Company: AAOI
Filing Date: 2025-11-06
Form Type: 10-Q
Source: 0001437749-25-033627
Chunk: 11

Company: APPLIED OPTOELECTRONICS, INC.
Filing Date: 2025-11-06
Form: 10-Q
Item: Part I, Item 1
Chunk 11
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   The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported. Actual results could differ materially from those estimates in the consolidated financial statements and accompanying notes. Significant estimates and assumptions that impact these financial statements and the accompanying notes relate to, among other things, revenue recognition, allowance for credit losses, inventory reserve, impairment of long-lived assets, service and product warranty costs, share-based compensation expense, estimated useful lives of tangible and intangible assets, and taxes.
    
    Product Warranty 

   The Company generally offers a one-year limited warranty for its products but it can extend for longer periods of three to five years for certain products sold to certain customers. The Company estimates the costs that  may be incurred under its basic limited warranty and records a liability for the amount of such costs at the time when product defects occur. Factors that affect the Company’s warranty liability include the historical and anticipated rates of warranty claims and cost to repair. While the Company believes that its warranty accrual is adequate, the actual warranty costs  may exceed the accrual, in which case the cost of sales will increase in the future. As of  September 30, 2025 and  December 31, 2024, the amount of accrued warranty was $0.45 million and $0.28 million, respectively. 

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   Note 2.  Significant Accounting Policies
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   There have been no changes in the Company’s significant accounting policies for the three and nine months ended  September 30, 2025, as compared to the significant accounting policies described in its 2024 Annual Report.
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   Recent Accounting Pronouncements
    
      In  November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07, Segment Reporting: Improvements to Reportable Segment Disclosures, which requires more detailed disclosures, on an annual and interim basis, related to the Company’s reportable segment. The guidance is effective for annual periods beginning after  December 15, 2023, and interim periods within fiscal years beginning after  December 15, 2024. See Note 17 Segment and Geographic Information for further details about the impact of this ASU on the Company’s financial statements.
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   Recent Accounting Pronouncements Yet to be Adopt