SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Principles of consolidation |
a.Principles
of consolidation:
The
consolidated financial statements include the accounts of the Company and its subsidiaries. Intercompany transactions and balances including
profit from intercompany sales not yet realized outside the Company have been eliminated upon consolidation.
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Use of estimates |
b.Use
of estimates:
The
preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported
amounts of assets, liabilities, revenues, costs and expenses and related disclosures in the accompanying notes. The duration, scope and
effects of the ongoing Covid-19 pandemic and the conflict in Ukraine, government and other third-party responses to it, and the related
macroeconomic effects, including to the Company’s business and the business of the Company’s suppliers and customers are uncertain,
rapidly changing and difficult to predict. As a result, the Company’s accounting estimates and assumptions may change over time
in response to this evolving situation. Such changes could result in future impairments of goodwill, intangibles, long-lived assets, inventories,
incremental credit losses on receivables and available-for-sale marketable debt securities, or an increase in the Company’s insurance
liabilities as of the time of a relevant measurement event.
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Financial statements in U.S. dollars |
c.Financial
statements in U.S. dollars:
A
major part of the Company’s operations is carried out in the United States, Israel and certain other countries. The functional currency
of these entities is the U.S. dollar. Financing activities, including cash investments are primarily made in U.S. dollars.
Accordingly,
monetary accounts maintained in currencies other than the U.S. dollar are translated into U.S. dollars in accordance with Financial Accounting
Standards Board Accounting Standards Codification (“ASC”) No. 830 “Foreign Currency Matters”. All transaction
gains and losses of the re-measurement of monetary balance sheet items are reflected in the statements of income as financial income or
expenses, as appropriate.
The
financial statements of other Company’s subsidiaries whose functional currency is other than the U.S. dollar have been translated
into U.S dollars. Assets and liabilities have been translated using the exchange rates in effect as of the balance sheet date. Statements
of income amounts have been translated using the date of the transaction or at the average exchange rate to for the relevant period.
The
resulting translation adjustments are reported as a component of stockholders’ equity in accumulated other comprehensive income
(loss). Gains and losses arising from intercompany foreign currency transactions that are of a long-term investment in nature are reported
in the same manner as translation adjustments.
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cash and cash equivalents |
d.Cash
and cash equivalents:
Cash
equivalents are short-term, highly liquid investments that are readily convertible to cash, with original maturities of three months or
less at the date acquired.
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Short-term bank deposits |
e.Short-term
bank deposits:
Short-term
bank deposits are deposits with an original maturity of more than three months and less than a year from the date of investment and which
do not meet the definition of cash equivalents. The deposits are presented according to their term deposits.
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Restricted bank deposits |
f.Restricted
bank deposits:
Short-term
restricted bank deposits possess an original maturity of more than three months and less than a year from the date of investment. Long-term
restricted bank deposits possess an original maturity of more than one year from the date of investment. Restricted bank deposits are
primarily used as collateral for the Company's office leases and credit cards.
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Marketable Securities |
g.Marketable
Securities:
Marketable
securities consist of corporate and governmental bonds. The Company determines the appropriate classification of marketable securities
at the time of purchase and re-evaluates such designation at each balance sheet date. In accordance with FASB ASC No. 320 “Investments
- Debt and Equity Securities”, the Company classifies marketable securities as available-for-sale.
Available-for-sale
("AFS") securities are stated at fair value, with unrealized gains and losses reported in accumulated other comprehensive income (loss),
a separate component of stockholders’ equity, net of taxes. Realized gains and losses on sales of marketable securities, as determined
on a specific identification basis, are included in financial income (expenses), net. The amortized cost of marketable securities is adjusted
for amortization of premium and accretion of discount to maturity, both of which, together with interest, are included in financial income
(expenses), net.
The
Company classifies its marketable securities as either short-term or long-term based on each instrument’s underlying contractual
maturity date. Marketable securities with maturities of 12 months or less are classified as short-term and marketable securities with
maturities greater than 12 months are classified as long-term.
