SEC Company Response from Barnes & Noble Education, Inc. (BNED) (CIK 0001634117) (BNED) — May 2, 2017
Barnes & Noble Education, Inc. (BNED) (CIK 0001634117)
Date: May 2, 2017 · CIK: 0001634117 · Accession: 0001634117-17-000053
AI Filing Summary & Sentiment
Reasoning
File numbers found in text: 001-37499
Referenced dates: April 7, 2017
Letter
VIA EDGAR CORRESPONDENCE Office of Consumer Products United States Securities and Exchange Commission Division of Corporation Finance Filed June 29, 2016 Form 10-Q for Fiscal Quarter Ended January 28, 2017 Filed February 28, 2017 File No. 001-37499
Dear Ms. Thompson:
As Chief Financial Officer of Barnes & Noble Education, Inc. (the “Company”), I am responding to your letter dated April 7, 2017 (the “Comment Letter”) to Max J. Roberts, the Company’s Chief Executive Officer. To facilitate your review, each comment in the Comment Letter is set forth below in bold type and my corresponding response appears below it in ordinary type.
Form 10-K for Fiscal Year Ended April 30, 2016
Item 8. Financial Statements and Supplementary Data
Note 2. Summary of Significant Accounting Policies
Merchandise Inventories, page 53
1.
We note your disclosure that market value of your inventory is determined based on its estimated net realizable value, which is generally the selling price. Please clarify why you do not indicate net realizable value is based on estimated selling prices less normally predictable costs of completion, disposal and transportation, as defined in ASC 330-10-20 and discussed in ASC 330-10-35. Please revise or advise us why you believe no revision is necessary.
Response:
We will revise our disclosure in future filings to clarify that disposal and transportation costs, where reasonably predictable, are factored into the determination of estimated net realizable value for our merchandise inventories in accordance with the guidance of ASC 330-10-35. Our inventory is comprised of finished goods and we do not incur costs to complete the products in our inventory. In future filings, we will add the underlined language below to our previous disclosure as follows:
“Market value of our inventory, which is all purchased finished goods, is determined based on its estimated net realizable value, which is generally the selling price less normally predictable costs of disposal and transportation.”
Property and Equipment, page 54
2.
We note your disclosure in footnote (a) that leasehold improvements are capitalized and depreciated over the terms of the respective leases. Please confirm whether or not you depreciate leasehold improvements over the shorter of the lease term or the useful life of the improvements pursuant to the guidance in ASC 840-10-35-6. If you follow such guidance, please revise your disclosures accordingly.
Response:
We confirm that our leasehold improvements are depreciated over the shorter of the lease term, or the useful life of the improvements, as required by the guidance of ASC 840-10-35-6. We will revise our disclosure in future filings to include this clarification with the underlined language added to our previous disclosure as follows:
“Leasehold improvements are capitalized and depreciated over the shorter of the lease term or the useful life of the improvements, ranging from one to 15 years.”
Revenue Recognition and Deferred Revenue, page 55
3.
We note your disclosure that you recognize revenue from the rental of digital textbooks at the time of sale and that once the digital content is delivered to the customer your performance obligation is complete. Please explain how your performance obligation is complete at the time of sale. Also clarify whether you recognize revenue from the rental of digital textbooks gross as a principal or net as an agent and the reasons supporting your accounting treatment. If such revenues are recognized net, please disclose such information in future filings.
Response:
The rental of a digital textbook allows the customer unrestricted access to digital content for a fixed period of time, typically 180 days or less, via our Yuzu® eTextbook reading platform. Once the digital rental product is purchased by our customer, the content is made available either directly through their Yuzu® digital library or via a redeemable access code provided at the time of purchase. Additionally, we have outsourced the hosting and delivery of eTextbooks to a third-party (Vital Source Technologies, Inc.) which is providing service under the Yuzu® brand. As with the purchase of our other physical or digital products offerings, the customer has full access to the content immediately following the purchase of the digital rental. For digital purchases, our policy is that we do not offer refunds on digital content once accessed. We have an obligation to deliver the purchased content to the customer and, regardless of the format (with expiration date or without)
or the method of delivery (direct insert to locker or issuance of access codes), the content is considered delivered when the customer is granted the right to access the content. Additionally, we have evaluated the ongoing commitments and costs after delivery of the digital textbook rental and have determined them to be immaterial. As such, no deferral of the digital textbook rental revenue was deemed necessary as delivery, in all material aspects, was completed at the time of the digital textbook rental sale.
