialization of AFREZZA is no longer economically viable in the United States, in which case the effective date of termination (the “Termination Date”) will be April 4, 2016. In the alternative, Sanofi indicated that the termination was also pursuant to its right to terminate the Sanofi License Agreement for any reason, in which case the Termination Date will be July 4, 2016. In the interest of an expedient transition, the Company is working with Sanofi to transfer and wind down the agreement activities by April 4, 2016, or as soon as practicable thereafter.

Under the Sanofi License Agreement, worldwide profits and losses, which are determined based on the difference between the net sales of AFREZZA and the costs and expenses incurred by the Company and Sanofi that are specifically attributable or related to the development, regulatory filings, manufacturing, or commercialization of AFREZZA, are shared 65% by Sanofi and 35% by the us. As a result of the loss share provision, and because the Company does not have the ability to estimate the amount of costs that would potentially be incurred related to the Sanofi License Agreement, the amount of up-front cash payment or milestone payments that could be recognized as revenue is not fixed or determinable. In connection with the Sanofi License Agreement, an affiliate of Sanofi provided the Company with a secured loan facility (the “Sanofi Loan Facility”) of up to $175.0 million to fund the Company’s share of net losses under the Sanofi License Agreement.

Additional funding sources that are, or in certain circumstances may be available to the Company, include approximately $30.1 million principal amount of available borrowings under The Mann Group Loan Arrangement. A portion of these available borrowings may be used to capitalize accrued interest into principal, upon mutual agreement of the parties, as it becomes due and payable under The Mann Group Loan Arrangement. (see note 7 — Related-party arrangements). The Company cannot provide assurances that its plans will not change or that changed circumstances will not result in the depletion of its capital resources more rapidly than it currently anticipates. The Company will need to raise additional capital, whether through a sale of equity or debt securities, a strategic business collaboration with a pharmaceutical company, the establishment of other funding facilities, licensing arrangements, asset sales or other means, in order to continue the development and commercialization of AFREZZA and other product candidates and to support its other ongoing activities. However, the Company cannot provide assurances that such additional capital will be available on acceptable terms or at all.

Principles of Consolidation

Principles of Consolidation — The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Intercompany balances and transactions have been eliminated.

Segment Information

Segment Information — In accordance with Accounting Standards Codification (“ASC”) 280-10-50 Segment Reporting, operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision-maker in making decisions regarding resource allocation and assessing performance. To date, the Company has viewed its operations and manages its business as one segment operating in the United States of America.

Financial Statement Estimates

Financial Statement Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Management considers many factors in selecting appropriate financial accounting policies, and in developing the estimates and assumptions that are used in the preparation of the financial statements. Management must apply significant judgment in this process. The more significant estimates reflected in these accompanying financial statements involve assessing long-lived assets for impairment, accrued expenses, including clinical study expenses, inventory recoverability, valuation of the facility financing obligation, commitment asset, milestone rights, valuation of stock-based compensation and the determination of the provision for income taxes and corresponding deferred tax assets and liabilities and any valuation allowance recorded against net deferred tax assets.

License and Collaboration and Supply Agreements

License and Collaboration and Supply Agreements — Pursuant to the Sanofi License Agreement and the Sanofi Supply Agreement, the Company granted to Sanofi exclusive, worldwide licenses to certain of the Company’s patents, trademarks and know-how for the development and commercialization of AFREZZA and retained the right to be the exclusive manufacturer and supplier of AFREZZA until specified conditions are met upon which a portion of the manufacturing activities may be assumed by Sanofi. The terms of the Sanofi License Agreement provide for consideration to the Company in the form of a non-refundable up-front payment, product sales, manufacturing, regulatory and sales milestone payments and profit and loss sharing.

The Company analyzes consideration received under the provisions of ASC 605, Revenue Recognition, to determine whether the consideration, or a portion thereof, could be recognized as revenue. ASC 605 provides that revenue is recognized when there is persuasive evidence that an arrangement exists, delivery has occurred or services have been rendered, the price is fixed or determinable and collection is reasonably assured.

