3. Summary of significant accounting policies
The following is a summary of significant accounting policies
followed by the Company in the preparation of these consolidated
Use of estimates
The preparation of consolidated financial statements in conformity
with U.S. GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenue and expenses during the reporting period. Actual results
could differ from estimates. The significant estimates underlying
the Company’s consolidated financial statements include
revenue recognition, including the accounting for certain merchant
revenues, allowance for doubtful accounts, recoverability of
intangible assets with indefinite useful lives and goodwill,
contingencies, fair value of stock based compensation and fair
value of financial instruments. The consolidated financial
statements reflect all adjustments considered, in the opinion of
management, necessary to fairly present the results for the periods
Concentration of risk
The Company’s business is subject to certain risks and
concentrations including dependence on relationships with travel
suppliers, primarily airlines, dependence on third-party technology
providers, exposure to risks associated with online commerce
security and payment related fraud. It also relies on global
distribution system (“GDS”) partners and third-party
service providers for certain fulfillment services.
Financial instruments, which potentially subject the Company to
concentration of credit risk, mainly consist of cash and cash
equivalents and accounts receivable (ie. clearing house for credit
cards). The Company maintains cash and cash equivalents balances in
financial institutions that management believes are high credit
quality. Accounts receivable are settled mainly through customer
credit cards and debit cards; the company maintains allowance for
doubtful accounts based on management’s evaluation of various
factors, including the credit risk of customers, historical trends
and other information.
The Company generates revenue as a result of the booking of travel
products and services on its websites and mobile apps. The Company
provides customers the ability to book travel products and services
on both a stand-alone basis or as a vacation package, primarily
through its merchant and agency business models.
The Company derives its revenue mainly from:
||Commissions earned from
intermediating services, including facilitating reservations of
flight tickets, hotel accommodations, car rentals and other
travel-related products and services;
||Service fees charged to customers for
processing air tickets, hotel accommodations, car rentals and other
travel-related products and services;
||Override commissions or incentives
from suppliers and GDS providers if the Company meets certain
performance conditions; and
||Advertising revenues from the sale of
advertising placements on the Company’s websites.
Revenue is recognized when earned and realizable based on the
following criteria: (1) persuasive evidence of an agreement
exists, (2) the fee is fixed or determinable and
(3) collectability is reasonably assured.
The Company also evaluated the presentation of revenue on a
“gross” versus a “net” basis. The consensus
of the authoritative accounting literature is that the presentation
of revenue as “the gross amount billed to a customer because
it has earned revenue from the sale of goods or services” or
“the net amount retained (i.e., the amount billed to a
customer less the amount paid to a supplier) because it has earned
a commission or fee” is a matter of judgment that depends on
the relevant facts and circumstances. Despegar.com has determined
net presentation is appropriate for the majority of its
transactions. In making an evaluation of this issue, some of the
factors that were considered are as follows: (i) the Company
is not the primary obligor in the arrangement (strong indicator);
(ii) the Company has no general supply risk (before customer order
is placed or upon customer return) (strong indicator); and
(iii) the Company has latitude in establishing price. The
guidance clearly indicates that the evaluations of these factors,
which at times can be contradictory, are subject to significant
judgment and subjectivity. The Company concludes that it performs
as an agent without assuming the risks and rewards of ownership of
goods, and therefore revenue is reported on a net basis.
The Company offers travel products and services through the
following business models: the Prepay/Merchant Model, which
represents approximately 80% of total revenue, Other Revenue
including GDS incentives, advertising represents 15% and the
Model, which represents approximately 5% of total revenue.
Prepay/Merchant Business Model
Through this model the Company provides customers the ability to
book air travel, accommodation, car rentals, cruises, destination
services and vacation packages. The Company generates revenue based
on the difference between the total amount that the customer pays
for the travel product and the net rate owed to the supplier plus
estimated taxes. Despegar.com also earns revenue by charging
customers a service fee for booking their travel reservation.
Customers generally pay at the time of booking and the Company
generally pays to the supplier at a later date, which is normally
at the time the customer uses the travel reservation.
Depegar.com records the payments as deferred merchant bookings in
travel suppliers payable in the balance sheet until the travel
occurs; at that point, the Company recognizes the revenue for those
refundable transactions on a net basis. For travel products that
are cancelled by the customer after a specified period of time, the
Company may charge a cancellation fee or penalty similar to the
amount that the supplier charges for the cancellation. In
nonrefundable transactions, as the Company does not have
significant post-delivery obligations, the revenue is recorded on a
net basis when the customer completes the reservation process in
the Company’s platform.