We provide digital textbook rentals to customers that fall broadly under two sales models: agency or reseller. We have considered all the relevant indicators listed within ASC 605-45-45 and determined that we hold similar obligations under each of the respective sales models with regard to the following indicators:
•
We do not have discretion in supplier selection as the specific titles are adopted by the schools or individual professors and are publisher specific (ASC 605-45-45-10).
•
We review and test the product specifications under both models to ensure compatibility of the content with Yuzu® eTextbook reading functionality (ASC 605-45-45-11).
•
We have credit risk under both models (ASC 605-45-45-13).
The distinction between the agency model and reseller model is the ability to establish the selling price of the product. Specifically:
•
Under an agency model, we do not have the ability to establish the selling price and are instead compensated either with a fixed percentage or dollar amount per transaction. (ASC 605-45-45-17).
•
Under a reseller model, we have discretion in establishing the selling price. (ASC 605-45-45-8).
The majority of our digital textbook rental sales are recognized under an agency model. Sales under an agency model are recognized on a net basis as the fixed compensation amount received is an indicator of net revenue reporting under ASC 605-45-45-17. Conversely, given that the ability to establish the selling price is an indicator of gross revenue reporting under ASC 605-45-45-8, we recognize sales under the reseller model on a gross basis.
In future filings, we will modify the disclosure and add the underlined language below to our previous disclosure as follows:
We rent both physical and digital textbooks. Revenue from the rental of physical textbooks is deferred and recognized over the rental period commencing at point of sale. We offer a buyout option to allow the purchase of a rented book at the end of the rental period. We record the buyout purchase when the customer exercises and pays the buyout option price. In these instances, we would accelerate any remaining deferred rental revenue at the point of sale.
Revenue from the rental of digital textbooks is recognized at time of sale. A software feature is embedded within the content of our digital textbooks, such that upon expiration of the rental term the customer is no longer able to access the content. While the digital rental allows the customer to access digital content for a fixed period of time, once the digital content is delivered to the customer our performance obligation is complete. We primarily record digital textbook rental sales on a net basis in accordance with ASC 605-45-45, Reporting Revenue Gross as a Principal versus Net as an Agent.
Change in Accounting Principle and Error Corrections, page 56
4.
We note your disclosure here and in Note 9 that you corrected two errors in your May 2, 2015 balance sheet, including an error correction impacting cash and accounts payable and an intercompany LIFO tax reserve error correction impacting other long-term liabilities and the Parent company investment. Please address the following comments related to these errors:
•
Tell us in further detail the nature of your intercompany LIFO reserve tax error. In doing so, explain why the error had no impact on your income and cash flows.
•
Provide us with your materiality analysis under SAB Topic 1:M that supports your determination that these errors were not qualitatively or quantitatively material.
•
Tell us how you considered the impact of these errors on your conclusions with respect to the effectiveness of your internal control over financial reporting and your disclosure controls and procedures.
Response:
Intercompany LIFO Reserve Tax Error
During the first quarter of Fiscal Year 2016, we identified an immaterial balance sheet error correction, resulting in an increase to other long-term liabilities and a decrease to Parent company investment by $63.5 million and $58.3 for the periods ended as of May 2, 2015 (Fiscal Year 2015) and August 2, 2014 (Fiscal Year 2014), respectively.
The LIFO reserve tax matter related to a non-routine process that occurred only as a result of the spin-off transaction from Barnes & Noble, Inc., (the “Former Parent”) and creation of our carve-out financial statements. Historically, the LIFO reserve was included in intercompany liabilities with our Former Parent, along with the regular income tax liability associated with our operations. During the financial statement close process, our Former Parent would adjust the LIFO reserve balance out of intercompany to appropriately reflect it as a long-term liability on their consolidated balance sheet. In connection with the spin-off transaction, our Former Parent agreed to forgive the then current intercompany payable from us, inclusive of the taxes payable related to our operations. After the calculation of the income tax provision, the entire intercompany liability balance was then deemed contributed to capital by our Former Parent. This had the effect of eliminating the long-term tax liability that we will ultimately be obligated to pay to the taxing authorities as the LIFO reserve reverses. However, the liability should not have been deemed contributed as the long-term obligation to the tax authority is required to remain with us as we would be legally obligated to pay that amount when due.