On
each reporting period, the Company evaluates whether declines in fair value below carrying value are due to expected credit losses, as
well as the ability and intent to hold the investment until a forecasted recovery occurs, in accordance with ASC 326. Allowance for credit
losses on AFS debt securities are recognized as a charge in financial income (expenses), net, on the consolidated statements of income,
and any remaining unrealized losses, net of taxes, are included in accumulated other comprehensive income (loss) in stockholders' equity.
The
Company has not recorded credit losses for the years ended December 31, 2022, 2021 and 2020.
The
Company determines realized gains or losses on sale of marketable securities on a specific identification method and records such gains
or losses in financial income (expenses), net on the consolidated statements of income.
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Investments in privately-held companies |
h.Investment
in privately-held companies:
The
Company's equity investments are investments in equity securities of privately-held companies, that are not traded and therefore not supported
with observable market prices. The Company elected to account for its equity investments without readily determinable market values that
either (i) do not meet the definition of in-substance common stock or (ii) do not provide the Company with control or significant influence
using Accounting Standards Update (“ASU”) 2016-01.
The Company adjusts the carrying value of its investments to fair value upon observable transactions for identical or similar investments of the same issuer. The
Company periodically evaluates the carrying value of the investments in privately-held companies when events and circumstances indicate
that the carrying amount of the investment may not be recovered. The maximum loss the Company can incur for its investments is their carrying
value.
The
Company may determine the fair value by reviewing equity valuation reports, current financial results, long-term plans of the privately-held
companies, the amount of cash that the privately-held companies have on-hand, the ability to obtain additional financing and overall market
conditions in which the privately-held companies operate or based on the price observed from the most recent completed financing.
All
gains and losses on investments in privately-held companies, realized and unrealized, are recognized in other income.
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Trade receivables |
i.Trade
receivables:
Trade
receivables are stated net of credit losses allowance. The Company is exposed to credit losses primarily through sales of products. The
allowance against gross trade receivables reflects the current expected credit loss inherent in the receivables portfolio determined based
on the Company’s methodology. The Company’s methodology is based on historical collection experience, customer creditworthiness,
current and future economic condition and market condition. Additionally, specific allowance amounts are established to record the appropriate
provision for customers that have a higher probability of default. Trade receivables are written off after all reasonable means to collect
the full amount have been exhausted.
The
following table provides a roll-forward of the allowance for credit losses that is deducted from the amortized cost basis of trade receivables
to present the net amount expected to be collected:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Inventories |
j.Inventories: Inventories are stated at the lower of cost or net realizable value. Cost includes depreciation, labor, material and overhead costs. Inventory reserves are provided to cover risks arising from slow-moving items or technological obsolescence. The Company periodically evaluates the quantities on hand relative to historical, current and projected sales volume. Based on this evaluation, an impairment charge is recorded when required to write-down inventory to its net realizable value. Cost of finished goods and raw materials is determined using the moving average cost method. |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Property, plant and equipment |
k.Property,
plant and equipment:
Property,
plant and equipment are stated at cost, net of accumulated depreciation and government grants. Assets under construction represent the
construction or development stage of property and equipment that have not yet been placed in service for the Company's intended use. Depreciation
is calculated by the straight-line method over the estimated useful life of the assets, at the following rates:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Government assistance |
l. Government assistance In 2020, SolarEdge Ltd, a wholly owned subsidiary of the Company, entered into an agreement with the Israeli Ministry of Economy and Industry to partially subsidize the construction of Sella 1, a factory for production of inverters and optimizers, in the amount of approximately $7,000. In 2020, SolarEdge Korea (formerly Kokam), a wholly owned subsidiary of the Company, entered into an agreement with Chungcheongbuk-do province of South Korea to partially subsidize the construction of Sella 2, a factory for production of lithium-ion cells and batteries, in the amount of approximately $12,000. The assistance
is in the form of a cash subsidy, which the government will pay as a grant upon the satisfaction of predetermined construction completion
milestones. When the defined milestones are reached and the right to receive a subsidy amount becomes virtually certain, the amount of
the grant is recorded as a reduction of the related asset's value under “Property, plant and equipment, net”.
