|3 Months Ended|
Mar. 31, 2018
|Revenue from Contract with Customer [Abstract]|
On January 1, 2018, we adopted ASU 2014-09 using the modified retrospective method and applied it to contracts which were not completed as of January 1, 2018. The following table presents the effect of the adoption of ASU 2014-09 on our consolidated balance sheet as of March 31, 2018 (in thousands):
The following table presents the effect of the adoption of ASU 2014-09 on our condensed consolidated statements of operations for the three months ended March 31, 2018 (in thousands, except per share amounts):
The following table represents a disaggregation of our revenue from contracts with customers for the three months ended March 31, 2018 and 2017 (in thousands):
Contract Assets and Liabilities
Aviation connectivity contracts involve performance obligations primarily consisting of connectivity equipment and connectivity services. The connectivity equipment can be provided at a discount and is delivered upfront while the connectivity services are rendered and paid over time. Revenue is allocated based upon the SSP principal. Where the SSP exceeds the revenue allocation, the revenue to which the Company is entitled is contingent on performing the ongoing connectivity services and we record a contract asset accordingly. The balance as of March 31, 2018 and December 31, 2017 of contract contingent revenue was not material.
For some customer contracts we may invoice upfront for services recognized over time or for contracts in which we have unsatisfied performance obligations. Payment terms and conditions vary by contract type, although terms generally include payment terms of 30 to 45 days. In the above circumstances where the timing of invoicing differs from the timing of revenue recognition, we have determined our contracts do not include a significant financing component.
The following table summarizes the significant changes in the contract liabilities balances during the period to March 31, 2018 (in thousands);
As of March 31, 2018, we had $1.1 billion of remaining performance obligations, which we also refer to as total backlog. We expect to recognize approximately 19% of our remaining performance obligations as revenue in 2018, an additional 32% by 2020 and the balance thereafter.
Accounts Receivable, net
The Company extends credit to its customers from time to time. An allowance for doubtful accounts is maintained for estimated losses resulting from the inability of the Company’s customers to make required payments. Management analyzes the age of customer balances, historical bad debt experience, customer creditworthiness and changes in customer payment terms when making estimates of the collectability of the Company’s accounts receivable balances. If the Company determines that the financial condition of any of its customers has deteriorated, whether due to customer specific or general economic issues, an increase in the allowance may be made. After all attempts to collect a receivable have failed, the receivable is written off.
Accounts receivable consist of the following (in thousands):
Movements in the balance for bad debt reserve and sales allowance for the three months ended March 31, 2018 and 2017 are as follows (in thousands):
Capitalized Contract Costs
Certain of our sales incentive programs meet the requirements to be capitalized as incremental costs of obtaining a contract. We recognize an asset for the incremental costs if we expect the benefit of those costs to be longer than one year and amortize those costs over the expected customer life. We apply a practical expedient to expense costs as incurred for costs to obtain a contract when the amortization period would have been one year or less.
Additionally, we capitalize assets associated with costs incurred to fulfill a contract with a customer. For example, we capitalize the costs incurred to obtain necessary STC or other customer specific certifications for our aviation, maritime and land customers.
The following table summarizes the significant changes in the contract assets balances during the period to March 31, 2018 (in thousands);
Contract assets are included within Other current assets on our condensed consolidated balance sheet.
Practical Expedients, Policy Elections and Exemptions
In circumstances where shipping and handling activities occur subsequent to the transfer of control, we have elected to treat shipping and handling as a fulfillment activity rather than a service to the customer.
We have made a policy election to exclude from the measurement of the transaction price all taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction and collected by the entity from a customer (e.g., sales, use, value added, and some excise taxes).
We apply a practical expedient to expense costs as incurred for incremental costs to obtain a contract when the amortization period would have been one year or less and did not evaluate contracts of one year or less for variable consideration.
The Company does not believe the impact of electing to use such practical expedients have a material impact on the financial statements.
The entire disclosure of revenue from contract with customer to transfer good or service and to transfer nonfinancial asset. Includes, but is not limited to, disaggregation of revenue, credit loss recognized from contract with customer, judgment and change in judgment related to contract with customer, and asset recognized from cost incurred to obtain or fulfill contract with customer. Excludes insurance and lease contracts.
Reference 1: http://www.xbrl.org/2003/role/presentationRef