Therefore, we corrected the balance sheet classification error between equity (overstated) and long-term payables (understated) and determined there was no impact to the income statement, cash or working capital. We also reviewed all other tax and intercompany accounts and no other amounts were inappropriately classified. There was a cash flow statement classification change in other long-term liabilities (overstated cash flow from operations) and net transfer from Parent (understated cash flow from financing).
Based on the quantitative and qualitative discussion below, we assessed the materiality of the error to determine if the previously issued Fiscal Year 2015 and Fiscal Year 2014 consolidated financial statements should be restated and reissued and determined that no restatement was necessary.
Materiality Assessment -Quantitative Considerations
There was no impact on the following items had the tax liability been correctly reflected in other long-term liabilities rather than Parent company investment for any of the periods presented.
• Pre-tax Net Income
• Cash and Cash Equivalents
• Income Tax Expense
• Working Capital
• Net Income
• Bank Covenants
• Earnings Per Share
• Non-GAAP Measures
• Total Assets
• Net Increase/Decrease in Cash and Cash Equivalents
The following reflects the impact of the LIFO tax classification error, and does not include the subsequently identified correction related to Cash and Accounts Payable that is further discussed in the subsection below, for the periods presented (in thousands of dollars, except percentages):
Fiscal Year
Total Revenues
As Reported
1,772,998
1,747,922
Corrected
1,772,998
1,747,922
Net Change
—
—
% Change
%
%
EBITDA
As Reported
84,069
106,339
Corrected
84,069
106,339
Net Change
—
—
% Change
%
%
Net Income
As Reported
19,132
35,106
Corrected
19,132
35,106
Net Change
—
—
% Change
%
%
Cash and Cash Equivalents
As Reported
59,714
144,269
Corrected
59,714
144,269
Net Change
—
—
% Change
%
%
Total Assets
As Reported
1,129,924
1,143,760
Corrected
1,129,924
1,143,760
Net Change
—
—
% Change
%
%
Total Liabilities
As Reported
339,796
335,825
Corrected
403,255
394,123
Net Change
63,459
58,298
% Change
18.7
%
17.4
%
Total Parent Investment/(Equity)
As Reported
790,128
424,538
Corrected
726,669
366,240
Net Change
(63,459)
(58,298)
% Change
(8.0
)%
(13.7
)%
Total Parent Investment/PMI Shareholders’ Equity
Adjusted 1
790,128
807,935
Corrected
726,669
749,637
Net Change
(63,459)
(58,298)
% Change
(8.0
)%
(7.2
)%
Net cash flow provided by operating activities
As Reported
13,520
65,804
Corrected
18,681
61,609
Net Change2
5,161
(4,195)
% Change
38.2
%
(6.4
)%
Net cash flow (used in) provided by financing activities
As Reported
32,527
60,490
Corrected
(45,051)
64,685
Net Change2
(5,161)
4,195
% Change
12.9
%
6.9
%
Net increase/decrease in cash and cash equivalents
As Reported
(84,555)
88,849
Corrected
(84,555)
88,849
Net Change
—
—
% Change
%
%
LIFO Long-Term Payable
63,459
58,298
Preferred membership interests1
—
383,397
1 - Shown for informational purposes. Microsoft and Pearson previously had an investment in BNED which was terminated FY15. This is the driver of the difference in equity between FY15 and FY14. When including the Preferred membership interests as equity, the impact of the error is consistent for all years.
2 - The Net Change balance identified for the respective periods above is the amount specific to the LIFO Reserve tax matter correction.
Based upon the quantitative analysis above, there was no impact to the income statement. While there was an impact of approximately $4.2 million and $5.2 million shifting between operating and financing cash flows in Fiscal Year 2014 and Fiscal Year 2015, respectively, there was no impact to cash and cash equivalents overall. There is a material quantitative balance sheet impact to long-term liabilities and equity, but based upon the qualitative considerations discussed below, we believe that, when taken in the context of the entire balance sheet, this is an immaterial balance sheet error correction.
