Business Combinations.  The purchase price for business combinations is allocated to the estimated fair values of acquired tangible and intangible assets, including goodwill, and assumed liabilities, where applicable.  Additionally, we recognize customer relationships, trademarks and trade names, and non-competition agreements as identifiable intangible assets.  These assets are recorded at fair value as of the transaction date.  The fair value of these intangible assets is determined primarily using the income approach and using current industry information.  Goodwill is recorded when consideration transferred exceeds the fair value of identifiable assets and liabilities.  Measurement-period adjustments are recorded in the period they occur.  Contingent consideration is recorded at fair value at the acquisition date.

 

Recently Adopted Accounting Pronouncements:

 

In July 2015, the FASB issued ASU 2015-11 “Simplifying the Measurement of Inventory.”  Under this guidance, inventory should be measured at the lower of cost and net realizable value.  Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.  We adopted this guidance in the beginning of the first quarter of 2017.  The adoption of this amendment did not have a material impact on our financial position or results of operations.

 

Recently Issued Accounting Pronouncements Not Yet Adopted:

 

In May 2014, the FASB issued a new standard for revenue recognition, ASC 606.  Subsequent to issuing ASC 606, the FASB issued a number of updates and technical improvements which do not change the core principles of the guidance.  The purpose of ASC 606 is to provide a single, comprehensive revenue recognition model for all contracts with customers to improve comparability across industries.  ASC 606 is effective for us beginning January 1, 2018, (with early adoption permitted) and allows for full retrospective or modified retrospective methods of adoption.  In determining the applicability of ASC 606, we considered the general nature of our orders is short-term, based on a single deliverable, and not accounted for under industry-specific guidance.  We reviewed our revenue streams at both our Installation and Distribution segments.  Our initial assessment indicates that the adoption of the standard will likely not have a material impact on the amount or timing of our revenue recognition process.  Additional disclosures related to our revenues, contract balances, and judgments affecting recognition will be required.  We plan to apply the modified retrospective approach to transition to the new guidance, which would allow us to recognize the cumulative effect of initially applying the standard as an adjustment to the opening balance of retained earnings.  We do not plan to early adopt the standard.  We will continue to evaluate additional changes, modifications, clarifications, or interpretations issued by the FASB, which may impact our current conclusions.

 

In February 2016, the FASB issued ASU 2016-02, “Leases.”  This standard requires a lessee to recognize most leases on their balance sheet.  Companies are required to use a modified retrospective transition method for all existing leases.  This standard is effective for us beginning January 1, 2019.  Early adoption is permitted.  We have not yet selected an adoption date and we are currently evaluating the effect on our financial position and results of operations.

 

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses.”  This guidance introduces a current expected credit loss (“CECL”) model for the recognition of impairment losses on financial assets, including trade receivables.  The CECL model replaces current GAAP’s incurred loss model.  Under CECL, companies will record an allowance through current earnings for the expected credit loss for the life of the financial asset upon initial recognition of the financial asset.  This update is effective for us at the beginning of 2020 with early adoption permitted at the beginning of 2019.  We have not yet selected an adoption date and we are currently evaluating the effect on our financial position and results of operations.

 

In January 2017, the FASB issued ASU 2017-01, “Clarifying the Definition of a Business.  The new standard narrows the definition of a business and provides a framework for evaluation.  This update is effective for us beginning January 1, 2018 and will be applied prospectively.  We do not expect this update to have a material impact on our financial position or results of operations.

 

In January 2017, the FASB issued ASU 2017-04, “Simplifying the Test for Goodwill Impairment.”  The new standard simplifies the subsequent measurement of goodwill by eliminating the second step of the good will impairment test.  This update is effective for us beginning January 1, 2020.  Early adoption is permitted and the new standard will be applied on a prospective basis.  We have not yet selected an adoption date and we are currently evaluating the effect on our financial position and results of operations.