Packages and sales transactions performed by customers through
affiliated agencies are recognized following the revenue
recognition policy described above for refundable / non refundable
Pursuant to the terms of the Company’s merchant supplier
agreements, the Company’s travel service suppliers are
permitted to bill it for the underlying cost of the service during
a specified period of time. In the event that the Company is not
billed by the travel supplier within a 12-month period from the check-out date, the Company recognizes
incremental revenue from the unbilled amounts.
Through this model, the Company provides customers the ability to
book hotels, car rentals and other travel-related products and
services to be paid at destination. Despegar.com earns a commission
paid directly by suppliers. The Company generally collects these
commissions after the customer uses the travel reservation. In
certain circumstances, the Company may also earn revenue by
charging customers with a service fee for booking their travel
The Company generally records revenue on an accrual basis when the
travel occurs and is presented on a net basis. In addition, the
Company records an allowance for collection risk on this revenue
based on historical experience.
The Company may receive override commissions from air, hotel and
other travel service suppliers when it meets certain performance
conditions. These commissions are recognized when the amount of the
commission becomes fixed or determinable, which is generally when
collection is reasonably assured (i.e. upon notification of the
respective air supplier).
Additionally the Company uses GDS services provided by recognized
suppliers. Under GDS service agreements, the Company earns revenue
in the form of an incentive payment for sales that are processed
through a GDS if certain contractual volume thresholds are met.
Revenue is recognized for these incentive payments on a monthly
accrued basis in accordance with ratable volume thresholds.
The Company records advertising revenue ratably over the
advertising period or upon delivery of advertising material,
depending on the terms of the advertising agreement.
The Company’s subsidiaries in Brazil, Argentina and Colombia
are subject to certain sales taxes, which are classified as
Cash and cash equivalents
Cash and cash equivalents include investments with an original
maturity of three months or less. All results generated from these
investmentes are recorded as financial results when earned.
Restricted cash and cash equivalents
The primary purpose of restricted cash and cash equivalents is to
collateralize operations with suppliers of travel products and
services and related service providers such as IATA. In addition,
the Company maintains $10,000 as security deposit with Expedia, as
established in the Expedia Outsourcing Agreement.
Accounts receivable, net of allowances for doubtful
Accounts receivables are recorded net of an allowance for doubtful
accounts. The Company determines its allowance based on the aging
of its receivables. While management uses the information available
to make evaluations, future adjustments to the allowance may be
necessary if future economic conditions differ substantially from
the assumptions used in making the evaluations. Management has
considered all events and/or transactions that are subject to
reasonable and normal methods of estimations, and the consolidated
financial statements reflect that consideration.
Property and equipment, net
Property and equipment are stated at acquisition cost, less
accumulated depreciation. Depreciation expense is calculated using
the straight-line method, based on the estimated useful lives of
the related assets.
The estimated useful lives (in years) of the main categories of the
Company’s property and equipment are as follows:
Estimated useful life (years)
Office furniture and fixture
Expenditures for repairs and maintenance are charged to expense as
incurred. The cost of significant renewals and improvements is
added to the carrying amount of the respective asset and its
depreciated over the life of the contract.
When assets are retired or otherwise disposed of, the cost and
related accumulated depreciation are removed from the accounts, and
any resulting gain or loss is reflected in the consolidated
statement of operations.
Goodwill and Intangible assets, net
Goodwill represents the excess of the purchase price over the fair
value of the net tangible and intangible assets acquired in a
business combination. Goodwill is not subject to amortization, but
is subject to an annual assessment for impairment, or more
frequently, if events and circumstances indicate impairment may
have occurred, applying a fair-value based test.
Intangible assets resulting from the acquisition of companies were
estimated by management based on the fair value of assets received.
Identifiable intangible assets are comprised of trademarks and
internet domains. Trademarks and domains are not subject to
amortization, but subject to an annual impairment assessment.
Certain costs incurred related to the development of internal-use software are capitalized.
Development costs incurred during the application development stage
and upgrades and enhancement to existing software that provides
additional functionality are capitalized. Costs incurred related to
the preliminary project and post-implementation phases are expensed
Software internally developed is amortized over a period of three
years according to its expected useful life, using the
straight-line method. In addition, the asset value of the software
is evaluated for impairment periodically.
Financial systems are amortized over a period of 10 years, using
the straight-line method.
