RECENT ACCOUNTING PRONOUNCEMENTS

Recently Issued Pronouncements

In February 2016, the FASB issued guidance regarding both operating and financing leases, requiring lessees to recognize on their balance sheets "right-of-use assets" and corresponding lease liabilities, measured on a discounted basis over the lease term. Virtually all leases will be subject to this treatment except leases that meet the definition of a "short-term lease". For expense recognition, the dual model requiring leases to be classified as either operating or finance leases has been retained from the prior standard. Operating leases will result in straight-line expense while finance leases will result in a front-loaded expense pattern. Lease classification will use criteria very similar to those applied in current lease accounting, but without explicit bright lines. Extensive additional quantitative and qualitative disclosures, including significant judgments made by management, will be required to provide greater insight into the extent of expense recognized and expected to be recognized. The new lease guidance will essentially eliminate off-balance sheet financing. The Company adopted the new standard on March 31, 2019 using a modified retrospective approach. Under the modified retrospective approach, the Company will not adjust the comparative period financial information or make the new required lease disclosures for periods before the effective date. The Company will elect the short-term lease recognition exemption and will not recognize Right of Use (ROU) assets or lease liabilities for leases with a term less than 12 months. While the Company continues to assess all of the effects of adoption, the Company believes the most significant effects relate to (i) the recognition of new ROU assets and lease liabilities on the consolidated balance sheet and (ii) providing significant new disclosures about the Company's leasing activities. The new ROU assets and lease liabilities, which will be recognized on the consolidated balance sheet, consist primarily of real estate facilities. We are continuing to analyze and evaluate the ROU assets and lease liability using the Company's incremental borrowing rate at March 31, 2019. Upon adoption of ASC 842, all existing leases will be classified as either operating leases or finance leases. The Company plans to modify its business processes and controls to support the adoption of the new standard, including expanded review of new contracts. After the adoption of Topic 842, we will first report the ROU assets and lease liabilities as of June 30, 2019 in our Quarterly Report on Form 10-Q based on our lease portfolio as of that date.

In June 2016, the FASB issued guidance regarding the measurement of credit losses on financial instruments, which changes the impairment model for most financial assets. The new model uses a forward-looking expected loss method, which will generally result in earlier recognition of allowances for losses. The guidance is effective for the Company's fiscal year ending March 31, 2021 with early adoption permitted beginning in the first quarter of Fiscal Year 2020. The Company is currently evaluating the impact the adoption of this standard will have on its consolidated financial statements and related disclosures.

Recently Adopted Pronouncement

Except for the changes below, the Company has consistently applied the accounting policies to all periods presented in these consolidated financial statements. The Company adopted Topic 606 Revenue from Contracts with Customers to all contracts not completed as of the initial application date of April 1, 2018. Topic 606 also includes Subtopic 340-40, Other Assets and Deferred Costs - Contracts with Customers, which requires the deferral of incremental costs of obtaining a contract with a customer. As a result, the Company has changed its accounting policy for revenue recognition as detailed below. The Company applied Topic 606 using the modified retrospective method by recognizing the cumulative effect of initially applying Topic 606 as an adjustment to the opening balance of retained earnings at April 1, 2018. Therefore, the comparative information has not been adjusted and continues to be reported in accordance with its historic accounting under Topic 605. The details of the notable changes and quantitative impact of the changes are set out below.

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Software Revenue: The Company historically deferred revenue for the value of software where vendor specific objective evidence ("VSOE") of fair value had not been established for undelivered items. Under Topic 606, revenue for such licenses is recognized at the time of delivery, rather than ratably, as the VSOE requirement no longer applies and the value of the remaining services are not material in the context of the contract. All deferred revenue pertaining to such licenses was eliminated as a cumulative effect adjustment of implementing the new standard.

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Marketing Development Funds: The Company frequently provides marketing development funds to its distributor and retail customers. Historically, its marketing development funds were recognized as a reduction of revenue at the later of when the related revenue is recognized or when the program is offered to the channel partner. Applying the criteria of Topic 606, these marketing development programs qualify as variable consideration, and are assigned as a reduction of the transaction price of the contract. This results in a timing difference such that all or some of the funds related to a program may be recognized in different periods than under Topic 605, depending on the circumstances.

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Discount, Rebates and Pricing Reserves: The Company establishes reserves for Discounts and Rebates at the end of each fiscal period. These reserves are estimated based on current relevant and historical data, but there can be some variability associated with unforeseen changes in customer claim patterns. Under Topic 606, in cases where there is uncertainty around the variable consideration amount, a constraint on that consideration must be considered. The impact of this constraint may result in slightly higher reserves than were recorded under the legacy methodology.

The Company has historically recorded reserves for customer-related pricing protection which is based on contractual terms and the legal interpretation thereof. Topic 606 prescribes an “expected value” method to estimating variable consideration which involves the sum of probability-weighted amounts for a range of possible outcomes. Applying this method may result in a slightly lower reserve than the reserves under legacy methodology.

Additionally, the balance sheet presentation of certain reserve balances previously shown net within accounts receivable are now presented as refund liabilities within current liabilities.

On July 2, 2018 the Company acquired Polycom, a privately held Company who had not yet adopted Topic 606. In addition to increasing the magnitude of certain of the items listed above, the acquisition introduced several additional areas of impact. The most notable areas of impact are:


•	Term Licenses: Legacy accounting standards required that revenue for term-based software licenses be recognized ratably when VSOE of fair value had not been established for undelivered items such as post-contract support. Under Topic 606, revenue for such licenses is recognized at the time of delivery, rather than ratably, as the VSOE requirement no longer applies.

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Cost of Obtaining a Contract: Under legacy guidance, in certain circumstances an entity could have elected to capitalize direct and incremental contract acquisition costs, such as sales commissions. Under Topic 606 and related guidance, an entity is required to capitalize costs that are incremental to obtaining a contract if it expects to recover them, unless it elects the practical expedient for costs with amortization periods of one year or less. This new provision affects the Company as it will capitalize those costs if the anticipated amortization period is greater than one year and the criteria have been met.

The cumulative effect of the changes made to the Company's consolidated April 1, 2018 balance sheet for the adoption of Topic 606 was as follows (in thousands):



	March 31, 2018		Adjustments due to Topic 606 (increase/(decrease))			April 1, 2018
ASSETS
Current assets:
Accounts receivable, net	$	152,888	$	14,221		$	167,109
Total current assets	899,726		14,221			913,947
Deferred tax and other assets	19,534		(493		)	19,041
Total assets	$	1,076,887	$	13,728		$	1,090,615

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accrued liabilities	$	80,097	$	11,133		$	91,230
Total current liabilities	125,514		11,133			136,647
Total liabilities	723,917		11,133			735,050
Commitments and contingencies (Note 9)
Stockholders' equity:
Retained earnings	299,066		2,595			301,661
Total stockholders' equity before treasury stock	1,179,397		2,595			1,181,992
Total stockholders' equity	352,970		2,595			355,565
Total liabilities and stockholders' equity	$	1,076,887	$	13,728		$	1,090,615

The following tables summarize the impacts of adopting Topic 606 on the Company’s consolidated balance sheet as of March 31, 2019:



	March 31, 2019 As Reported		Adjustments due to Topic 606* (increase/(decrease))			March 31, 2019 Without Adoption of Topic 606
ASSETS
Current assets:
Accounts receivable, net	$	337,671	$	(96,023	)	$	241,648
Other current assets	50,488		(813		)	49,675
Total current assets	781,146		(96,836		)	684,310
Deferred tax and other assets	26,508		(2,597		)	23,911
Total assets	$	3,116,535	$	(99,433	)	$	3,017,102

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accrued liabilities	$	398,715	$	(84,562	)	$	314,153
Total current liabilities	528,229		(84,562		)	443,667
Other long-term liabilities	142,697		(803		)	141,894
Total liabilities	2,394,848		(85,365		)	2,309,483
Commitments and contingencies (Note 7)
Stockholders' equity:
Retained earnings	143,344		(14,068		)	129,276
Total stockholders' equity before treasury stock	1,575,360		(14,068		)	1,561,292
Total stockholders' equity	721,687		(14,068		)	707,619
Total liabilities and stockholders' equity	$	3,116,535	$	(99,433	)	$	3,017,102

* The ASC 606 related adjustments include the impact of purchase accounting.

The following tables summarize the impacts of adopting Topic 606 on the Company’s the consolidated financial statements for the year ended March 31, 2019:



CONSOLIDATED STATEMENTS OF OPERATIONS Selected Line Items (in thousands) (Unaudited)
	March 31, 2019 As Reported			Adjustments due to Topic 606 (increase/(decrease))			March 31, 2019 Without Adoption of Topic 606
Net revenues
Net product revenues	$	1,510,770		$	(1,347	)	$	1,509,423
Net service revenues	163,765			1,598			165,363
Total net revenues	1,674,535			251			1,674,786
Gross profit	694,139			251			694,390
Operating expenses
Selling, general, and administrative	567,879			3,070			570,949
Total operating expenses	803,434			3,070			806,504
Operating loss	(109,295		)	(2,819		)	(112,114		)
Loss before income taxes	(185,692		)	(2,819		)	(188,511		)
Income tax expense (benefit)	(50,131		)	(309		)	(50,440		)
Net loss	$	(135,561	)	$	(2,510	)	$	(138,071	)

Loss per common share:
Basic	$	(3.61	)	$	(0.07	)	$	(3.68	)
Diluted	$	(3.61	)	$	(0.07	)	$	(3.68	)

The following tables summarize the impacts of adopting Topic 606 on the Company’s consolidated statement of comprehensive loss for the Fiscal Year ended March 31, 2019:



CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS Selected Line Items (in thousands) (Unaudited)
	March 31, 2019 as Reported			Adjustments due to Topic 606 (increase/(decrease))			March 31, 2019 Without Adoption of Topic 606
Net loss	$	(135,561	)	$	(2,510	)	$	(138,071	)
Comprehensive loss	$	(138,905	)	$	(2,510	)	$	(141,415	)

Adoption of the standards related to revenue recognition had no impact to cash from or used in operating, financing, or investing in the Company's the Consolidated Cash Flows Statements.