Materiality Assessment - Qualitative Considerations
We considered certain qualitative factors set forth in SAB Topic 1:M related guidance and such other factors we considered relevant when assessing whether the prior period balance sheet misstatements are material to the Fiscal Year 2014 and Fiscal Year 2015 financial statements as outlined below:
•
Whether the misstatement arises from an item capable of precise measurement or whether it arises from an estimate and, if so, the degree of imprecision inherent in the estimate - The calculation of the tax liability was a precise measurement and was calculated correctly. The classification on the balance sheet was an error as w
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CORRESP 1 filename1.htm Document May 2, 2017 VIA EDGAR CORRESPONDENCE Ms. Jennifer Thompson Accounting Branch Chief Office of Consumer Products United States Securities and Exchange Commission Division of Corporation Finance 100 F Street, N.E. Washington, D.C. 20549 RE: Barnes & Noble Education, Inc. Form 10-K for Fiscal Year Ended April 30, 2016 Filed June 29, 2016 Form 10-Q for Fiscal Quarter Ended January 28, 2017 Filed February 28, 2017 File No. 001-37499 Dear Ms. Thompson: As Chief Financial Officer of Barnes & Noble Education, Inc. (the “Company”), I am responding to your letter dated April 7, 2017 (the “Comment Letter”) to Max J. Roberts, the Company’s Chief Executive Officer. To facilitate your review, each comment in the Comment Letter is set forth below in bold type and my corresponding response appears below it in ordinary type. Form 10-K for Fiscal Year Ended April 30, 2016 Item 8. Financial Statements and Supplementary Data Note 2. Summary of Significant Accounting Policies Merchandise Inventories, page 53 1. We note your disclosure that market value of your inventory is determined based on its estimated net realizable value, which is generally the selling price. Please clarify why you do not indicate net realizable value is based on estimated selling prices less normally predictable costs of completion, disposal and transportation, as defined in ASC 330-10-20 and discussed in ASC 330-10-35. Please revise or advise us why you believe no revision is necessary. 1 Response: We will revise our disclosure in future filings to clarify that disposal and transportation costs, where reasonably predictable, are factored into the determination of estimated net realizable value for our merchandise inventories in accordance with the guidance of ASC 330-10-35. Our inventory is comprised of finished goods and we do not incur costs to complete the products in our inventory. In future filings, we will add the underlined language below to our previous disclosure as follows: “Market value of our inventory, which is all purchased finished goods, is determined based on its estimated net realizable value, which is generally the selling price less normally predictable costs of disposal and transportation.” Property and Equipment, page 54 2. We note your disclosure in footnote (a) that leasehold improvements are capitalized and depreciated over the terms of the respective leases. Please confirm whether or not you depreciate leasehold improvements over the shorter of the lease term or the useful life of the improvements pursuant to the guidance in ASC 840-10-35-6. If you follow such guidance, please revise your disclosures accordingly. Response: We confirm that our leasehold improvements are depreciated over the shorter of the lease term, or the useful life of the improvements, as required by the guidance of ASC 840-10-35-6. We will revise our disclosure in future filings to include this clarification with the underlined language added to our previous disclosure as follows: “Leasehold improvements are capitalized and depreciated over the shorter of the lease term or the useful life of the improvements, ranging from one to 15 years.” Revenue Recognition and Deferred Revenue, page 55 3. We note your disclosure that you recognize revenue from the rental of digital textbooks at the time of sale and that once the digital content is delivered to the customer your performance obligation is complete. Please explain how your performance obligation is complete at the time of sale. Also clarify whether you recognize revenue from the rental of digital textbooks gross as a principal or net as an agent and the reasons supporting your accounting treatment. If such revenues are recognized net, please disclose such information in future filings. Response: The rental of a digital textbook allows the customer unrestricted access to digital content for a fixed period of time, typically 180 days or less, via our Yuzu® eTextbook reading platform. Once the digital rental product is purchased by our customer, the content is made available either directly through their Yuzu® digital library or via a redeemable access code provided at the time of purchase. Additionally, we have outsourced the hosting and delivery of eTextbooks to a third-party (Vital Source Technologies, Inc.) which is providing service under the Yuzu® brand. As with the purchase of our other physical or digital products offerings, the customer has full access to the content immediately following the purchase of the digital rental. For digital purchases, our policy is that we do not offer refunds on digital content once accessed. We have an obligation to deliver the purchased