Basis of Presentation
|3 Months Ended|
Mar. 31, 2019
|Accounting Policies [Abstract]|
|Basis of Presentation||
1. BASIS OF PRESENTATION
Our unaudited interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. In our opinion, the accompanying financial statements reflect all adjustments necessary for a fair presentation of our statements of financial position, results of operations and cash flows for the periods presented. Except as otherwise disclosed herein, these adjustments consist of normal recurring items. Operating results for interim periods are not necessarily indicative of results that may be expected for the fiscal year as a whole.
The preparation of the financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and the related disclosures at the date of the financial statements and during the reporting period. Actual results could materially differ from these estimates.
For further information, refer to the audited financial statements and notes thereto included in our Annual Report filed with the Securities and Exchange Commission (SEC) on March 12, 2019. The accompanying Balance Sheet as of December 31, 2018 was derived from the audited financial statements but it does not include all disclosures required by U.S. GAAP for a full set of financial statements. This Form 10-Q should be read in conjunction with the Company’s financial statements and notes included in the Annual Report on Form 10-K filed on March 12, 2019, as referenced above. We are only highlighting in this Form 10-Q the material changes from our disclosures in our Annual Report.
Inventories are recorded at the lower of cost or net realizable value and include all costs of seed production and grain we purchase as well as costs to transport and process the grain into finished products. Consideration we receive from our growers to purchase seed is reduction in the cost of inventory.
We evaluate inventory balances for obsolescence quarterly using projected selling prices for our products, market prices for the underlying agricultural markets, the age of products, and other factors considering our limited operating history.
Effective January 1, 2019, we designated all seed and grain production agreements as normal purchases and as a result no longer consider these agreements to be accounting derivatives. As a result, we no longer reflect these agreements at fair value. As of that date, any mark-to-market gains or losses were frozen on our balance sheet and will be reflected in inventory upon delivery as part of the cost of the associated grain.
Prior to the commercialization of our High Oleic Soybean Products in late February 2019, we expensed all costs associated with the production of seed and acquisition of grain, net of proceeds from seed sales, as research and development (R&D) expense.
We recognize sales revenue at the point in time control transfers to the customer, which is based on shipping terms. Sales include shipping and handling charges if billed to the customer and are reported net of trade promotion and other costs, including estimated allowances for returns, unsalable product, and prompt pay discounts. Sales, use, value-added and other excise taxes are not recognized in revenue. Trade promotions are recorded based on estimated participation and performance levels for offered programs at the time of sale. We generally do not allow a right of return. However, on a limited case-by-case basis with prior approval, we may allow customers to return product.
We also recognize revenue from R&D agreements and license agreements. Revenues from R&D agreements may consist of nonrefundable up-front payments, milestone payments, royalties, and services. In addition, we may license our technology to third parties, which may or may not be part of an R&D agreement.
Nonrefundable up-front payments are deferred and recognized as revenue over the term of the R&D agreement. If an R&D agreement is terminated before the original term of the agreement is fulfilled, all remaining deferred revenue is recognized at termination.
Milestone payments represent amounts received from our R&D partners, the receipt of which is dependent upon the achievement of certain scientific, regulatory, or commercial milestones. We recognize milestone payments when the triggering event has occurred, there are no further contingencies or services to be provided with respect to that event, and the counterparty has no right to refund of the payment.
We measure employee stock-based awards at grant-date fair value and record compensation expense over the vesting period of the award. Grants to nonemployees were previously remeasured each reporting period. Following the adoption of the new accounting pronouncement as discussed below, as of January 1, 2019, we no longer remeasure these awards as the fair value is determined on the grant date
Recently Adopted Accounting Pronouncements
In the first quarter of 2019, we adopted new accounting requirements for recognition of revenue from contracts with customers. We adopted these requirements using the cumulative effect approach. The adoption did not have an impact on our financial statements.
In the first quarter of 2019, we adopted new accounting requirements for share-based payment transactions for acquiring goods and services from nonemployees. The adoption did not have an impact on our financial statements as each of the share-based payment awards granted to nonemployees had a measurement date upon grant, and thus no cumulative adjustment to retained earnings was required.
The entire disclosure for the basis of presentation and significant accounting policies concepts. Basis of presentation describes the underlying basis used to prepare the financial statements (for example, US Generally Accepted Accounting Principles, Other Comprehensive Basis of Accounting, IFRS). Accounting policies describe all significant accounting policies of the reporting entity.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef