|9 Months Ended|
Nov. 30, 2018
|New Accounting Pronouncements and Changes in Accounting Principles [Abstract]|
Recently adopted accounting guidance –
In May 2014, the FASB issued guidance regarding the recognition of revenue from contracts with customers. Under this guidance, an entity will recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Additionally, this guidance requires improved disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.
We adopted this guidance on March 1, 2018, using the retrospective application method to allow for comparable reporting in all periods throughout the year ending February 28, 2019. Based on our analysis, we concluded that the adoption of the amended guidance did not have a material impact on our net sales recognition. However, the broad definition of variable consideration under this guidance requires us to estimate and recognize certain variable payments resulting from various sales incentives earlier than we have historically recognized them. This change in the timing of when we recognize sales incentive expenses resulted in a shift in net sales recognition primarily between our fiscal quarters. Under the retrospective application method, we recognized the cumulative impact of adopting this guidance in the first quarter of fiscal 2019 with a reduction to our March 1, 2016, opening retained earnings of $49.0 million, net of income tax effect, with an offsetting increase to current accrued promotion expense and the recognition of a deferred tax asset to align the timing of when we recognize sales incentive expense and when we recognize revenue.
The effects of the retrospective application method on our consolidated financial statements for the periods presented in this report were as follows:
The adoption of the revenue recognition guidance had no impact to cash flows from operating, financing or investing activities in our consolidated statement of cash flows for the nine months ended November 30, 2017.
In October 2016, the FASB issued guidance that simplifies the accounting for the income tax consequences of intra-entity transfers of assets other than inventory. Under this guidance, an entity is required to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. Prior guidance prohibited the recognition in earnings of current and deferred income taxes for an intra-entity asset transfer until the asset had been sold to an outside party or recovered through use.
We adopted this guidance on March 1, 2018, using the modified retrospective basis, which requires a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. Based on our assessment of intra-entity asset transfers that are in scope and the related deferred income taxes, in the first quarter of fiscal 2019, we recognized a net increase in our March 1, 2018, opening retained earnings and deferred tax assets of $2.2 billion, primarily in connection with the intra-entity transfer of certain intellectual property related to our imported beer business for the year ended February 28, 2018.
Accounting guidance not yet adopted –
In February 2016, the FASB issued guidance for the accounting for leases. Under this guidance, a lessee will recognize assets and liabilities on its balance sheet for most leases, but will recognize expense similar to current lease accounting guidance. Additionally, this guidance requires enhanced disclosures regarding the amount, timing and uncertainty of cash flows arising from leasing arrangements. We are required to adopt this guidance for our annual and interim periods beginning March 1, 2019. We intend to implement this guidance under the modified retrospective approach and apply the transition method which does not require adjustments to comparative periods or require modified disclosures for those comparative periods.
The guidance provides a number of optional practical expedients in transition. We expect to elect all of the available transition practical expedients, other than the use-of-hindsight. We are currently preparing to implement changes to our accounting policies, systems and controls, including the implementation of new leasing software capable of producing the required data for accounting and disclosure purposes. Based on analysis to date, we do not expect the adoption of this guidance to have a material impact on our results of operations or liquidity. We are in the process of quantifying the impact on our financial condition from applying this guidance, including the recognition of new right-of-use assets and lease liabilities associated with our operating leases. Among other items, we are finalizing (i) the development and application of the rates at which future lease payments will be discounted and (ii) the review of our existing contracts for embedded lease arrangements. Our assessment will be completed during the fourth quarter of fiscal 2019.
The guidance also provides practical expedients for an entity’s ongoing accounting. We expect to elect the short-term lease recognition exemption which will allow us to not recognize right-of-use assets and lease liabilities for all leases with an initial term of 12 months or less. We also expect to elect the practical expedient to not separate lease and non-lease components for all of our leases.
The entire disclosure of changes in accounting principles, including adoption of new accounting pronouncements, that describes the new methods, amount and effects on financial statement line items.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef