Company: AAOI
Filing Date: 2025-08-07
Form Type: 10-Q
Source: 0001437749-25-025450
Chunk: 8

Company: APPLIED OPTOELECTRONICS, INC.
Filing Date: 2025-08-07
Form: 10-Q
Item: Part I, Item 1
Chunk 8
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 and six months ended  June 30, 2025 are not necessarily indicative of the results expected for the entire fiscal year. All significant inter-company accounts and transactions have been eliminated.
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   Use of Estimates
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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  June, 30, 2025 and  December 31, 2024, the amount of accrued warranty was $0.36 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 six months ended  June 30, 2025, as compared to the significant accounting policies described in its 2024 Annual Report.
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   Recent Accounting Pronouncements
            
              There was no accounting pronouncement adopted in the second quarter of 2025.
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   Recent Accounting Pronouncements Yet to be Adopted

      In
     May 2024, the Financial Accounting Standard Board ("FASB") issued Accounting Standard Update ("ASU")
    2025-
    04 "Share-Based Consideration Payable to a Customer". The standard is effective for our
    2026 annual period, and