In arrangements involving the delivery of more than one element, each required deliverable is evaluated to determine whether it qualifies as a separate unit of accounting. This determination is generally based on whether the deliverable has “stand-alone value” to the customer. The arrangement’s consideration that is fixed and determinable is then allocated to each separate unit of accounting based on the relative selling price of each deliverable. The estimated selling price of each deliverable is determined using the following hierarchy of values: (i) vendor-specific objective evidence of fair value, (ii) third-party evidence of selling price and (iii) best estimate of selling price (BESP). The BESP reflects the Company’s best estimate of what the selling price would be if the deliverable was regularly sold by the Company on a stand-alone basis. In general, the consideration allocated to each unit of accounting is recognized as the related goods or services are delivered, limited to the consideration that is not contingent upon future deliverables.

The assessment of multiple element arrangements requires judgment in order to determine the appropriate units of accounting and the points in time that, or periods over which, revenue should be recognized. Given that, as of December 31, 2015, the Company did not have the ability to estimate the amount of costs that would potentially be incurred under the loss share provision related to the Sanofi License Agreement and the Sanofi Supply Agreement, the Company believe the fixed and determinable fee requirement for revenue recognition was not met.

Cash and Cash Equivalents

Cash and Cash Equivalents — The Company considers all highly liquid investments with original or remaining maturities of 90 days or less at the time of purchase, that are readily convertible into cash to be cash equivalents. As of December 31, 2015 and 2014, cash equivalents were comprised of cash and money market accounts with maturities less than 90 days from the date of purchase.

Concentration of Credit Risk

Concentration of Credit Risk — Financial instruments which potentially subject the Company to concentration of credit risk consist of cash and cash equivalents. Cash and cash equivalents consist of interest-bearing accounts, which are regularly monitored by management and held in high credit quality institutions.

State Research and Development Credit Exchange Receivable

State Research and Development Credit Exchange Receivable — The State of Connecticut provides certain companies with the opportunity to exchange certain research and development income tax credit carryforwards for cash in exchange for foregoing the carryforward of the research and development credits. The program provides for an exchange of research and development income tax credits for cash equal to 65% of the value of corporation tax credit available for exchange. Estimated amounts receivable under the program are recorded as a reduction of research and development expenses.

Prepaid expenses and other current assets

Prepaid expenses and other current assets — Prepaid expenses and other current assets primarily consist of prepaid expenses for goods and services to be received. As of December 31, 2015, prepaid and other current assets had a balance of $4.0 million, mainly comprised of prepaid insurance. As of December 31, 2014 prepaid and other current assets had a balance of $20.2 million, mainly comprised of a $15.0 million prepayment for 2015 quantities of insulin, and prepaid insurance.

Sale of intellectual property

Sale of intellectual property — On July 18, 2014, the Company entered into an assignment agreement with a third party whereby the third party acquired all proprietary rights, technology and know-how that related to a small molecule inhibitor compound and all pre-clinical data and results related thereto. Under the terms of the assignment agreement, the Company received total consideration of $9.3 million and accrued $1.4 million in expense for a net amount of $7.9 million recorded as other income. In 2015, the Company recorded other income of $1.4 million related to the relief of the $1.4 million accrual for expenses associated with the sale of intellectual property related to oncology in 2014, which was subsequently resolved without payment.

Milestone Rights

Milestone Rights — On July 1, 2013, in conjunction with the execution of the Facility Agreement, the Company issued Milestone Rights to Deerfield whereby the Company agreed to provide Deerfield with pre-specified Milestone Payments upon the achievement of 13 specific Milestone Events related to the commercial release and future cumulative net sales of AFREZZA. The Company analyzed the Milestone Rights under the provisions of ASC 815 and determined that the agreement does not meet the definition of a freestanding derivative. Since the Company has not elected to apply the fair value option to the Milestone Rights Purchase Agreement, the Company recorded the Milestone Rights at their estimated fair value and accounted for the Milestone Rights as a liability by applying the indexed debt guidance contained in paragraphs ASC 470-10-25-3 and 35-4.