Impairment of Long-Lived Assets
The Company reviews long-lived assets for impairments whenever
events or changes in circumstances indicate that the carrying value
of an asset may not be recoverable. Recoverability of assets to be
held and used is measured by a comparison of the carrying amount of
an asset to undiscounted future net cash flows expected to be
generated by the asset. If such assets are considered to be
impaired on this basis, the impairment loss to be recognized is
measured by the amount by which the carrying amount of the assets
exceeds the fair value of the assets.
Goodwill and intangible assets with indefinite lives are reviewed
at least annually for impairment, generally as of December 31,
or more frequently if events and circumstances indicate impairment
may have occurred. Impairment of goodwill is tested at the
reporting unit level by comparing the reporting units carrying
amount, including goodwill, to the fair value of the reporting
unit. The fair values of the reporting units are estimated using a
combination of the income or discounted cash flows approach and the
market approach, which utilizes comparable companies’ data.
If the carrying amount of the reporting unit exceeds its fair
value, goodwill is considered impaired and a second step is
performed to measure the amount of impairment loss, if any. No
impairments were recognized during the reporting years for goodwill
or intangible assets with indefinite life.
The Company does not maintain any pension plans. The laws in the
different countries in which the Company carries out its operations
provide for pension benefits to be paid to retired employees from
government pension plans and/or private pension plans. Amounts
payable to such plans are accounted for on an accrual basis.
The Company may register a liability for severance payments if the
following criteria are met: (a) management, having the
authority to approve the action, commits to a plan of termination;
(b) the plan identifies the number of employees to be
terminated, their job classifications or functions and their
locations, and the expected completion date; (c) the plan
establishes the terms of the benefit arrangement, including the
benefits that employees will receive upon termination, in
sufficient detail to enable employees to determine the type and
amount of benefits they will receive if they are involuntarily
terminated; (d) actions required to complete the plan indicate
that it is unlikely that significant changes to the plan will be
made or that the plan will be withdrawn; and (e) the plan has
been communicated to employees.
The Company has certain regulatory and legal matters outstanding,
as discussed further in note 13 “Commitments and
Contingencies.” Periodically, the status of all significant
outstanding matters is reviewed to assess the potential financial
exposure. When (i) it is probable that an asset has been
impaired or a liability has been incurred and (ii) the amount
of the loss can be reasonably estimated, the Company records the
estimated loss in the consolidated statements of operations.
Additionally, disclosure in the notes to the consolidated financial
statements is provided for loss contingencies that do not meet both
of these conditions if there is a reasonable possibility that a
loss may have been incurred that would materially impact the
financial position and results of operations. Significant judgment
is required to determine the probability that a liability has been
incurred and whether such liability is reasonably estimable.
The Company records accruals related to commercial, labor and tax
contingencies that may generate an obligation for the Company.
Accruals are made on the best information available at the time;
such analysis may be highly subjective. The final outcome of these
matters could vary significantly from the amounts included in the
accompanying consolidated financial statements.
Derivative instruments are carried at fair value on the
consolidated balance sheets. The fair values of the derivative
financial instruments generally represent the estimated amounts the
Company would expect to receive or pay upon termination of the
contracts as of the reporting date.
As of December 31, 2017 the Company maintained derivative
instruments consisting of foreign currency forward contracts. The
Company uses foreign currency forward contracts to hedge exposure
in currencies different from the reporting currency. The goal in
managing the foreign exchange risk is to reduce, to the extent
practicable, the potential exposure to exchange rate fluctuations
and its resulting effect on earnings, cash flows and financial
position. The foreign currency forward contracts are typically
short-term and do not qualify for hedge accounting treatment.
Changes in fair value are recorded in financial results.
Following is the derivatives position as of December 31, 2017
||Jan / Feb-18
||In each respective currency.
The changes in fair value of derivatives has been accounted for
under Financial income/(expense) in the consolidated statement of
Comprehensive income / (loss)
Comprehensive income / (loss) includes net income / (loss) as
currently reported under U.S. GAAP and also considers the effect of
additional economic events that are not required to be recorded in
determining net income, but are rather reported as a separate
component of shareholders’ deficit.
Other comprehensive income / (loss) includes the cumulative
translation adjustment relating to the translation of the financial
statements of the Company’s foreign subsidiaries (see Note 2
“Foreign currency translation”).
Compensation cost related to stock-based employee compensation
arrangements are accounted for at fair value at the time of grant.
The calculation of fair value is affected by the Company’s
stock price estimation as well as assumptions regarding a number of
highly complex and subjective variables at the time of the grant.
Compensation cost is recognized on a straight-line basis over the
requisite service period which commences on the grant date as there
exists a mutual understanding of the key terms and conditions at
the date the award is approved by the board of directors or other
management with relevant authority and the following conditions are
• The award is a unilateral grant and, therefore, the
recipient does not have the ability to negotiate the key terms and
conditions of the award with the employer.
• The key terms and conditions of the award had been
communicated to an individual recipient within a relatively short
time period from the date of approval.
Marketing and advertising expenses
The Company incurs advertising expense consisting of offline costs,
including television and radio advertising, and online advertising
expense to promote the business. The Company expenses the
production costs associated with advertisements in the period in
which the advertisement first takes place. The Company expenses the
costs of advertisement in the period during which the advertisement
space or airtime is consumed. Internet advertising expenses are
recognized based on the terms of the individual agreements, which
is generally over the greater of (i) the ratio of the number
of clicks delivered over the total number of contracted clicks, on
a pay-per-click basis, or
(ii) on a straight-line basis over the term of the
Advertising expenses for 2017, 2016 and 2015 amounted $ 144,777, $
102,770 and $149,814, respectively.
Accounting for income taxes
The Company is subject to U.S. and foreign income taxes. The
provision for income taxes includes federal and foreign taxes.
Income taxes are accounted for under the asset and liabilities
method. Under this method, deferred income tax assets and
liabilities are recognized for the future tax consequences
attributable to differences between the consolidated financial
statement carrying amounts of existing assets and liabilities and
their respective tax bases.
Deferred income tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years
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.
The Company set up a valuation allowance for that component of net
deferred tax assets which does not meet the more-likely-than-not criterion for
realization. A valuation allowance is recognized for a component of
net deferred tax assets, including tax loss carryforward, which is
assessed as not recoverable. As of December 31, 2017 and 2016
the valuation allowance amounted to $ 42,584 and $ 45,526,
Due to inherent complexities arising from the nature of the
Company’s business, future changes in income tax law,
transfer pricing new regulations or variances between actual and
anticipated operating results, the Company makes certain judgments
and estimates. Therefore, actual income taxes could materially vary
from those estimates.
As further discussed in note 14, in March 2015, the Company entered
into a $270,000 equity transaction with (sale of common stock to)
Expedia, Inc. (Expedia) while at the same time an agreement (the
Expedia Outsourcing Agreement a revenue arrangement for the Company
to act as an agent for Expedia in certain countries) was signed
which includes a $125,000 termination fee if certain minimum
revenue thresholds are not achieved or if and when the Company
ultimately terminates the agreement. At the same time as these
transactions occurred, the Company repurchased common stock of
certain shareholders seeking liquidity at the same purchase price
per share paid by Expedia to the Company under the Stock Purchase
The termination provisions of the Expedia Outsourcing Agreement
never expire and also could be triggered by Expedia if the Company
does not meet certain minimum volume commitments, which is not
within the Company’s control. Eventually, the Company will
terminate the agreement or there may be a change of control and
will need to refund $125,000 to Expedia. Accordingly, this payment
is not considered as a contingent payment but rather a known
payment with just a contingency as to timing of payment.
Following the guidance in ASC 505 and ASC 605-50, equity was credited at its
fair value with any remaining amounts paid attributable to other
elements of the arrangement.
Management has determined the fair value of the equity issued to
Expedia taking into account independent valuations, resulting in an
amount of approximately $145,000. Therefore, it was concluded that
the Expedia transaction was issued at a premium of approximately
$125,000, which was recorded as a liability to reflect the
According to the Expedia Outsourcing Agreement, the Company must
consistently generate a certain minimum volume of paid customer
activity for Expedia over the term of the Expedia Outsourcing
Agreement or Expedia would have the right to terminate the
agreement and the Company would be subject to pay $ 125,000 in
liquidated damages to Expedia. In addition, if in the future
management and the Company’s directors determine that the
Company should exit the Expedia Outsourcing Agreement after the
minimum term of seven years, which the Company has no present
intention of doing, it would be required to pay $ 125,000 to do so.
As the agreement with Expedia automatically renews indefinitely and
there is no way for the Company to exit the agreement and avoid
this payment without agreement from Expedia, the obligation to
ultimately pay Expedia upon termination of the arrangement (even if
delayed) represents a long-term liability in the amount of the $
125,000 termination fee.
The revenue derived from Expedia Lodging outsourcing agreement is
fixed and determinable and is not subject to any refund beyond the
$ 125,000 termination fee that has been fully accrued.
Stock issuance costs totaling $2,470 were recorded as a reduction
of stock purchase price.
Recently issued accounting pronouncements
The Company provides below a description of those standards which
are relevant to the Company’s business only and the impact of
their adoption if any.
New Revenue Recognition policy
In May 2014, the Financial Accounting Standards Board
(“FASB”) issued an Accounting Standard Update
(“ASU”) amending revenue recognition guidance and
requiring more detailed disclosures to enable users of financial
statements to understand the nature, amount, timing and uncertainty
of revenue and cash flows arising from contracts with customers. In
August 2015, the FASB issued an ASU deferring the effective date of
the revenue standard so it would be effective for annual and
interim reporting periods beginning after December 15, 2017.
In addition, the FASB has also issued several amendments to the
standard which clarify certain aspects of the guidance, including
principal versus agent consideration and identifying performance
The Company has determined that the new guidance will not change
our previous conclusion on net presentation. The Company has also
determined that the standard will affect the moment in which the
revenue is recognized for pre-paid refundable transactions and
transactions that are paid at destination. Under this standard,
companies are permitted to recognize revenue from transactions once
the performance obligation has been satisfied. As an intermediary
between customers and travel suppliers, the Company’s
performance obligation is concluded at the completion of the
transaction on the Company’s platform at the time of booking,
therefore the revenue can be recognized at that time, rather than
at the check-out date.
Concurrently, the Company will recognize a provision for
cancellations and customers failing to arrive for their
reservations for all refundable pre-paid sales and all pay-at-destination reserves
recognized under this criteria. The Company will adopt the modified
retrospective approach and the net impact in Revenue of this change
will be $43.9 million. This change will have an effect in
accumulated earnings of $37.8 million, net of tax effect.
The Company has completed the overall assessment and finalized the
quantification of the retained earnings impact. Additionally, the
Company has identified and implemented changes on its accounting
policies and practices, business processes, and controls to support
the new revenue recognition standard. The Company is continuing the
assessment of potential changes to its disclosures under the new
On February 25, 2016 the FASB issued ASU 2016-02. The amendments in
this update create Topic 842, Leases, which supersedes Topic
840, Leases. The core principle of Topic 842 is that a lessee
should recognize the assets and liabilities that arise from leases.
Previous GAAP did not require lease assets and lease liabilities to
be recognized for most leases. A lessee should recognize in the
statement of financial position a liability to make lease payments
(the lease liability) and a right-of-use asset representing
its right to use the underlying asset for the lease term. For
leases with a term of 12 months or less, a lessee is permitted to
make an accounting policy election by class of underlying asset not
to recognize lease assets and lease liabilities. Topic 842 retains
a distinction between finance leases and operating leases. The
classification criteria for distinguishing between finance leases
and operating leases are substantially similar to the
classification criteria for distinguishing between capital leases
and operating leases in the previous leases guidance. The result of
retaining a distinction between finance leases and operating leases
is that under the lessee accounting model in Topic 842, the effect
of leases in the statement of comprehensive income and the
statement of cash flows is largely unchanged from previous
GAAP. Based on existing leases currently classified as
operating leases, the Company expects to recognize on the
statements of financial position right-of-use assets and lease
liabilities. The amendments in this update are effective for fiscal
years beginning after December 15, 2018, including interim
periods within those fiscal years. The Company is assessing
the effects that the adoption of this accounting
pronouncement may have on the Company’s financial
On June 16, 2016 the FASB issued the ASU 2016-13 “Financial
Instruments-Credit Losses (Topic 326): Measurement of credit losses
on financial instruments”. This update amends guidance on
reporting credit losses for assets held at amortized cost basis and
available for sale debt securities. For assets held at amortized
cost basis, this update eliminates the probable initial recognition
threshold in current GAAP and, instead, requires an entity to
reflect its current estimate of all expected credit losses. For
available for sale debt securities, credit losses should be
measured in a manner similar to current GAAP, however this topic
will require that credit losses be presented as an allowance
rather than as a write-down. The new standard is effective for
fiscal years beginning after December 15, 2019. The Company is
assessing the effects that the adoption of this accounting
pronouncement may have on its financial statements.
In August 2016, the FASB issued Accounting Standard Update No.
2016-15, Statement of Cash Flows (topic 230):
Classification of Certain Cash Receipts and Cash
Payments (ASU 2016-15), which clarifies how companies present
and classify certain cash receipts and cash payments in the
statement of cash flows. The new guidance is effective for annual
periods, and interim periods within those annual periods, beginning
after December 15, 2017 with early adoption permitted. We plan to
adopt this new guidance on January 1, 2018 using the retrospective
transition approach for all periods presented. We do not expect the
adoption of this guidance to have a material impact on our
consolidated financial statements.
In November 2016, the FASB issued Accounting Standards Update No.
of Cash Flows (Topic 230): Restricted Cash (ASU
2016-18), which requires
companies to include amounts generally described as restricted cash
and restricted cash equivalents in cash and cash equivalents when
reconciling beginning-of-period and
end-of-period total amounts
shown on the statement of cash flows. We will adopt the new
standard effective January 1, 2018, using the retrospective
transition approach for all periods presented. We do not expect the
adoption of this guidance to have a material impact on our
consolidated financial statements.
In January 2017, the FASB issued ASU No. 2017-04. To simplify the
subsequent measurement of goodwill, the amendments eliminate Step 2
from the goodwill impairment test. The annual, or interim, goodwill
impairment test is performed by comparing the fair value of a
reporting unit with its carrying amount. An impairment charge
should be recognized for the amount by which the carrying amount
exceeds the reporting unit’s fair value; however, the loss
recognized should not exceed the total amount of goodwill allocated
to that reporting unit. In addition, income tax effects from any
tax deductible goodwill on the carrying amount of the reporting
unit should be considered when measuring the goodwill impairment
loss, if applicable. The amendments also eliminate the requirements
for any reporting unit with a zero or negative carrying amount to
perform a qualitative assessment and, if it fails that qualitative
test, to perform Step 2 of the goodwill impairment test. An entity
still has the option to perform the qualitative assessment for a
reporting unit to determine if the quantitative impairment test is
necessary. A public business entity should adopt the amendments for
its annual or any interim goodwill impairment tests in fiscal years
beginning after December 15, 2019. Early adoption is permitted for
interim or annual goodwill impairment tests performed on testing
dates after January 1, 2017. The adoption of this standard is not
expected to have a material impact on the Company’s financial
On May 10, 2017 the FASB issued “ASU 2017-09—Compensation—Stock
compensation (Topic 718): Scope of modification accounting”.
The amendments in the update provide guidance about types of
changes to the terms or conditions of share-based payment awards
would be required to apply modification accounting under Topic 718.
The new standard is effective for annual, and interim periods
within those annual periods, beginning after December 15, 2017
with early adoption permitted. The adoption of this standard
is not expected to have a material impact on the Company’s
On September 29, 2017 the FASB issued “ASU 2017-13—Revenue recognition
(Topic 605), Revenue from contracts with customers (Topic 606),
Leases (Topic 840), and Leases (Topic 842)”. This update
addresses Transition Related to Accounting Standards Updates No.
2014-09, Revenue from
Contracts with Customers (Topic 606), and No. 2016-02, Leases (Topic 842). This
Update also supersedes SEC paragraphs pursuant the rescission of
SEC Staff Announcement, “Accounting for Management Fees Based
on a Formula”, effective upon the initial adoption of Topic
606, Revenue from Contracts with Customers, and SEC Staff
Announcement, “Lessor Consideration of Third-Party Value
Guarantees,” effective upon the initial adoption of Topic
842, Leases. The adoption of this standard is not expected to
have a material impact on the Company’s financial
On November 22, 2017 the FASB issued “ASU
Statement—Reporting Comprehensive Income (Topic
220), Revenue Recognition (Topic 605), and Revenue from
Contracts with Customers (Topic
606)”. This update amends SEC paragraphs pursuant
to the SEC Staff Accounting Bulletin No. 116 and SEC Release
No. 33-10403, which
bring existing guidance into conformity with Topic 606, Revenue
from Contracts with Customers. The adoption of this standard
is not expected to have a material impact on
the Company’s financial statements.
On February 14, 2018 the FASB issued “ASU 2018-02—Income
Statement—Reporting Comprehensive Income (Topic 220):
Reclassification of Certain Tax Effects from Accumulated Other
Comprehensive Income”. This update allows a reclassification
from accumulated other comprehensive income to retained earnings
for stranded tax effects resulting from the Tax Cuts and Job Acts.
Because the amendments only relate to the reclassification of the
income tax effects of the Tax Cuts and Jobs Act, the
underlying guidance that requires that the effect of a change
in tax laws or rates be included in income from continuing
operations is not affected. The adoption of this standard
is not expected to have a material impact on
the Company’s financial statements.