The
Company recorded reduction of property, plant and equipment in the amount of $7,359
and $4,842
for the years ended December 31, 2022 and 2021, respectively.
As
of December 31, 2022, the Company has a right to receive of $9,233
that has yet to be paid which was recorded under “Prepaid expenses and other current assets”. |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Leases |
m.Leases: The
Company determines if an arrangement is a lease at inception. Contracts containing a lease are further evaluated for classification as
an operating or finance lease. In determining the leases classification the Company assesses among other criteria: (i) 75% or more of
the remaining economic life of the underlying asset is a major part of the remaining economic life of that underlying asset; and (ii)
90% or more of the fair value of the underlying asset comprises substantially all of the fair value of the underlying asset. Operating
leases are included in operating lease right-of-use (“ROU”) assets, other current liabilities and long-term operating lease
liabilities in the Company’s consolidated balance sheets. Finance leases are included in property, plant and equipment, net, other
current liabilities, and long-term finance lease liabilities in the Company’s consolidated balance sheets. ROU assets represent
the right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments
arising from the lease. For leases with terms greater than 12 months, the Company records the ROU asset and liability at commencement
date based on the present value of lease payments according to their term.
The
Company uses incremental borrowing rates based on the estimated rate of interest for collateralized borrowing over a similar term of the
lease payments at commencement date. The ROU asset also includes any lease payments made and excludes lease incentives. Lease terms may
include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expenses
are recognized on a straight-line basis over the lease term or the useful life of the leased asset.
In
addition, the carrying amount of the ROU and lease liabilities are remeasured if there is a modification, a change in the lease term,
a change in the in-substance fixed lease payments or a change in the assessment to purchase the underlying asset.
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Business Combination |
n.Business
Combination:
The
Company allocates the fair value of the purchase price to the tangible assets acquired, liabilities assumed and intangible assets acquired
based on their estimated fair value. The excess of the fair value of the purchase price over the fair values of these identifiable assets
and liabilities is recorded as goodwill. Such valuations require management to make significant estimates and assumptions, especially
with respect to intangible assets.
Significant
estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows from acquired technology and
discount rates. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently
uncertain and unpredictable and, as a result, actual results may differ from estimates. During the measurement period, which does not
exceed one year from the acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed, with the
corresponding offset to goodwill. Upon the finalization of the measurement period, any subsequent adjustments are recorded to earnings.
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Intangible Assets |
o.Intangible
Assets: Acquired
identifiable finite-lived intangible assets are amortized on a straight-line basis or accelerated method over the estimated useful lives
of the assets. The basis of amortization approximates the pattern in which the assets are utilized, over their estimated useful lives.
The Company routinely reviews the remaining estimated useful lives of finite-lived intangible assets. In case the Company reduces the
estimated useful life for any asset, the remaining unamortized balance is amortized or depreciated over the revised estimated useful life
(see Note 8). |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Impairment of long-lived assets |
p.Impairment
of long-lived assets: The Company’s long-lived assets to be held and used, including ROU assets and identifiable intangible assets that are subject to amortization, other than goodwill, are reviewed for impairment in accordance with ASC 360 “Property, Plants and Equipment”, whenever events or changes in circumstances indicate that the carrying amount of an asset (or asset group) may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset (or asset group) to the future undiscounted cash flows expected to be generated by the assets (or asset group). If such evaluation indicates that the carrying amount of the asset (or asset group) is not recoverable, the assets are considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying amount of the assets exceeds their fair value (see Note 8). For the years ended December 31, 2022, 2021 and 2020, the Company recorded impairment charges of $29,037, $2,209 and $1,471, under Goodwill impairment and other operating expenses (income), net, respectively. |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Goodwill |
q.Goodwill:
Goodwill
reflects the excess of the consideration transferred, including the fair value of any contingent consideration and any non-controlling
interest in the acquiree, over the assigned fair values of the identifiable net assets acquired. Goodwill is not amortized, and is assigned
to reporting units and tested for impairment at least on an annual basis, in the fourth quarter of the fiscal year.
