On January 1, 2018, the Company adopted Accounting Standards Codification Topic 606 – “Revenue from Contracts with Customers” (“ASC 606”), using the modified retrospective method. Results for reporting periods beginning after January 1, 2018 are presented under the new revenue recognition standard, while prior period amounts are not adjusted and continue to be reported under the accounting standards in effect for the prior periods.

 

The Company recorded a net decrease to opening accumulated deficit of $0.1 million as of January 1, 2018 due to the cumulative impact of adopting ASC 606, with the impact primarily related to the licensing of our restaurants and the amortization of fees associated with our license agreements. The changes were as follows (in thousands):

 

		Balance at December 31, 2017			ASC 606 Adjustments			Balance at January 1, 2018
Liabilities
Deferred license revenue, current		$	115		$	100		$	215
Deferred license revenue, long-term			1,222			(46)			1,176
Equity
Accumulated deficit			(31,979)			(54)			(32,033)

 

Under ASC 606, because the services we provide that are related to initial license fees and upfront fees related to our license agreements do not contain separate and distinct performance obligations from the license right, these fees will be recognized on a straight line basis over the term of the licensee agreement. Under previous guidance, initial license fees were recognized when the related services had been provided, which was generally upon the opening of the restaurant, and upfront fees were recognized on a pro-rata basis as restaurants under the development agreement were opened. These fees will continue to be recorded as a component of management, license and incentive fee revenue on the consolidated statement of operations and comprehensive income (loss). ASC 606 requires sales-based royalties to continue to be recognized as licensee restaurant sales occur. 

 

The impact of adopting ASC 606 as compared to the previous recognition guidance on our consolidated statement of operations and comprehensive income (loss) was as follows (in thousands):

 

		For the quarter ended March 31, 2018
		As Reported			Balances Without Adoption of ASC 606			Adoption Impact of ASC 606
Revenues
Management, license and incentive fee revenues			2,436			2,407			29
Net income			118			89			29