DEFERRED COSTS AND REVENUES/CONTRACT COSTS AND LIABILITIES

6 Months Ended

Jun. 30, 2018

DEFERRED COSTS AND REVENUES [Abstract]

DEFERRED COSTS AND REVENUES/CONTRACT COSTS AND LIABILITIES

NOTE 7 – DEFERRED COSTS AND REVENUES/CONTRACT COSTS AND LIABILITIES

Deferred costs and revenues/contract costs and liabilities to be recognized over the next twelve months are classified as current and included in the Company’s unaudited condensed consolidated balance sheets. The remaining deferred cost and revenue/contract cost and liability amounts are classified as non-current in the unaudited condensed consolidated balance sheets.

Deferred costs/contract costs were comprised of the following in the periods shown (in thousands):

	Core Consumer									Enterprise									Consolidated
	Incremental costs to obtain contracts			Costs to fulfill contracts			Total			Incremental costs to obtain contracts			Costs to fulfill contracts			Total			Incremental costs to obtain contracts			Costs to fulfill contracts			Total
Balance at December 31, 2017	$	-		$	1,893		$	1,893		$	-		$	43		$	43		$	-		$	1,936		$	1,936
Adoption of ASC 606		647			(1,893	)		(1,246	)		-			-			-			647			(1,893	)		(1,246	)
Balance at January 1, 2018, as adjusted		647			-			647			-			43			43			647			43			690
Costs recognized from previous contracts		(98	)		-			(98	)		-			(43	)		(43	)		(98	)		(43	)		(141	)
Additions for contracts acquired in the period		99			-			99			182			101			283			281			101			382
Costs recognized from new contracts		(9	)		-			(9	)		(12	)		(68	)		(80	)		(21	)		(68	)		(89	)
Balance at June 30, 2018	$	639		$	-		$	639		$	170		$	33		$	203		$	809		$	33		$	842
Current		228			-			228			61			12			73			289			12			301
Non-current		411			-			411			109			21			130			520			21			541

Deferred revenues/contract liabilities were related to the Core Consumer segment and were comprised of the following (in thousands):

	magicJack devices direct sales (1)			magicJack devices retail sales (1)			Access right renewals current			Prepaid minutes			Other			Total Current			Access right renewals non-current			Other		Total
Balance at December 31, 2017	$	3,056		$	2,221		$	34,607		$	2,254		$	105		$	42,243		$	38,797		$	-	$	81,040
Adoption of ASC 606		(1,656	)		(978	)		-			-			-			(2,634	)		-			-		(2,634	)
Balance at January 1, 2018, as adjusted		1,400			1,243			34,607			2,254			105			39,609			38,797			-		78,406
Revenue recognized from previous contracts		(1,028	)		(850	)		(22,670	)		(1,370	)		(105	)		(26,023	)		-			-		(26,023	)
Additions for contracts acquired in the period		1,796			1,799			16,556			1,673			352			22,176			5,964			9		28,149
Revenue recognized from new contracts		(991	)		(883	)		(2,034	)		(593	)		(300	)		(4,801	)		-			-		(4,801	)
Transfer of current portion		-			-			8,168			-			-			8,168			(8,168	)		-		-
Balance at June 30, 2018	$	1,177		$	1,309		$	34,627		$	1,964		$	52		$	39,129		$	36,593		$	9	$	75,731

(1) Deferred revenues/contract liabilities from device sales include only the service portion.

Contract liabilities as of June 30, 2018 were related to the Core Consumer segment and are expected to be recognized as revenue in future years as follows (in thousands):

Recognition Period	Estimated Recognition of Contract Liabilities

Next 12 months	$	39,129
13-24 Months		16,499
25-36 Months		10,723
37-48 months		4,924
49-60 Months		1,993
61+ Months		2,463
	$	75,731

Certain costs necessary to fulfill the Company’s obligations to provide broadband telephone service to new and existing customers who have purchased magicJack devices or access rights to access the Company’s servers are expensed as incurred. For the Core Consumer segment, such costs were approximately $2.2 million and $2.4 million for the three months ended June 30, 2018 and 2017, respectively and $4.3 million and $5.1 million for the six months ended June 30, 2018 and 2017, respectively. For the Enterprise segment, such costs were approximately $0.7 million and $0.8 million for the three months ended June 30, 2018 and 2017, respectively and $1.3 million for the six months ended June 30, 2018 and 2017. Costs related to providing broadband telephone service to SMB segment customers were not significant for the three months ended March 31, 2017.

MAGICJACK VOCALTEC LTD 10-Q