The initial fair value estimate of the Milestone Rights was calculated using the income approach in which the cash flows associated with the specified contractual payments were adjusted for both the expected timing and the probability of achieving the milestones and discounted to present value using a selected market discount rate. The expected timing and probability of achieving the milestones was developed with consideration given to both internal data, such as progress made to date and assessment of criteria required for achievement, and external data, such as market research studies. The discount rate was selected based on an estimation of required rate of returns for similar investment opportunities using available market data. The Milestone Rights liability will be remeasured as the specified milestone events are achieved. Specifically, as each milestone event is achieved, the portion of the initially recorded Milestone Rights liability that pertains to the milestone event being achieved, will be remeasured to the amount of the specified related milestone payment. The resulting change in the balance of the Milestone Rights liability due to remeasurement will be recorded in the Company’s Statement of Operations as interest expense. Furthermore, the Milestone Rights liability will be reduced upon the settlement of each milestone payment. As a result, each milestone payment would be effectively allocated between a reduction of the recorded Milestone Rights liability and an expense representing a return on a portion of the Milestone Rights liability paid to the investor for the achievement of the related milestone event (see Note 17 — Facility Agreement). As of December 31, 2015, the remaining liability balance of $8.9 million was classified as long-term liability in other liabilities.

Deferred product costs from collaboration

Deferred product costs from collaboration — Deferred product costs represent the costs of product manufactured and sold to Sanofi, as long as they are not greater than the amount of deferred product sales related to the collaboration, for which recognition of revenue has been deferred. Given that the costs of inventory delivered to a customer, but for which revenue may not yet be recognized, meet both the definition and characteristics of an “asset” and the Company believes that it is probable that the amount of future revenue will exceed the amount of deferred costs (i.e., the asset would be realizable through the recognition of probable future income), the Company has elected to account for the deferred costs related to the product sold to Sanofi as an asset and carry forward to future periods until the related revenue is recognized.

Fair Value of Financial Instruments

Fair Value of Financial Instruments — The Company utilizes fair value measurement guidance prescribed by GAAP to value its financial instruments. The guidance includes a definition of fair value, prescribes methods for measuring fair value, establishes a fair value hierarchy based on the inputs used to measure fair value and expands disclosures about the use of fair value measurements. The valuation techniques utilized are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect internal market assumptions. These two types of inputs create the following fair value hierarchy:

Level 1 — Quoted prices for identical instruments in active markets.

Level 2 — Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

Level 3 — Significant inputs to the valuation model are unobservable.

The carrying amounts reflected in the consolidated balance sheets for cash equivalents, other current assets, accounts payable, and accrued expenses and other current liabilities, approximate fair value due to their relatively short maturities.

Inventories

Inventories — Inventories are stated at the lower of cost or market. The Company determines the cost of inventory using the first-in, first-out, or FIFO, method. The Company capitalizes inventory costs associated with the Company’s products based on management’s judgment that future economic benefit is expected to be realized; otherwise, such costs are expensed as product manufacturing. The Company periodically analyzes its inventory levels to identify inventory that may expire or has a cost basis in excess of its estimated realizable value, and writes-down such inventories as appropriate. In addition, the Company’s products are subject to strict quality control and monitoring which the Company performs throughout the manufacturing process. If certain batches or units of product no longer meet quality specifications or become obsolete due to expiration, the Company will record a charge to write down such unmarketable inventory to its estimated realizable value. Inventory that is not expected to be used within one year is classified as a long term asset on the accompanying condensed consolidated balance sheet.

We analyzed our inventory levels to identify inventory that may expire or has a cost basis in excess of its estimated realizable value. We performed an assessment of projected sales and to evaluate the lower of cost or market and the potential excess inventory on hand at December 31, 2015. As a result of this assessment, we recorded a charge of $39.3 million to record the inventory raw materials on hand at the lower of cost or market, inventory expiry, and write-off other inventory related assets.

In connection with the projected sales assessment, we also evaluated our inventory purchase commitments totalling $116.2 million for potential impairment. As a result of this assessment, we recorded a $66.2 million charge related to a loss on future purchase commitments both from a lower of cost or market excess inventory perspective. The purchase commitment obligation has been reduced to reflect our expectation that a portion will be recoverable from a third party.

Property and Equipment

Property and Equipment — Property and equipment are recorded at cost and depreciated using the straight-line method over the estimated useful lives of the related assets. Leasehold improvements are amortized over the term of the lease or the service lives of the improvements, whichever is shorter. Maintenance and repairs are expensed as incurred. Assets under construction are not depreciated until placed into service.

Impairment of Long-Lived Assets — The Company evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable in accordance with ASC 360-10-35 Property Plant and Equipment. Assets are considered to be impaired if the carrying value may not be recoverable based upon management’s assessment of the following events or changes in circumstances:

• significant changes in the Company’s strategic business objectives and utilization of the assets;

• a determination that the carrying value of such assets cannot be recovered through undiscounted cash flows;

• loss of legal ownership or title to the assets;

• a significant adverse change in legal factors or in the business climate that could affect the value of a long-lived asset (asset group), including an adverse action or assessment by a regulator; or

• the impact of significant negative industry or economic trends.

If the Company believes an asset to be impaired, the impairment recognized is the amount by which the carrying value of the assets exceeds the fair value of the assets. Any write-downs would be treated as permanent reductions in the carrying amount of the asset and an operating loss would be recognized.

The Company recorded an asset impairment of $140.4 million for the year ended December 31, 2015 (see Note 5 — Property and Equipment). No asset impairment was recognized during the years ended December 31, 2014, and 2013, respectively.

Income Taxes

Income Taxes — The provisions for federal, foreign, state, and local income taxes are calculated on pre-tax income based on current tax law and include the cumulative effect of any changes in tax rates from those used previously in determining deferred tax assets and liabilities. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the year in which the temporary differences are expected to be recovered or settled. A valuation allowance is recorded to reduce net deferred income tax assets to amounts that are more likely than not to be realized.

Income tax positions are considered for uncertainty in accordance with ASC 740-10-25 Income Taxes, The Company believes that its income tax filing positions and deductions will be sustained on audit and does not anticipate any adjustments that will result in a material change to its financial position. Therefore, no liabilities for uncertain income tax positions have been recorded. If a tax position does not meet the minimum statutory threshold to avoid payment of penalties, the Company recognizes an expense for the amount of the penalty in the period the tax position is claimed in the tax return of the Company. The Company recognizes interest accrued related to unrecognized tax benefits in income tax expense, if any. Penalties, if probable and reasonably estimable, are recognized as a component of income tax expense.

Significant management judgment is involved in determining the provision for income taxes, deferred tax assets, deferred tax liabilities, and any valuation allowance recorded against deferred tax assets. Due to uncertainties related to the realization of the Company’s deferred tax assets as a result of its history of operating losses, a valuation allowance has been established against the total deferred tax asset balance. The valuation allowance is based on management’s estimates of taxable income by jurisdiction in which the Company operates and the period over which deferred tax assets will be recoverable. In the event that actual results differ from these estimates or the Company adjusts these estimates in future periods, a change in the valuation allowance may be needed, which could materially impact the Company’s financial position and results of operations.

Contingencies

Contingencies — Contingencies are recorded in accordance with ASC 450 Contingencies. Accordingly, the Company records a loss contingency for a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. These accruals represent management’s best estimate of probable loss. Disclosure also is provided when it is reasonably possible that a loss will be incurred or when it is reasonably possible that the amount of a loss will exceed the recorded provision. On a quarterly basis, the Company reviews the status of each significant matter and assesses its potential financial exposure. Significant judgment is required in both the determination of probability and the determination as to whether an exposure is reasonably estimable. Because of uncertainties related to these matters, accruals are based only on the best information available at the time. As additional information becomes available, the Company reassesses the potential liability related to pending claims and litigation and may revise its estimates. These revisions in the estimates of the potential liabilities could have a material impact on the Company’s consolidated results of operations and financial position.

