In May 2014, the FASB issued ASU 2014-09,
Revenue from Contracts with Customers (Topic 606), which is the new comprehensive revenue recognition standard that will
supersede all existing revenue recognition guidance under U.S. GAAP. The standard's core principle is that a company will recognize
revenue when it transfers promised goods or services to a customer in an amount that reflects the consideration to which the company
expects to be entitled in exchange for those goods or services. In August 2015, the FASB subsequently issued ASU 2015-14, Revenue
from Contracts with Customers - Deferral of the Effective Date, which approved a one year deferral of ASU 2014-09 for annual reporting
periods beginning after December 15, 2017, including interim periods within that reporting period. In March 2016 and April 2016,
the FASB issued ASU 2016-08, Revenue from Contracts with Customers - Principal versus Agent Considerations (Reporting Revenue Gross
versus Net), and ASU 2016-10, Revenue from Contracts with Customers - Identifying Performance Obligations and Licensing, respectively,
which further clarify the guidance related to those specific topics within ASU 2014-09. In May 2016, the FASB issued ASU 2016-12,
Revenue from Contracts with Customers - Narrow Scope Improvements and Practical Expedients, to reduce the risk of diversity in
practice for certain aspects in ASU 2014-09, including collectibility, noncash consideration, presentation of sales tax and transition.
Additionally, in December 2016, the FASB issued ASU 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from
Contracts with Customers. ASU 2016-20 makes minor corrections or minor improvements to the standard that are not expected to have
a significant effect on current accounting practice or create a significant administrative cost to most entities. The Company has
made progress in its evaluation of the amended guidance, including identification of revenue streams. The Company recognizes revenue
from product sales at the time of shipment and passage of title and risk of loss and control of the goods is transferred to the
customer. The Company has no acceptance or other post-shipment obligations and does not offer product warranties or services to
its customers. Although the Company is continuing to assess the impact of the amended guidance, Aceto generally anticipates that
the timing of recognition of revenue will be substantially unchanged under the amended guidance. The Company is continuing to evaluate
the impact on certain other transactions including third-party collaborations and other arrangements. The amended guidance will
be effective for Aceto in the first quarter of fiscal 2019 and permits adoption under either the full retrospective approach (recognize
effects of the amended guidance in each prior reporting period presented) or the modified retrospective approach (recognize the
cumulative effect of adoption as an adjustment to retained earnings at the date of initial application). The Company anticipates
adopting this amended standard on a modified retrospective basis.
|Item 3.||Quantitative and Qualitative Disclosures About Market
Market Risk Sensitive Instruments
The market risk inherent in our market-risk-sensitive
instruments and positions is the potential loss arising from adverse changes in investment market prices, foreign currency exchange-rates
and interest rates.
Investment Market Price Risk
We had short-term investments of $3,048
at September 30, 2017 and $2,046 at June 30, 2017. Those short-term investments consisted of time deposits. Time deposits are short-term
in nature and are accordingly valued at cost plus accrued interest, which approximates fair value.
Foreign Currency Exchange Risk
In order to reduce the risk of foreign
currency exchange rate fluctuations, we hedge some of our transactions denominated in a currency other than the functional currencies
applicable to each of our various entities. The instruments used for hedging are short-term foreign currency contracts (futures).
The changes in market value of such contracts have a high correlation to price changes in the currency of the related hedged transactions.
At September 30, 2017, we had foreign currency contracts outstanding that had a notional amount of $48,816. At June 30, 2017 our
outstanding foreign currency contracts had a notional amount of $62,187. The difference between the fair market value of the foreign
currency contracts and the related commitments at inception and the fair market value of the contracts and the related commitments
at September 30, 2017 was not material.
We are subject to risk from changes in
foreign exchange rates for our subsidiaries that use a foreign currency as their functional currency and are translated into U.S.
dollars. These changes result in cumulative translation adjustments, which are included in accumulated other comprehensive income
(loss). On September 30, 2017, we had translation exposure to various foreign currencies, with the most significant being the Euro.
The potential loss as of September 30, 2017, resulting from a hypothetical 10% adverse change in quoted foreign currency exchange
rates amounted to $9,253. On June 30, 2017 such potential loss amounted to $8,869. Actual results may differ.
Interest rate risk
Due to our financing, investing and cash-management
activities, we are subject to market risk from exposure to changes in interest rates. We utilize a balanced mix of debt maturities
along with both fixed-rate and variable-rate debt to manage our exposure to changes in interest rates. Our financial instrument
holdings were analyzed to determine their sensitivity to interest rate changes. In this sensitivity analysis, we used the same
change in interest rate for all maturities. All other factors were held constant. If there were an adverse change in interest rates
of 10%, the expected effect on net income related to our financial instruments would be immaterial. However, there can be no assurances
that interest rates will not significantly affect our results of operations.