content to the customer and, regardless of the format (with expiration date or without) 2 or the method of delivery (direct insert to locker or issuance of access codes), the content is considered delivered when the customer is granted the right to access the content. Additionally, we have evaluated the ongoing commitments and costs after delivery of the digital textbook rental and have determined them to be immaterial. As such, no deferral of the digital textbook rental revenue was deemed necessary as delivery, in all material aspects, was completed at the time of the digital textbook rental sale. We provide digital textbook rentals to customers that fall broadly under two sales models: agency or reseller. We have considered all the relevant indicators listed within ASC 605-45-45 and determined that we hold similar obligations under each of the respective sales models with regard to the following indicators: • We do not have discretion in supplier selection as the specific titles are adopted by the schools or individual professors and are publisher specific (ASC 605-45-45-10). • We review and test the product specifications under both models to ensure compatibility of the content with Yuzu® eTextbook reading functionality (ASC 605-45-45-11). • We have credit risk under both models (ASC 605-45-45-13). The distinction between the agency model and reseller model is the ability to establish the selling price of the product. Specifically: • Under an agency model, we do not have the ability to establish the selling price and are instead compensated either with a fixed percentage or dollar amount per transaction. (ASC 605-45-45-17). • Under a reseller model, we have discretion in establishing the selling price. (ASC 605-45-45-8). The majority of our digital textbook rental sales are recognized under an agency model. Sales under an agency model are recognized on a net basis as the fixed compensation amount received is an indicator of net revenue reporting under ASC 605-45-45-17. Conversely, given that the ability to establish the selling price is an indicator of gross revenue reporting under ASC 605-45-45-8, we recognize sales under the reseller model on a gross basis. In future filings, we will modify the disclosure and add the underlined language below to our previous disclosure as follows: We rent both physical and digital textbooks. Revenue from the rental of physical textbooks is deferred and recognized over the rental period commencing at point of sale. We offer a buyout option to allow the purchase of a rented book at the end of the rental period. We record the buyout purchase when the customer exercises and pays the buyout option price. In these instances, we would accelerate any remaining deferred rental revenue at the point of sale. Revenue from the rental of digital textbooks is recognized at time of sale. A software feature is embedded within the content of our digital textbooks, such that upon expiration of the rental term the customer is no longer able to access the content. While the digital rental allows the customer to access digital content for a fixed period of time, once the digital content is delivered to the customer our performance obligation is complete. We primarily record digital textbook rental sales on a net basis in accordance with ASC 605-45-45, Reporting Revenue Gross as a Principal versus Net as an Agent. 3 Change in Accounting Principle and Error Corrections, page 56 4. We note your disclosure here and in Note 9 that you corrected two errors in your May 2, 2015 balance sheet, including an error correction impacting cash and accounts payable and an intercompany LIFO tax reserve error correction impacting other long-term liabilities and the Parent company investment. Please address the following comments related to these errors: • Tell us in further detail the nature of your intercompany LIFO reserve tax error. In doing so, explain why the error had no impact on your income and cash flows. • Provide us with your materiality analysis under SAB Topic 1:M that supports your determination that these errors were not qualitatively or quantitatively material. • Tell us how you considered the impact of these errors on your conclusions with respect to the effectiveness of your internal control over financial reporting and your disclosure controls and procedures. Response: Intercompany LIFO Reserve Tax Error During the first quarter of Fiscal Year 2016, we identified an immaterial balance sheet error correction, resulting in an increase to other long-term liabilities and a decrease to Parent company investment by $63.5 million and $58.3 for the periods ended as of May 2, 2015 (Fiscal Year 2015) and August 2, 2014 (Fiscal Year 2014), respectively. The LIFO reserve tax matter related to a non-routine process that occurred only as a result of the spin-off transaction from Barnes & Noble, Inc., (the “Former Parent”) and creation of our carve-out financial statements. Historically, the LIFO reserve was included in intercompany liabilities with our Former Parent, along with the regular income tax liability associated with our operations. During the financial statement close process, our Former Parent would adjust the LIFO reserve balance out of intercompany to appropriately reflect it as a long-term liability on their consolidated balance sheet. In connection with the spin-off transaction, our Former Parent agreed