Stock-Based Compensation

Stock-Based Compensation — As of December 31, 2015, the Company had three active stock-based compensation plans, which are described more fully in Note 13. The Company accounts for all share-based payments to employees, including grants of stock awards and the compensatory elements of the employee stock purchase plan in accordance with ASC 718. ASC 718 Compensation — Stock Compensation (“ASC 718”) requires all share-based payments to employees, including grants of stock options, restricted stock units, performance-based awards and the compensatory elements of employee stock purchase plans, to be recognized in the statement of operations based upon the fair value of the awards at the grant date. The Company uses the Black-Scholes option valuation model to estimate the grant date fair value of employee stock options and the compensatory elements of employee stock purchase plans. Option valuation models require the input of assumptions, including the expected life of the stock-based awards, the estimated stock price volatility, the risk-free interest rate, and the expected dividend yield. Beginning in the third quarter of 2014, the Company began to assess both historical and implied volatility in order to determine its estimated volatility rate. Implied volatility was considered due to the change in the Company’s business, which occurred with the approval for the sale of AFREZZA. The expected volatility assumption is based on an assessment of the historical volatility and the implied volatility of the Company’s common stock, derived from an analysis of historical traded and quoted options on the Company’s common stock. Restricted stock units are valued based on the market price on the grant date. The Company evaluates stock awards with performance conditions as to the probability that the performance conditions will be met and estimates the date at which the performance conditions will be met in order to properly recognize stock-based compensation expense over the requisite service period.

Warrants

Warrants — The Company has issued warrants to purchase shares of its common stock. Warrants have been accounted for within equity in accordance with the provisions of ASC 815-40, Contracts in an Entity’s Own Stock, previously EITF Issue No. 00-19: Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock.

Comprehensive Loss

Comprehensive Loss — Other comprehensive loss is recorded in accordance with ASC 220-10-45 Comprehensive Income, which requires that all components of comprehensive loss be reported in the financial statements in the period in which they are recognized. Other comprehensive loss includes certain changes in stockholders’ equity that are excluded from net income. Specifically, the Company includes unrealized gains and foreign exchange translation losses, if any, and cumulative translation gains and losses in other comprehensive loss.

Research and Development Expenses

Research and Development Expenses — Research and development expenses consist of costs associated with the clinical trials of the Company’s product candidates, manufacturing supplies and other development materials, compensation and other expenses for research and development personnel, costs for consultants and related contract research, facility costs, and depreciation. Research and development costs, which are net of any tax credit exchange recognized for the Connecticut state research and development credit exchange program, are expensed as incurred consistent with ASC 730-10 Research and Development. The Company began commercial manufacturing in the latter part of the fourth quarter of 2014. As such, commercial manufacturing costs incurred in the fourth quarter of 2014 and included in research and development as expenses were immaterial for the year ended December 31, 2014.

Clinical Trial Expenses

Clinical Trial Expenses — Clinical trial expenses, which are reflected in research and development expenses in the accompanying statements of operations, result from obligations under contracts with vendors, consultants, and clinical site agreements in connection with conducting clinical trials. The financial terms of these contracts are subject to negotiations which vary from contract to contract and may result in payment flows that do not match the periods over which materials or services are provided to the Company under such contracts. The appropriate level of trial expenses are reflected in the Company’s financial statements by matching period expenses with period services and efforts expended. These expenses are recorded according to the progress of the trial as measured by patient progression and the timing of various aspects of the trial. Clinical trial accrual estimates are determined through discussions with internal clinical personnel and outside service providers as to the progress or state of completion of trials, or the services completed. Service provider status is then compared to the contractually obligated fee to be paid for such services. During the course of a clinical trial, the Company may adjust the rate of clinical expense recognized if actual results differ from management’s estimates.

