FINANCIAL INSTRUMENTS — For financial instruments such as cash, short-term investments, accounts receivables, accounts payable and other current
liabilities, we consider the recorded value of the financial instruments to approximate the fair value due to their short maturities. On March 31, 2023, the carrying amounts of our notes receivable, recourse and non-recourse payables were $109.2 million, $6.0 million, and $34.3 million, respectively, and their fair values were $109.5
million, $6.0 million, and $34.5
million, respectively. On March 31, 2022, the carrying amounts of our notes receivable, recourse and non-recourse payables were $80.5
million, $13.1 million, and $21.2
million, respectively, and their fair values were $80.0 million, $13.1 million, and $21.2 million, respectively.
FINANCING RECEIVABLES AND OPERATING LEASES — Financing receivables and operating leases consist of notes receivable, sales-type leases, and
operating leases. We issue financing receivables for periods generally between 2 to 6 years, with most terms ranging between 3 to 4 years. When we lease equipment under an operating lease, we recognize the underlying asset at cost and depreciate it on a straight-line bases over
its estimated useful life. We estimate that the useful life for most information technology (“IT”) equipment under lease is 4 years.
FOREIGN CURRENCY MATTERS — Our functional currency is the US dollar. Our international subsidiaries typically use their local currency as their
functional currency. We translate the assets and liabilities of our international subsidiaries into US dollars at the spot rate in effect at the applicable reporting date. We translate the revenues and expenses of our international subsidiaries
into US dollars at the average exchange rates in effect during the applicable period. We report the resulting foreign currency translation adjustment as accumulated other comprehensive income (loss), which is reflected as a separate component of
stockholders’ equity. We report all foreign currency transaction gains or losses in other income (expense), net on our consolidated statement of operations. For the years ended March 31, 2023, 2022, and 2021, we recognized a loss of $5.4 million, a loss of $0.5 million,
and a gain of $0.5 million, respectively, due to foreign currency transactions.
GOODWILL — We test goodwill for impairment on an annual basis, as of October 1, and between annual tests if an event occurs, or circumstances
change, that would more likely than not reduce the fair value of a reporting unit below its carrying amount.
In a qualitative assessment, we assess qualitative factors to determine whether it is more likely than not (that is, a likelihood of more than 50
percent) that the fair value of a reporting unit is less than its carrying amount, including goodwill. If, after assessing the totality of events or circumstances, we determine that it is not more likely than not that the fair value of a
reporting unit is less than its carrying amount, then the quantitative goodwill impairment test is unnecessary.
If, after assessing the totality of events or circumstances, we determine that it is more likely than not that the fair value of a reporting unit
is less than its carrying amount, then we perform the quantitative goodwill impairment test. We may also elect the unconditional option to bypass the qualitative assessment for any reporting unit in any period and proceed directly to performing
the quantitative goodwill impairment test.
In the quantitative impairment test, we compare the fair value of a reporting unit with its carrying amount, including goodwill. If the fair value
of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired. Conversely, if the carrying amount of a reporting unit exceeds its fair value, an impairment loss shall be recognized in an amount equal
to that excess, limited to the total amount of goodwill allocated to that reporting unit.
IMPLEMENTATION COSTS OF A HOSTING ARRANGEMENT- We capitalize implementation costs incurred in a hosting arrangement that is a service contract with
the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. We classify these capitalized costs in the same balance sheet line item as the amounts prepaid for the related hosting arrangement and we
present the amortization of these capitalized costs in the same income statement line item as the service fees for the related hosting arrangement. Our long-term prepaids are included in our consolidated balance sheets as part of property,
equipment, and other assets. We amortize the capitalized implementation costs over the term of the hosting arrangement.
INCOME TAXES — Deferred income taxes are accounted for in accordance with Codification Topic 740 Income Taxes (“Codification Topic 740”). Under this method, deferred income tax assets and liabilities are determined based on the temporary differences between the financial statement reporting and tax
bases of assets and liabilities, using tax rates currently in effect. Future tax benefits, such as net operating loss carry-forwards, are recognized to the extent that realization of these benefits is considered to be more likely than not. We
review our deferred tax assets at least annually and make necessary valuation adjustments.
In addition, we account for uncertain tax positions in accordance with Codification Topic 740. Specifically, the Topic prescribes a recognition
threshold and a measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The interpretation also provides guidance on the related de-recognition,
classification, interest and penalties, accounting for interim periods, disclosure, and transition of uncertain tax positions. In accordance with our accounting policy, we recognize accrued interest and penalties related to unrecognized tax
benefits as a component of tax expense.
INVENTORIES — Inventories are stated at the lower of cost and net realizable value. Cost is determined using a weighted average cost method. Net
realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Our determination of the net realizable value for inventories is based on the
terms of underlying purchase commitments from our customers, current economic conditions, and other relevant factors.
