Revenue Recognition - Contracts with Customers. This standard was issued to achieve a consistent application of revenue recognition within the U.S., resulting in a single revenue model to be applied by reporting companies under U.S. GAAP. Under the new model, recognition of revenue occurs when a customer obtains control of promised goods or services in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, the new standard requires that reporting companies disclose the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers.
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Effective in the first quarter of 2018.
We plan to adopt the standard retrospectively with the cumulative effect of initially applying it recognized at the date of initial application ("modified retrospective" approach).
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Our assessment has identified a change in revenue recognition timing on our component sales made to distributors. We expect to recognize revenue when we deliver to the distributor rather than deferring recognition until the distributor sells the components.
On the date of initial application, we will remove the deferred net revenue on component sales made to distributors through a cumulative adjustment to retained earnings. We expect the revenue deferral, historically recognized in the following period, to be offset by the acceleration of revenue recognition as control of the product transfers to our customer.
Our assessment has also identified a change in expense recognition timing related to payments we make to our customers for distinct services they perform as part of cooperative advertising programs. We expect to recognize the expense for cooperative advertising in the period the marketing activities occur. We currently recognize the expense in the period the customer is entitled to participate in the program, which coincides with the period of sale.
On the date of initial adoption, we will capitalize the expense of cooperative advertising not performed through a cumulative adjustment to retained earnings. We expect the recognition of capitalized advertising to offset the deceleration in expense recognition until the marketing services are performed.
We will continue our assessment, operate parallel systems and processes, as well as finalize our evaluation of any changes to our accounting policies and disclosures. This excludes our planned divestiture of Intel Security Group (ISecG).
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Financial Instruments - Recognition and Measurement. Requires changes to the accounting for financial instruments that primarily affect equity investments, financial liabilities measured using the fair value option, and the presentation and disclosure requirements for such instruments.
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Effective in the first quarter of 2018.
Certain elements of the new standard are required to be adopted using a modified-retrospective approach through a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. Other elements will be adopted prospectively.
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We expect marketable equity securities, previously classified as available-for-sale equity investments, to be measured and recorded at fair value and all unrealized gains or losses previously recorded in accumulated other comprehensive income (loss) will be recorded in earnings.
We are continuing to assess the overall impacts of the new standard, including the impact to our significant accounting policies with regard to non-marketable equity securities classified as cost method investments.
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