The
goodwill impairment test is performed according to the following principles:
For
the year ended December 31, 2022, the Company recorded impairment charges of goodwill in the amount of $90,104.
For the years ended December 31, 2021 and 2020, the Company did not record any impairment charges. |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cloud computing arrangements |
r.Cloud
computing arrangements:
In 2021, due to the growing size and complexity of the Company, the Company decided to implement a new global enterprise resource planning ("ERP") system, which will replace the Company's existing operating and financial systems. During the year ended December 31, 2022, the Company began implementing a cloud-based ERP system. The implementation is expected to occur in phases over the next several years. The Company incurs costs to implement cloud computing arrangements ("CCA") that are hosted by third party vendors. Implementation costs associated with CCA are capitalized when incurred during the application development phase until the software is ready for its intended use. The costs are then amortized on a straight-line basis over the contractual term of the cloud computing arrangement and are recognized as an operating expense within the consolidated statements of income. Capitalized amounts related to such arrangements are recorded within other long-term assets in the consolidated balance sheets. Cash payments for CCA implementation costs are classified as cash outflows from operating activities. For the year ended December 31, 2022, the Company has capitalized implementation costs related to its upcoming ERP conversion in the amount of $3,457 and presented it under other long-term assets in the consolidated balance sheet. |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Severance pay |
s.Severance
pay:
The
employees of the Company’s Israeli subsidiary are included under Section 14 of the Severance Pay Law, 1963, under which these employees
are entitled only to monthly deposits made in their name with insurance companies, at a rate of 8.33% of their monthly salary. These payments
cause the Company to be released from any future obligation under the Israeli Severance Pay Law to make severance payments in respect
of those employees; therefore, related assets and liabilities are not presented in the consolidated balance sheets.
If applicable, severance costs are recorded in each entity in accordance with local laws and regulations. For
the years ended December 31, 2022, 2021 and 2020, the Company recorded $17,202,
$14,231
and $10,598 in
severance expenses related to its employees, respectively.
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Derivatives and Hedging |
t.Derivatives
and Hedging:
The
Company accounts for derivatives and hedging based on ASC 815 (“Derivatives and Hedging”). ASC 815 requires the Company to
recognize all derivatives on the balance sheet at fair value. The accounting for changes in the fair value (i.e., gains or losses) of
a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and further, on the
type of hedging relationship.
To
protect against the increase in value of forecasted foreign currency cash flows resulting from salary denominated in the Israeli currency,
the New Israeli Shekels (“NIS”), during the year ended December 31, 2022, the Company instituted a foreign currency cash flow
hedging program whereby portions of the anticipated payroll denominated in NIS for a period of one to nine months with hedging contracts.
Accordingly,
when the dollar strengthens against the NIS, the decline in present value of future foreign currency expenses is offset by losses in the
fair value of the hedging contracts. Conversely, when the dollar weakens, the increase in the present value of future foreign currency
cash flows is offset by gains in the fair value of the hedging contracts. These hedging contracts are designated as cash flow hedges,
as defined by ASC 815 and are all effective hedges.
The Company also entered into derivative instrument arrangements to hedge the Company’s exposure to currencies other than the U.S. dollar. These derivative instruments are not designated as cash flow hedges, as defined by ASC 815, and therefore all gains and losses, resulting from fair value remeasurement, were recorded immediately in the statement of income, as a financial income (expense), net.. The Company classifies cash flows related to its hedging as operating activities in its consolidated statement of cash flows. |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Revenue recognition |
u.Revenue
recognition:
Revenues
are recognized in accordance with ASC 606; revenue from contracts with customers is recognized when control of the promised goods or services
is transferred to the customers, in an amount that the Company expects in exchange for those goods or services.
