We assessed the materiality of the misstatements on prior periods financial statements in accordance with
SEC Staff Accounting Bulletin (SAB) Topic 1.M, Materiality, codified in ASC Topic 250, Accounting Changes and Error Corrections, (ASC 250) and concluded that the misstatements were not material to any prior
annual or interim periods. In accordance with ASC 250 (SAB Topic 1.N, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements), we have corrected these misstatements for all
prior periods presented by revising the condensed consolidated financial statements and other consolidated financial information included herein. We have revised, and will revise for annual and interim periods in future filings, certain amounts in
the consolidated financial statements to correct these misstatements. See Note 15 for additional information on the revision.
Newly Adopted Accounting
In March 2016, the Financial Accounting Standards Board (the FASB) issued Accounting Standards Update (ASU) 2016-09, Improvements to Employee Share-Based Payment Accounting. The new standard changes how companies account for certain aspects of share-based payments to employees. Entities must recognize the income
tax effects of awards in the statement of operations when the awards vest or are settled (i.e., additional paid-in capital pools were eliminated). The guidance changed regarding employers accounting for
an employees use of shares to satisfy the employers statutory income tax withholding obligation and for forfeitures. The guidance was effective for public business entities for fiscal years beginning after December 15, 2016, and
interim periods within those fiscal years. As of January 1, 2017, we adopted ASU 2016-09, and the effects of the standard are reflected in the three-month and nine-month periods ended September 30,
2017, balances. Upon adoption, we reclassified $0.7 million in historical tax benefits from deferred taxes to retained earnings. We will recognize prospective tax benefits in income tax expense. Tax payments in respect of shares withheld for
taxes are now classified in the financing section of the statement of cash flows. The calculation of diluted earnings per share now excludes tax benefits that would have generated more dilutive shares. The effects of the adoption were not material
to the financial statements.
Issuance of New Accounting Standards
Revenue Recognition. In May 2014, the FASB issued a new standard that provides a single, comprehensive revenue recognition model for all contracts with
customers and supersedes most of the existing revenue recognition requirements. Under the new guidance, revenue is recognized when a customer obtains control of promised goods or services in an amount that reflects the consideration the entity
expects to receive in exchange for those goods or services. The standard also requires disclosure of the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. Factors that will affect pre-and post-implementation include, but are not limited to, identifying all the contracts that exist and whether incidental obligations or marketing incentives included in some of those contracts are performance
obligations. Additionally, we are evaluating the transfer of control of certain consignment contracts which may impact the timing of revenue recognition under the new standard.
The standard will be effective for us beginning January 1, 2018. We intend to adopt the standard utilizing the modified retrospective transition method.
Under this transition method, we will recognize the cumulative effect of initially applying the new standard as an adjustment to the opening balance of retained earnings as of January 1, 2018, and will apply the new standard beginning with the
most current period presented to contracts that are not completed at the date of initial application. We continue to evaluate the adoption method throughout each phase of implementation.
While our ability to adopt the standard using the modified retrospective method depends on system readiness and completing our analysis of information
necessary to present required footnote disclosures in the consolidated financial statements, the implementation project remains on schedule. We have completed a diagnostic accounting assessment, including an analysis of a representative sample of
contracts, to identify areas that will be most significantly impacted by implementation of the new standard. We have also completed initial training to educate contract managers of the technical aspects of the new standard. We are in the process of
concluding on and documenting our assessments related to the standard as well as potential system and procedural changes. We are evaluating the impact the new standard will have on our financial condition, results of operations and cash flows. We
expect to complete our final evaluation of the impact of adopting the new standard during 2017.
Leases. In February 2016, the FASB issued ASU 2016-02, Leases. ASU 2016-02 creates Topic 842, Leases, in the ASC and supersedes ASC 840, Leases. Entities that hold numerous equipment and real estate
leases, in particular those with numerous operating leases, will be most affected by the new guidance. The lease accounting standard is effective for NN beginning January 1, 2019, with modified retrospective adoption required and early adoption
permitted. The amendments in ASU 2016-02 are expected to impact balance sheets at many companies by adding lease-related assets and liabilities. This may affect compliance with contractual agreements and loan
covenants. We have performed inquiries within segment locations and compiled information on operating and capital leases. We are currently evaluating the impacts of the lease accounting standard on our financial position, results of operations, and