Tucows 2015 Annual Report Download - page 192

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) ("ASU
2014-09"), which is a comprehensive revenue recognition standard that will supersede nearly all existing revenue
recognition guidance under U.S. GAAP. The new standard provides a single principles-based, five-step model to be
applied to all contracts with customers, which steps are to (1) identify the contract(s) with the customer, (2) identify the
performance obligations in the contracts, (3) determine the transaction price, (4) allocate the transaction price to the
performance obligations in the contracts and (5) recognize revenue when each performance obligation is satisfied. More
specifically, revenue will be recognized when promised goods or services are transferred to the customer in an amount
that reflects the consideration expected in exchange for those goods or services. ASU 2014-09 was set to be effective
for interim and annual periods beginning after December 15, 2016. On July 9, 2015, the FASB voted to defer the
effective date by one year, such that the new standard will be effective for the Company for the interim and annual
reporting periods beginning after December 15, 2017 (January 1, 2018 for the Company). Early adoption of the standard
is permitted but not before the original effective date. Companies can transition to the standard either retrospectively or
as a cumulative-effect adjustment as of the date of adoption. The Company does not intend to adopt the standard early
and is currently in the process of evaluating the impact that the adoption of ASU 2014-09 will have on its consolidated
financial statements and the selected method of transition to the new standard.
3. Acquisitions:
On February 27, 2015, Ting Fiber, Inc., one of our wholly owned subsidiaries, acquired a 70% ownership
interest in the newly formed Ting Virginia, LLC and its subsidiaries, Blue Ridge Websoft, LLC (doing business as Blue
Ridge Internet Works), Fiber Roads, LLC and Navigator Network Services, LLC (the “BRI Group”) for consideration of
approximately $3.5 million. The Company advanced in escrow $3,125,000 during the year ended December 31, 2014,
and paid the remaining purchase price of $357,492 during the year ended December 31, 2015. Ting Virginia, LLC was
an independent Internet service provider in Charlottesville, Virginia, doing business primarily as Blue Ridge Internet
Works. The BRI Group provides high speed internet access, Internet hosting and network consulting services to over
3,000 customers in central Virginia. The purchase price was primarily satisfied through an advance under our 2012 DLR
Loan facility.
Ting Fiber, Inc. and the selling shareholders (the “Minority Shareholders”) also agreed to certain put and call
options with regard to the remaining 30% interest in Ting Virginia, LLC retained by the Minority Shareholders. On the
second anniversary of the closing date, Ting Fiber, Inc. may exercise a call option to purchase an additional 20%
ownership interest in Ting Virginia, LLC. Contingent upon the exercise of the call option by Ting Fiber, Inc. the
Minority Shareholders may exercise a put option within 7 days following the exercise of the call option by Ting Fiber,
Inc., to sell their remaining 10% ownership interest in Ting Virginia, LLC. The consideration to be exchanged for the
shares acquired or sold under the options shall be $100,000 per percentage point of the additional equity interest
acquired.
In addition, on the fourth anniversary of the closing date, the Minority Shareholders may exercise a put option
under which Ting Fiber, Inc. shall be obligated to purchase the Minority Shareholders’ remaining interest for $120,000
per percentage point of the additional equity interest acquired.
The Company has determined that the put options described above are embedded within the non-controlling
interest shares that are subject to the put options. The redemption feature requires classification of the Minority
Shareholders’ Interest in the Consolidated Balance Sheets outside of equity under the caption “Redeemable non-
controlling interest”. The present value of the liability at the acquisition date was $3,000,000 and is being accreted to the
estimated liability amount using a rate of 1.6% from the acquisition date. During the year, this amount was increased by
$36,598 to $3,036,598, to reflect the present value of this Redeemable non-controlling interest as at December 31, 2015.
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