The
Company’s products and services consist mainly of (i) power optimizers, (ii) inverters, (iii) residential batteries, (iv) a related
cloud-based monitoring platform, (v) communication services, (vi) warranty extension services, (vii) Lithium-ion cells and other storage
solutions (viii) EV components, and (ix) automated machinery for manufacturing lines.
The
Company recognizes revenue under the core principle that transfer of control to the Company’s customers should be depicted in an
amount reflecting the consideration the Company expects to receive in revenue. In
order to achieve that core principle, the Company applies the following five-step approach: (1) identify the contract with a customer,
(2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the
performance obligations in the contract, and (5) recognize revenue when the performance obligation is satisfied.
(1)Identify
the contract with a customer
A
contract is an agreement or purchase order between two or more parties that creates enforceable rights and obligations. In evaluating
the contract, the Company analyzes the customer’s intent and ability to pay the amount of promised consideration (credit risk) and
considers the probability of collecting substantially all of the consideration.
The
Company determines whether collectability is reasonably assured on a customer-by-customer basis pursuant to its credit review policy.
The Company typically sells to customers with whom it has a long-term business relationship and a history of successful collection. For
a new customer, or when an existing customer substantially expands its commitments, the Company evaluates the customer’s financial
position, the number of years the customer has been in business, the history of collection with the customer, and the customer’s
ability to pay, and typically assigns a credit limit based on that review.
(2)Identify
the performance obligations in the contract
At
a contract’s inception, the Company assesses the goods or services promised in a contract with a customer and identifies the performance
obligations. The main performance obligations are the provisions of the following: providing of the Company’s products; cloud based
monitoring services; extended warranty services and communication services. Depending on the shipping terms agreed with the customer,
the Company may perform shipping and handling activities after the customer obtains control of the goods and revenue is recognized. The
Company has elected to account for shipping and handling costs as activities to fulfill the promise to transfer the goods. As a result
of this accounting policy election, the Company does not consider shipping and handling activities after the customer obtains control
of the goods as promised services to its customers.
(3)Determine
the transaction price
The
transaction price is the amount of consideration to which the Company is entitled in exchange for transferring promised goods or services
to a customer, excluding amounts collected on behalf of third parties. Generally, the Company does not provide price protection, stock
rotation, and/or right of return. The Company determines the transaction price for all satisfied and unsatisfied performance obligations
identified in the contract from contract inception to the beginning of the earliest period presented. Rebates or discounts on goods or
services are accounted for as variable consideration. The rebate or discount program is applied retrospectively for future purchases.
Provisions for rebates, sales incentives, and discounts to customers are accounted for as reductions in revenue in the same period the
related sales are recorded.
Accrual
for rebates for direct customers is presented net of receivables. Accrual for sale incentives related to non-direct customers is presented
under accrued expenses and other current liabilities. The Company accrued $176,706
and $152,717
for rebates and sales incentives as of December 31, 2022 and 2021, respectively. When
a contract provides a customer with payment terms of more than a year, the Company considers whether those terms create variability in
the transaction price and whether a significant financing component exists.
As
of December 31, 2022, the Company has not provided payment terms of more than a year.
The
performance obligations that extend for a period greater than one year are those that include a financial component: (i) warranty extension
services, (ii) cloud-based monitoring, and (iii) communication services. The Company recognizes financing component expenses in its consolidated
statement of income in relation to advance payments for performance obligations that extend for a period greater than one year. These
financing component expenses are reflected in the Company’s deferred revenues balance.
(4)Allocate
the transaction price to the performance obligations in the contract
The
Company performs an allocation of the transaction price to each separate performance obligation, in proportion to their relative standalone
selling prices.
