Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2018

Basis of Accounting, Policy [Policy Text Block]

Tandy Leather Factory, Inc. is a specialty retailer of leather and leathercraft related items, offering a broad range of leather, quality tools, hardware, accessories, liquids, lace, kits and teaching materials. We sell our products through company-owned stores and through orders generated from our website, www.tandyleather.com. We also manufacture the leather lace and some of our do-it-yourself kits that are sold in our stores and website.

In the opinion of management, the accompanying consolidated financial statements contain all adjustments (consisting of normal recurring adjustments) necessary to present fairly our financial position as of

March 31, 2018

and

December 31, 2017,

and our results of operations and cash flows for the

three

-month periods ended

March 31, 2018

and

2017.

Operating results for the

three

-month period ended

March 31, 2018

are

not

necessarily indicative of the results that

may

be expected for the year ending

December 31, 2018.

These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes included in our Annual Report on Form

-K for the year ended

December 31, 2017.

The preparation of financial statements in accordance with accounting principles generally accepted in the United States 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.

Inventory, Policy [Policy Text Block]

Inventory

Inventory is valued at the lower of cost or net realizable value. In addition, the value of inventory is periodically reduced to net realizable value for slow-moving or obsolete inventory based on our review of items on hand compared to their estimated future demand. Based on negotiations with vendors, title generally passes to us when merchandise is put on board. Merchandise to which we have title but have

not

yet received is recorded as inventory in transit.

	March 31, 20 1 8		December 31, 20 1 7
Inventory on hand:
Finished goods held for sale	$	34,185,969	$	34,824,728
Raw materials and work in process		1,082,632		1,138,316
Inventory in transit		1,503,259		1,348,153
Total inventory	$	36,771,860	$	37,311,197

Goodwill and Intangible Assets, Policy [Policy Text Block]

Goodwill and Other Intangibles

. Goodwill represents the excess of the purchase price over the fair value of net assets acquired in a business combination. Goodwill is required to be evaluated for impairment on an annual basis, absent indicators of impairment during the interim. Application of the goodwill impairment test requires exercise of judgment, including the estimation of future cash flows, determination of appropriate discount rates and other important assumptions. Changes in these estimates and assumptions could materially affect the determination of fair value and/or goodwill impairment for each reporting unit. During the

first

quarter of

2018,

indicators of impairment were identified. Further, the only change in our goodwill for the

three

-month periods ended

March 31, 2018

and

2017

resulted from foreign currency translation of

$2,596

and

$1,146,

respectively.

Other intangibles consist of the following:

	March 31 , 20 1 8						December 31, 20 1 7
	Gross		Accumulated Amortization		Net		Gross		Accumulated Amortization		Net
Trademarks, Copyrights	$	554,369	$	546,202	$	8,167	$	554,369	$	545,897	$	8,472
Non-Compete Agreements		175,316		164,816		10,500		175,316		164,566		10,750
	$	729,685	$	711,018	$	18,667	$	729,685	$	710,463	$	19,222

We recorded amortization expense of

$555

during the

first

quarter of

2018

compared to

$444

during the

first

quarter of

2017.

All of our intangible assets, other than goodwill, are subject to amortization under U.S. GAAP. Based on the current amount of intangible assets subject to amortization, the estimated amortization expense for each of the succeeding

years is estimated to be less than

$1,000

per year.

Revenue Recognition, Policy [Policy Text Block]

Revenue Recognition

Our sales generally occur via

two

methods: (

) at the counter in our stores, and (

) shipment by common carrier. Sales at the counter are recorded and title passes as transactions occur. Otherwise, sales are recorded and title passes when the merchandise is shipped to the customer. Shipping terms are normally FOB shipping point. Sales tax and comparable foreign tax is excluded from revenue.

We offer an unconditional satisfaction guarantee to our customers and accept all product returns. Net sales represent gross sales less negotiated price allowances, product returns, and allowances for defective merchandise.

Historically, the sale of gift cards has

not

been material to our financial condition, results of operations or cash flows. As such, prior to

January 1, 2018,

gift cards were recognized as sales in the period the gift card was sold. Effective

January 1, 2018,

in conjunction with the adoption of Accounting Standards Codification

606,

"Revenue from Contracts with Customers" ("ASC

606"

), we began recording a gift card liability on the date we issue a gift card to a customer. We record revenue and reduce the gift card liability as the customer redeems the gift card. In addition, for gift card breakage, we recognize a proportionate amount for the expected unredeemed gift cards over the expected customer redemption period which is

one

year. At

March 31, 2018,

our gift card liability, included in accrued expenses and other liabilities, totaled approximately

$188,000,

of which approximately

$168,000

was recognized on

January 1, 2018

as the cumulative effect of an accounting change.

Disaggregated Revenue

In the following table, revenue is disaggregated by our major customer groups for the

three

months ended

March 31:

	201 8			2017
RETAIL (end users, consumers, individuals)		62	%		59	%
NON-RETAIL (hospitals, youth organizations, resellers, distributors, businesses)		38	%		41	%
		100	%		100	%

Note

contains additional disaggregated revenue information by segment and geographic area.

Comprehensive Income, Policy [Policy Text Block]

Comprehensive Income (

loss

Comprehensive income includes net income and certain other items that are recorded directly to Stockholders’ Equity. Our only source of other comprehensive income is foreign currency translation adjustments.

New Accounting Pronouncements, Policy [Policy Text Block]

Recent Accounting Pronouncements.

ASC

606

requires revenue to be recognized based on the amount an entity is expected to be entitled to for promised goods or services provided to customers. ASC

606

also requires expanded disclosures regarding contracts with customers. We adopted this standard effective

January 1, 2018

using the modified retrospective basis which allows an adjustment to equity as of

January 1, 2018

for all existing contracts and intend to apply the new standard to all new contracts that begin in

2018.

Given the nature of our business and that our sales generally occur at the counter or by shipment through common carrier at observable transaction prices with little, if any, variable consideration factors, there were

significant changes to the amount and timing of revenue recognition, except for our accounting for gift cards which has been discussed above. While we offer an unconditional right of return to our customers, this has historically been immaterial to our financial condition, results of operations and cash flows (annual gross product returns represent less than

0.5%

of our net sales). In conjunction with our adoption of ASC

606

January 1, 2018,

as it relates to our gift card liability, we recorded a net decrease to opening retained earnings of

$168,311

for gift cards where satisfaction of our performance obligation had

not

yet been completed.

February 2016,

the Financial Accounting Standards Board (“FASB”) issued ASU

2016

02,

“Leases”, a comprehensive new standard that amends various aspects of existing accounting guidance for leases, including the recognition of a right of use asset and a lease liability for leases with a duration greater than

one

year. The guidance is effective for fiscal years beginning after

December 15, 2018,

including interim periods within those fiscal years. Early adoption is permitted. We have

not

completed our review of the new guidance; however, we anticipate that upon adoption of the standard, using a modified retrospective approach, we will recognize additional assets and corresponding liabilities related to leases on our balance sheet.