Video Display Corporation and Subsidiaries
Notes to Interim Condensed Consolidated Financial Statements
Note 1. Summary of Significant Accounting Policies
The interim condensed consolidated financial statements include the accounts of the Company and its majority-owned subsidiaries after
elimination of all significant intercompany accounts and transactions.
As contemplated by the Securities and Exchange Commission (the
SEC or Commission) instructions to Form 10-Q, the following footnotes have been condensed and, therefore, do not contain all disclosures required in connection with annual consolidated
financial statements. Reference should be made to the Companys year-end consolidated financial statements and notes thereto, including a description of the accounting policies followed by the Company,
contained in its Annual Report on Form 10-K as of and for the fiscal year ended February 28, 2018, as filed with the Commission. There are no material changes in accounting policy during the six months
ended August 31, 2018.
The condensed consolidated financial information included in this report has been prepared by the Company,
without audit. In the opinion of management, the interim condensed consolidated financial information included in this report contains all adjustments (all of which are normal and recurring) necessary for a fair presentation of the results for the
interim periods. Nevertheless, the results shown for interim periods are not necessarily indicative of results to be expected for the full year. The February 28, 2018 consolidated balance sheet data was derived from the audited consolidated
financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America (U.S. GAAP).
Effective March 1, 2018 we adopted Accounting Standards Update (ASU)
No. 2014-09, Revenue from Contracts with Customers and the additional related ASUs (ASC 606), which replaces existing revenue guidance and outlines a single set of comprehensive principles for
recognizing revenue under GAAP. We elected the modified retrospective method upon adoption with no impact to the opening retained earnings or revenue reported.
The adoption of ASC 606 represents a change in accounting principle that will more closely align revenue recognition with the delivery of the
Companys goods and services and will provide the financial statement readers with enhanced disclosures.
These standards provide
guidance on recognizing revenue, including a five-step method to determine when revenue recognition is appropriate.
Step 1: Identify the
contract with the customer
Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the performance obligations
Step 5: Recognize revenue as the Company satisfies a performance obligation
ASC 606 provides that revenue is recognized when control of the promised goods or services is transferred to customers at an amount that
reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. We generally satisfy performance obligations upon shipment of the product or service to the customer. This is consistent with the time
in which the customer obtains control of the product or service. For service contracts, which are transferred to the customer over time, revenue is recognized over time as the services are performed. Some contracts include installation services,
which are completed in a short period of time and the revenue is recognized when the installation is complete. Customized products with no alternative future use to the Company, and that have an enforceable right to payment for performance completed
to date, are also recorded over time. The Company considers this to be a faithful depiction of the transfer to the customer of revenue over time as the work or service is performed. Revenue is recognized as performance obligations are met, which
includes design, manufacture of product/system, installation and set-up. In certain cases, we recognize revenue using the
percentage-of-completion method of accounting. These are fixed price contracts. These types of contracts are satisfied over time. Based on the nature of products
provided or services performed, revenue is recognized as costs are incurred (the percentage of completion cost to cost method).