(5)Recognize
revenue when a performance obligation is satisfied
Revenue
is recognized when or as performance obligations are satisfied by transferring control of a promised good or service to a customer. Control
either transfers over time or at a point in time, which affects when revenue is recorded.
Revenues from sales of products are recognized based on the transfer of control, which includes but is not limited to, the agreed International Commercial terms, or “INCOTERMS”. Revenues related to warranty extension services, cloud-based monitoring, and communication services are recognized over time on a straight-line basis. Deferred
revenues consist of deferred cloud-based monitoring services, communication services, warranty extension services and advance payments
received from customers for the Company’s products. Deferred revenues are classified as short-term and long-term deferred revenues
based on the period in which revenues are expected to be recognized (see Note 14).
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cost of revenues |
v.Cost
of revenues:
Cost
of revenues includes the following: product costs consisting of purchases from contract manufacturers and other suppliers, direct and
indirect manufacturing costs, shipping and handling, support, warranty expenses, provision for losses related to slow moving and dead
inventory, personnel and logistics costs. |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shipping and handling costs |
Shipping
and handling costs, which amounted to $257,753,
$116,574
and $101,597,
for the years ended December 31, 2022, 2021 and 2020, respectively, are included in the cost of revenues in the consolidated statements
of income. Shipping and handling costs include custom tariff charges and all other costs associated with the distribution of finished
goods from the Company’s point of sale directly to its customers.
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Warranty obligations |
w.Warranty
obligations:
The
Company provides a product warranty for its solar segment related products as follows: a standard 10-year
limited warranty for its residential batteries, a standard 12-year
limited warranty for the majority of its inverters, that is extendable up to 25
years for an additional cost and a 25-year
limited warranty for power optimizers.
The
Company maintains reserves to cover the expected costs that could result from the standard warranty. The warranty liability is in the
form of product replacement and associated costs. Warranty reserves are based on the Company’s best estimate of such costs and are
included in cost of revenues. The reserve for the related warranty expenses is based on various factors including assumptions about the
frequency of warranty claims on product failures, derived from results of accelerated lab testing, field monitoring, analysis of the history
of product field failures, and the Company’s reliability estimates.
The
Company has established a reliability measurement system based on the units’ estimated mean time between failure, or MTBF, a metric
that equates to a steady-state failure rate per year for each product generation. The MTBF predicts the expected failure rate of each
product within the Company's products installed base during the expected product warranted lifetime.
The
Company performs accelerated life cycle testing, which simulates the service life of the product in a short period of time.
The
accelerated life cycle tests incorporate test methodologies derived from standard tests used by solar module vendors to evaluate the period
over which solar modules wear out. Corresponding replacement costs are updated periodically to reflect changes in the Company’s
actual and estimated production costs for its products, rate of usage of refurbished units as a replacement of faulty units, and other
costs related to logistic and subcontractors’ services associated with the replacement products.
In
addition, through the collection of actual field failure statistics, the Company has identified several additional failure causes that
are not included in the MTBF model. Such causes, which mostly consist of design errors, workmanship errors caused during the manufacturing
process and, to a lesser extent, replacement of non-faulty units by installers, result in generating additional replacement costs to the
replacement costs projected under the MTBF model.
For
other products, the Company accrues for warranty costs based on the Company’s best estimate of product and associated costs. The
Company’s other products are sold with a standard limited warranty that typically range in duration from one to ten years.
Warranty
obligations are classified as short-term and long-term obligations based on the period in which the warranty is expected to be claimed.
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Convertible senior notes |
x.Convertible
senior notes:
Effective
January 1, 2021, the Company early adopted ASU 2020-06 using the modified retrospective approach. The Notes are accounted for as a single
liability measured at its amortized cost, as no other embedded features require bifurcation and recognition as derivatives. Adoption of
the new standard resulted in an increase of retained earnings in the amount of $2,884,
a decrease of an additional paid-in capital in the amount of $36,336,
an increase of convertible senior notes, net, in the amount of $45,282
and a decrease of deferred tax liabilities, net, in the amount of $11,830.