LESSEE ACCOUNTING — We lease office space for periods up to six years and lease warehouse space for periods of up to 10 years, and we have some lease options
that can be exercised to extend beyond those lease term limits. At the lease commencement date, we recognize operating lease liabilities based on the present value of the future minimum lease payments. In determining the present value of future
minimum lease payments, we use our incremental borrowing rate based on the information available at the commencement date. When the future minimum payments encompass non-lease components, we account for the lease and non-lease components as a
single lease component. We elected not to recognize right-of-use assets and lease liabilities for leases with an initial term of 12 months or less. We recognize lease expense on a straight-line basis over the lease term beginning on the
commencement date.
PROPERTY AND EQUIPMENT — Property and equipment are stated at cost, net of accumulated depreciation and amortization. We recognize property and
equipment obtained through a business combination at its fair market value as of the acquisition date. We compute depreciation and amortization using the straight-line method over the estimated useful lives of the related assets, which range
from three to seven years.
We typically depreciate internal use IT equipment over three years, perpetual software licenses over five years, furniture and fixtures over five years,
and telecommunications equipment over seven years.
RESIDUAL ASSETS — Our estimate for the residual asset in a lease is the amount we expect to derive from the underlying asset following the end of
the lease term. In a sales-type lease, we recognize the unguaranteed residual asset, measured on a discounted basis, upon lease commencement. In our subsequent accounting for the lease, we increase the unguaranteed residual asset using the
effective interest method. We evaluate residual values for impairment on a quarterly basis. We recognize impairments as incurred. We do not recognize upward adjustments due to changes in estimates of residual values.
REVENUE RECOGNITION — We recognize most of our revenues from the sales of third-party products, third-party software, third-party maintenance,
software support, and services, ePlus professional and managed services, and hosting ePlus proprietary software. We recognize revenue from these sales under the guidance in Codification Topic 606.
The core principle of Codification Topic 606 is that an entity should recognize revenue for the transfer of goods and services equal to an amount
it expects to be entitled to receive for those goods and services. We account for a contract under Codification Topic 606 when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are
established, the contract has commercial substance, and collectability of consideration is probable.
Revenues are reported net of sales refunds, including an estimate of future returns based on an evaluation of historical sales returns, current
economic conditions, volume, and other relevant factors.
Our contracts with customers may include multiple promises that are distinct performance obligations. For such arrangements, we allocate the
transaction price to each performance obligation based on its relative standalone selling price. We determine standalone selling prices using expected cost-plus margin.
We recognize revenue when (or as) we satisfy a performance obligation by transferring a promised good or service to a customer. A good or service
is transferred when (or as) the customer obtains control of that good or service. Depending on the nature of each performance obligation, this may be at a point in time or over time, as further described below.
We typically invoice our customers for third-party products upon shipment, unless our customers lease the equipment through our financing segment,
in which case the arrangement is accounted for as a lease in accordance with Codification Topic 842, Leases (“Codification Topic 842”). We typically
invoice our customers for third-party software upon delivery and third-party services at the point of sale, unless our customers finance these products through our financing segment, in which case we record a financing receivable based on the
terms of the arrangement.
Product revenue
Sales of third-party products
We are the principal in sales of third-party products. As such, we recognize sales on a gross basis with the selling price to the customer recorded
as sales and the acquisition cost of the product recognized as cost of sales. We recognize revenue from these sales at the point in time that control passes to the customer, which is typically upon delivery of the product to the customer.
In some instances, our customers may request that we bill them for a product but retain physical possession of the product until later delivery,
commonly known as “bill-and-hold” arrangements. We have warehousing agreements with select customers wherein title to products ordered through the agreements transfers to our customer at the point we invoice the customer and after the product
arrives at our warehouse. In these “bill-and-hold” arrangements, we recognize revenue when the customer has ordered the product through their warehousing agreement with us or signed a bill-and-hold agreement with us, the customer has legal title,
the product is identified separately as belonging to the customer, and the product is ready for delivery to the customer.
We recognize sales of off-lease equipment within our financing segment when control passes to the customer, which is typically the date that title
to the equipment is transferred per the sales agreement.
Sales of third-party software
We are typically the principal in sales of third-party software. Sales are recognized on a gross basis with the selling price to the customer
recorded as sales and the acquisition cost of the product recognized as cost of sales. We recognize revenue from these sales at the point in time that control passes to the customer, which is typically upon delivery of the software to the
customer.
Sales of third-party maintenance, software support, and services
We are the agent in sales of third-party maintenance, software support, and services as the third-party controls the service until it is
transferred to the customer. Similarly, we are the agent in sales of third-party software and accompanying third-party support when the third-party software benefits the customer only in conjunction with the accompanying support. In these sales,
we consider the third-party software and support as inputs to a single performance obligation. In all these sales where we are the agent, we recognize sales on a net basis at the point that our customer and vendor accept the terms and conditions
of the arrangement.
Freight and sales tax
We present freight billed to our customers within sales and the related freight charged to us within cost of sales. We present sales tax collected
from customers and remittances to governmental authorities on a net basis.
Financing revenue and other
We account for leases to customers in accordance with Codification Topic 842. We utilize a portfolio approach by grouping together many similar
assets being leased to a single customer.