Interest Expense

Interest Expense — Interest costs are expensed as incurred, except to the extent such interest is related to construction in progress, in which case interest is capitalized. Interest expense, net of interest capitalized, for the years ended December 31, 2015, 2014 and 2013 was $24.1 million, $20.4 million, and $21.5 million, respectively. Interest costs capitalized for the years ended December 31, 2015, 2014, and 2013 were $0.1 million, $0.8 million, and $0.4 million, respectively.

Net Loss Per Share of Common Stock

Net Loss Per Share of Common Stock — Basic net loss per common share is computed by dividing net loss by the weighted-average number of common shares outstanding during the period. Diluted net loss per common share is computed by dividing the net loss by the sum of the weighted-average number of common shares outstanding during the period plus the potential dilutive effect of stock options, restricted stock units, warrants, and shares that could be issued upon conversion of the senior convertible notes outstanding during the period calculated in accordance with the treasury stock method, but are excluded if their effect is anti-dilutive. Because the impact of these items is anti-dilutive during periods of net loss, there was no difference between basic and diluted loss per common share for the years ended December 31, 2015, 2014, and 2013.

Recently Issued Accounting Standards

Recently Issued Accounting Standards — From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (FASB) or other standard setting bodies that are adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on the Company’s financial position or results of operations upon adoption.

In May 2014, the FASB issued ASU 2014-09 related to revenue recognition, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The guidance requires a company to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration it expects to be entitled to receive in exchange for those goods or services. In July 2015, the FASB issued ASU 2015-14, which delayed the effective date of the new revenue standard by one year. The FASB also agreed to allow entities to choose to adopt the standard as of the original effective date. The standard is effective beginning the first quarter of the Company’s 2018 fiscal year and is required to be adopted using either a full retrospective or a modified retrospective approach. The Company is assessing the potential impact of the new standard on its consolidated financial statements and has not yet selected a transition method.

In August 2014, the FASB issued ASU 2014-15, which provides guidance on determining when and how reporting entities must disclose going-concern uncertainties in their financial statements. The new standard requires management to perform interim and annual assessments of an entity’s ability to continue as a going concern within one year of the date of issuance of the entity’s financial statements (or within one year after the date on which the financial statements are available to be issued, when applicable). Further, an entity must provide certain disclosures if there is “substantial doubt about the entity’s ability to continue as a going concern”. The ASU is effective for annual periods ending after December 15, 2016, and interim periods thereafter; early adoption is permitted. The Company is evaluating the impact the adoption of ASU 2014-15 will have on its consolidated financial statements.

In April 2015, the FASB issued ASU 2015-03, “Simplifying the Presentation of Debt Issuance Costs.” The guidance requires debt issuance costs to be presented in the balance sheet as a direct deduction from the carrying value of the associated debt, consistent with the presentation of a debt discount. The guidance is effective for annual reporting periods beginning after December 15, 2015 and interim periods thereafter. As permitted by the standard, the Company adopted the new presentation prospectively and the adoption did not have an impact on its consolidated financial statements and disclosures.

In July 2015, the FASB issued ASU 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory. Topic 330, Inventory, currently requires an entity to measure inventory at the lower of cost or market. Market could be replacement cost, net realizable value, or net realizable value less an approximately normal profit margin. The amendments do not apply to inventory that is measured using last-in, first-out (LIFO) or the retail inventory method. The amendments apply to all other inventory, which includes inventory that is measured using first-in, first-out (FIFO) or average cost. The amendments are effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. The amendments should be applied prospectively with earlier application permitted as of the beginning of an interim or annual reporting period. The Company is evaluating the impact the adoption of ASU 2015-11 will have on its consolidated financial statements.

In November 2015, the FASB issued ASU No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes. The new standard requires that deferred tax assets and liabilities be classified as noncurrent in a classified statement of financial position. For public business entities, the amendments in this Update are effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods. As permitted by the standard, the Company adopted the new presentation and the adoption did not have an impact on its consolidated financial statements and disclosures.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments — Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The update is intended to improve the recognition and measurement of financial instruments. The update are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company is evaluating the impact the adoption of ASU 2016-01 will have on its consolidated financial statements.