to forgive the then current intercompany payable from us, inclusive of the taxes payable related to our operations. After the calculation of the income tax provision, the entire intercompany liability balance was then deemed contributed to capital by our Former Parent. This had the effect of eliminating the long-term tax liability that we will ultimately be obligated to pay to the taxing authorities as the LIFO reserve reverses. However, the liability should not have been deemed contributed as the long-term obligation to the tax authority is required to remain with us as we would be legally obligated to pay that amount when due. Therefore, we corrected the balance sheet classification error between equity (overstated) and long-term payables (understated) and determined there was no impact to the income statement, cash or working capital. We also reviewed all other tax and intercompany accounts and no other amounts were inappropriately classified. There was a cash flow statement classification change in other long-term liabilities (overstated cash flow from operations) and net transfer from Parent (understated cash flow from financing). Based on the quantitative and qualitative discussion below, we assessed the materiality of the error to determine if the previously issued Fiscal Year 2015 and Fiscal Year 2014 consolidated financial statements should be restated and reissued and determined that no restatement was necessary. 4 Materiality Assessment -Quantitative Considerations There was no impact on the following items had the tax liability been correctly reflected in other long-term liabilities rather than Parent company investment for any of the periods presented. • Pre-tax Net Income • Cash and Cash Equivalents • Income Tax Expense • Working Capital • Net Income • Bank Covenants • Earnings Per Share • Non-GAAP Measures • Total Assets • Net Increase/Decrease in Cash and Cash Equivalents The following reflects the impact of the LIFO tax classification error, and does not include the subsequently identified correction related to Cash and Accounts Payable that is further discussed in the subsection below, for the periods presented (in thousands of dollars, except percentages): Fiscal Year 2015 2014 Total Revenues As Reported 1,772,998 1,747,922 Corrected 1,772,998 1,747,922 Net Change — — % Change 0 % 0 % EBITDA As Reported 84,069 106,339 Corrected 84,069 106,339 Net Change — — % Change 0 % 0 % Net Income As Reported 19,132 35,106 Corrected 19,132 35,106 Net Change — — % Change 0 % 0 % Cash and Cash Equivalents As Reported 59,714 144,269 Corrected 59,714 144,269 Net Change — — % Change 0 % 0 % Total Assets As Reported 1,129,924 1,143,760 Corrected 1,129,924 1,143,760 Net Change — — % Change 0 % 0 % 5 Total Liabilities As Reported 339,796 335,825 Corrected 403,255 394,123 Net Change 63,459 58,298 % Change 18.7 % 17.4 % Total Parent Investment/(Equity) As Reported 790,128 424,538 Corrected 726,669 366,240 Net Change (63,459) (58,298) % Change (8.0 )% (13.7 )% Total Parent Investment/PMI Shareholders’ Equity Adjusted 1 790,128 807,935 Corrected 726,669 749,637 Net Change (63,459) (58,298) % Change (8.0 )% (7.2 )% Net cash flow provided by operating activities As Reported 13,520 65,804 Corrected 18,681 61,609 Net Change2 5,161 (4,195) % Change 38.2 % (6.4 )% Net cash flow (used in) provided by financing activities As Reported 32,527 60,490 Corrected (45,051) 64,685 Net Change2 (5,161) 4,195 % Change 12.9 % 6.9 % Net increase/decrease in cash and cash equivalents As Reported (84,555) 88,849 Corrected (84,555) 88,849 Net Change — — % Change 0 % 0 % LIFO Long-Term Payable 63,459 58,298 Preferred membership interests1 — 383,397 1 - Shown for informational purposes. Microsoft and Pearson previously had an investment in BNED which was terminated FY15. This is the driver of the difference in equity between FY15 and FY14. When including the Preferred membership interests as equity, the impact of the error is consistent for all years. 2 - The Net Change balance identified for the respective periods above is the amount specific to the LIFO Reserve tax matter correction. Based upon the quantitative analysis above, there was no impact to the income statement. While there was an impact of approximately $4.2 million and $5.2 million shifting between operating and financing cash flows in Fiscal Year 2014 and Fiscal Year 2015, respectively, there was no impact to cash and cash equivalents overall. There is a material quantitative balance sheet impact to long-term liabilities and equity, but based upon the qualitative considerations discussed below, we believe that, when taken in the context of the entire balance sheet, this is an immaterial balance sheet error correction. 6 Materiality Assessment - Qualitative Considerations We considered certain qualitative factors set forth in SAB Topic 1:M related guidance and such other factors we considered relevant when assessing whether the prior period balance sheet misstatements are material to the Fiscal Year 2014 and Fiscal Year 2015 financial statements as outlined below: • Whether the misstatement arises from an item capable of precise measurement or whether it arises from an estimate and, if so, the degree of imprecision inherent in the estimate - The calculation of the tax liability was a precise measurement and was calculated correctly. The classification on the balance sheet was an error as w