|INTUITIVE SURGICAL INC filed this Form 10-K on 02/02/2018|
|<< Previous Page | Next Page >>|
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 bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts that are expected more likely than not to be realized in the future.
The Company recognizes tax benefits from uncertain tax positions only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement.
The Company operates in one segment. Management uses one measurement of profitability and does not segregate its business for internal reporting. As of December 31, 2017, and 2016, 88% and 86% of long-lived assets were in the United States. Revenue is attributed to a geographic region based on the location of the end customer.
The Company is involved in a number of legal proceedings involving product liability, intellectual property, shareholder derivative actions, securities class actions, and other matters. A liability and related charge are recorded to earnings in the Company’s consolidated financial statements for legal contingencies when the loss is considered probable and the amount can be reasonably estimated. The assessment is re-evaluated each accounting period and is based on all available information, including discussion with outside legal counsel. If a reasonable estimate of a known or probable loss cannot be made, but a range of probable losses can be estimated, the low-end of the range of losses is recognized if no amount within the range is a better estimate than any other. If a material loss is reasonably possible, but not probable and can be reasonably estimated, the estimated loss or range of loss is disclosed in the notes to the consolidated financial statements. The Company expenses legal fees as incurred.
When determining the estimated probable loss or range of losses, significant judgment is required to be exercised in order to estimate the amount and timing of the loss to be recorded. Estimates of probable losses resulting from litigation are inherently difficult to make, particularly when the matters are in early procedural stages with incomplete facts and information. The final outcome of legal proceedings is dependent on many variables difficult to predict and, therefore, the ultimate cost to entirely resolve such matters may be materially different than the amount of current estimates. Consequently, new information or changes in judgments and estimates could have a material adverse effect on the Company's business, financial condition, and results of operations or cash flows.
Recent Accounting Pronouncements Not Yet Adopted
In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2014-09, Revenue from Contracts with Customers, which sets forth a single, comprehensive revenue recognition model for all contracts with customers to improve comparability. Subsequently, the FASB has issued several standards related to ASU 2014-09 (collectively, the “New Revenue Standard”). The New Revenue Standard requires revenue recognition to depict the transfer of goods or services to customers in an amount that reflects the consideration that the entity expects to receive in exchange for those goods or services. In addition, the New Revenue Standard requires expanded disclosures. This New Revenue Standard permits the use of either the retrospective or cumulative effect transition method when adopted. The New Revenue Standards becomes effective for the Company in the first quarter of fiscal year 2018.
The Company will adopt the New Revenue Standard in the first quarter of fiscal year 2018 using the full retrospective method to restate each prior reporting period presented in its Financial Statements. In preparation of adopting the New Revenue Standard, the Company has implemented additional internal controls and updated key system functionality to enable future preparation of financial information in accordance with the New Revenue Standard. The Company has also substantially completed its evaluation of the impact of the New Revenue Standard on its historical financial statements. Based on that evaluation, the Company has concluded that future billings related to future service included in its multi-year contracts should be part of the consideration allocated to all performance obligations under the New Revenue Standard. Under the current standard, future service billings are considered to be contingent revenue, and therefore, are not included in the consideration allocated. Accordingly, the amount of consideration allocated to the performance obligations identified in the Company’s system arrangements will be different under the New Revenue Standard than the amount allocated under the current standard. In general, this will result in an acceleration of the amount revenue recognized for system sales with multi-year service contracts.
The Company currently expects total revenue to increase by approximately $9 million and $2 million for fiscal 2017 and 2016, respectively. Because future service billings will be included in the contract consideration allocated to all performance
|<< Previous Page | Next Page >>|