Organization and Basis of Presentation (Policies)
|9 Months Ended
Jun. 30, 2018
|Organization, Consolidation and Presentation of Financial Statements [Abstract]
|Basis of Accounting
The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. As permitted by these instructions, they do not include all of the information and notes required by generally accepted accounting principles (GAAP) for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. The results of operations for the three and nine months ended June 30, 2018 are not necessarily indicative of the results that may be expected for the full fiscal year. The balance sheet at September 30, 2017 has been derived from the audited financial statements at that date, but does not include all of the information and notes required by GAAP for complete financial statements. Certain financial results have been reclassified to conform with our current period presentation.
|Use of Estimates
The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent liabilities and the reported amounts of revenue and expenses. On an ongoing basis, we evaluate our estimates including those related to revenue recognition and cost estimation on certain contracts, the realizability of goodwill and amounts related to income taxes, certain accrued liabilities and contingencies and litigation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results could differ from those estimates.
|New accounting pronouncements
Recent accounting pronouncements
We are evaluating the effects of guidance issued in three significant areas of financial reporting.
In May 2014, the Financial Accounting Standards Board (FASB) issued ASU No. 2014-09, Revenue from Contracts with Customers. In addition, the FASB has issued additional updates covering technical items and changing the date of adoption. This new standard will change the manner in which we evaluate revenue recognition for all contracts with customers, although the effect of the changes on revenue recognition will vary from contract to contract. We will adopt this standard at the beginning of our 2019 fiscal year. The standard is required to be applied either retrospectively to each prior period presented (the full retrospective approach) or retrospectively with the cumulative effect of the initial application recognized at the date of initial application (the modified retrospective approach). While we previously disclosed that we anticipated using the full retrospective approach, we have further evaluated both approaches and have concluded that we will adopt the standard using the modified retrospective approach.
We have established a cross-functional steering committee which includes representatives from across all our business and support segments. The steering committee is responsible for evaluating the impact of the standard on our operations including accounting, taxation, internal audit and financial systems. Our approach to analyzing these impacts includes reviewing our current accounting policies and practices to identify potential differences that will result from applying the requirements of the new standard to our existing contracts. We are in the process of evaluating the changes needed to our business processes, systems and controls in order to support revenue recognition and the related disclosures under the new standard.
While we are still evaluating the changes that the new standard will have, we have identified areas where we believe the standard will have an effect; most notably, we expect that contracts where we have a contingent fee based upon achievement of a target over several months, we will see acceleration in our recognition of revenue. At this time, the most significant effect is expected to be within our Human Services Segment where we have welfare-to-work contracts which include incentive payments where participants reach employment milestones, which are typically remaining in employment for a period of three to twelve months. At present, we recognize these incentive payments only when the outcome has been achieved; under the new standard, we will recognize revenue over the period where we are servicing the participants. This will require us to make estimates of future outcome fees and the periods over which these fees will be earned. The new standard requires additional disclosures regarding our contracts with customers, including disclosure of our remaining unsatisfied performance obligations, which we are continuing to assess. The cumulative catch-up adjustment will be recorded through shareholders' equity on October 1, 2018; this total is still being quantified.
In February 2016, the FASB issued ASU No. 2016-02, Leases. The new standard requires that assets and liabilities arising under leases be recognized on the balance sheet. The standard also requires additional quantitative and qualitative disclosures that provide the amount, timing and uncertainty of cash flows relating to lease arrangements. This standard is effective for annual reporting periods beginning after December 15, 2018, using a modified retrospective approach. The modified retrospective approach requires retrospective application to the earliest period presented in the respective financial statements. This approach also provides practical expedients related to leases that commenced prior to the effective date and allows the use of hindsight when evaluating lease options. In July 2018, the FASB amended the standard to give companies another option for transition. We will adopt this standard at the beginning of our 2020 fiscal year. We are currently evaluating the likely effects on our business.
In January 2017, the FASB issued ASU No. 2017-04, Simplifying the Test for Goodwill Impairment. This standard will not change the manner in which we would identify a goodwill impairment but would change the manner of the calculation of any resulting impairment. Under existing guidance, we would calculate goodwill for each of our reporting units by calculating the fair value of all existing assets and liabilities within that reporting unit and comparing this to the fair value of the reporting unit; to the extent that this difference is less than our existing goodwill balance related to that reporting unit, we would record an impairment. The new standard will require us to calculate goodwill based upon the difference between the fair value and reported value of a reporting unit. This standard would be effective for our 2021 fiscal year, although early adoption is permitted. The impact of the new standard will depend on the outcomes of future goodwill impairment tests.
In August and November 2016, the FASB issued two ASUs pertaining to the statement of cash flows; ASU No. 2016-15 Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments and ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. These updates will requires us to make certain changes to the presentation of our cash flows. The most notable change will be the removal of changes in restricted cash from our cash flows and the inclusion of restricted cash balances in our opening and closing reconciling balances. We will adopt these updates during the first quarter of our 2019 fiscal year on a retroactive basis. We hold cash that we believe is restricted in use in a number of locations and for a number of purposes, including collateral for letters of credit, lease agreements and corporate credit cards. Although these updates will affect our cash flows, we do not believe they will have a significant effect on our reported cash flows.
With the exception of the new accounting standards discussed above, there have been no new accounting pronouncements that have significance, or potential significance, to the Company's consolidated financial statements.