We classify our leases as either sales-type leases or operating leases. We classify leases as sales-type leases if any one of five criteria are
met, each of which indicate that the lease transfers control of the underlying asset to the lessee. We classify our other leases as operating leases.
For sales-type leases, upon lease commencement, we recognize the present value of the lease payments and the residual asset discounted using the
rate implicit in the lease. When we are financing equipment provided by another dealer, we typically do not have any selling profit or loss arising from the lease. When we are the dealer of the equipment being leased, we typically recognize
revenue in the amount of the lease receivable and cost of sales in the amount of the carrying value of the underlying asset minus the unguaranteed residual asset. After the commencement date, we recognize interest income as part of net sales
using the effective interest method.
For operating leases, we recognize the underlying asset as an operating lease asset. We depreciate the asset on a straight-line basis to its
estimated residual value over its estimated useful life. We recognize the lease payments over the lease term on a straight-line basis as part of net sales.
In all of our leases, we recognize variable lease payments, primarily reimbursement for property taxes associated with the leased asset, as part of
net sales in the period in which the changes in facts and circumstances on which the variable lease payments are based occur. We exclude from revenues and expenses any sales taxes reimbursed by the lessee.
We also finance third-party software and third-party services for our customers, which we classify as notes-receivable. We recognize interest
income on our notes-receivable using the effective interest method.
We account for transfers of our financial assets, under Codification Topic 860 Transfers and Servicing (“Codification Topic 860”). When a transfer meets all the requirements for sale accounting, we derecognize the financial asset and record a net gain or loss that is included in net sales.
Service revenue
Sales of ePlus professional, managed services, and staffing
ePlus professional services offerings include
assessments, project management, and staging, configuration, and integration. ePlus managed service offerings range from monitoring and notification to a
fully outsourced network management or service desk solution. ePlus staffing delivers a full range of staffing solutions, including short-term, long-term,
temporary-to-hire, and direct-hire IT professionals. In all these arrangements, we satisfy our performance obligation and recognize revenue over time.
In arrangements for ePlus professional services and
staffing, we provide services under both time and materials and fixed price contracts. When services are provided on a time and materials basis, we recognize sales at agreed-upon billing rates as services are performed. When services are provided
on a fixed fee basis, we recognize sales over time in proportion to our progress toward complete satisfaction of the performance obligation. We typically measure progress based on costs incurred in proportion to total estimated costs, commonly
referred to as the “cost-to-cost” method.
In arrangements for ePlus managed services, our
arrangement is typically a single performance obligation comprised of a series of distinct services that are substantially the same and that have the same pattern of transfer (i.e., distinct days of service). We typically recognize sales from
these services on a straight-line basis over the period services are provided.
SHARE-BASED COMPENSATION — We account for share-based compensation in accordance with Codification Topic 718 Compensation—Stock Compensation.We account for forfeitures when they occur. There are no additional conditions for vesting other than service conditions.
We recognize compensation cost for awards of restricted stock with graded vesting on a straight-line basis over the requisite service period. There
are no additional conditions for vesting other than service conditions.
We recognize compensation cost for our employee stock purchase plan on a straight-line basis over the offering period, which is 6 months. We measure the award on the grant date at fair value using the Black-Scholes option pricing model.
SOFTWARE DEVELOPMENT COSTS — We capitalize costs for the development of internal use software under the Codification Topic 350-40 Intangibles—Goodwill and Other Intangibles, Subtopic Internal-Use Software.
We did not have significant capitalized development costs for internal use software for either of the years ended March 31, 2023,
or March 31, 2022. We capitalized development costs for internal use software of $0.2 million for the year ended March 31, 2021. We had
capitalized costs, net of amortization, of approximately $1.0 million and $2.1 million as of March 31, 2023, and March 31, 2022, respectively, that is included in the accompanying consolidated balance sheets as a component of other intangible
assets-net.
TREASURY STOCK — We account for treasury stock under the cost method and include treasury stock as a component of stockholders’ equity on the
accompanying consolidated balance sheets.
VENDOR CONSIDERATION — We receive payments and credits from vendors pursuant to volume incentive programs and shared marketing expense programs.
Many of these programs extend over one or more quarters’ sales activities. Different programs have different vendor/program specific milestones to achieve. Amounts due from vendors as of March 31, 2023, and 2022 were $21.9 million and $12.9 million,
respectively, which were included within accounts receivable-other, net in the accompanying balance sheets.
We recognize rebates pursuant to volume incentive programs, when the rebate is probable and reasonably estimable, based on a systematic and
rational allocation of the cash consideration offered to the underlying transactions that result in our progress toward earning the rebate. When a rebate is not probable or not reasonably estimable, we recognized the rebate as the milestones are
achieved or as cash is received.
We recognize rebates pursuant to shared marketing expense programs as a reduction of the related selling and administrative expenses in the
period the program occurs when the consideration represents a reimbursement of specific, incremental, identifiable costs. We recognize consideration that exceeds the specific, incremental, identifiable costs as a reduction of cost of sales.