The impact of adoption of this standard on the Company’s earnings per share was immaterial. The
Company’s Convertible Senior Notes are included in the calculation of diluted Earnings Per Share (“EPS”) if the assumed
conversion into common shares is dilutive, using the “if-converted” method. This involves adding back the periodic non-cash
interest expense net of tax associated with the Notes to the numerator and by adding the shares that would be issued in an assumed conversion
(regardless of whether the conversion option is in or out of the money) to the denominator for the purposes of calculating diluted EPS,
unless the Notes are antidilutive (see Note 21). |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Advertising costs |
y.Advertising costs
Advertising costs are expensed when incurred and are included in sales and marketing expenses in the consolidated statements of income. The Company incurred advertising expenses of $11,090, $6,323, and $4,199 for the years ended December 31, 2022, 2021, and 2020, respectively. |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Research and development costs |
z.Research
and development costs:
Research
and development costs, are charged to the consolidated statement of income as incurred. |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Concentrations of credit risks |
aa.Concentrations
of credit risks:
Financial
instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents, short-term
bank deposits, restricted bank deposits, marketable securities, trade receivables, derivative instruments and other accounts receivable.
Cash
and cash equivalents, short-term bank deposits and restricted bank deposits are mainly invested in major banks in the U.S., Israel, Germany
and Korea. Management believes that the financial institutions that hold the Company’s investments are financially sound and, accordingly,
minimal credit risk exists with respect to these investments.
The
Company's debt marketable securities include investments in highly-rated corporate debentures (located mainly in U.S., Canada, France,
UK, Cayman Islands and other countries) and governmental bonds. The financial institutions that hold
the Company's debt marketable securities are major financial institutions located in the United States. The Company believes its debt
marketable securities portfolio is a diverse portfolio of highly-rated securities and the Company's investment policy limits the amount
the Company may invest in an issuer (see Note 2g.).
The
trade receivables of the Company derive from sales to customers located primarily in the United States and Europe.
The
Company performs ongoing credit evaluations of its customers for the purpose of determining the appropriate allowance for credit losses
(see Note 2i.). The Company generally does not require collaterals, however, in certain circumstances, the Company may require letters
of credit, other collateral, or additional guarantees. From time to time, the Company may purchase trade credit insurance.
The Company
had one major customer (customers with attributable revenues that represents more than 10% of total revenues) for the year ended December
31, 2022, two major customers for the year ended December 31, 2021, and one major customer for the year ended December 31, 2020 that accounted
for approximately 18.5%,
30.9%%
and 14.8%
of the Company’s consolidated revenues, respectively. All of the revenues from these customers were generated in the solar segment.
The Company had three major customers (customer with a balance that represents more than 10% of total trade receivables, net) as of December 31, 2022 and two major customers for the year ended December 31, 2021 that accounted in the aggregate for approximately 42.2% and 39.3%, of the Company’s consolidated trade receivables, net, respectively. |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Concentrations of supply risks |
ab.Concentrations
of supply risks:
The
Company depends on two contract manufacturers and several limited or single source component suppliers, including, Samsung SDI, that provides
lithium-ion battery cells required for the Company's residential storage solution. Reliance on these vendors makes the Company vulnerable
to possible capacity constraints and reduced control over component availability, delivery schedules, manufacturing yields, and costs.
As
of December 31, 2022 and 2021, two contract manufacturers collectively accounted for 34.3%
and 27.9%
of the Company’s total trade payables, net, respectively.
In
the second quarter of 2022, the Company announced the opening of “Sella 2”, a two gigawatt-hour (GWh) Li-Ion battery cell
manufacturing facility located in South Korea. Sella 2 is in the ramp-up phase, that is expected to continue throughout 2023. Sella
2 is the Company's second owned manufacturing facility following the establishment of Sella 1 in 2020. Sella 1 is the Company's manufacturing
facility in the North of Israel that produces power optimizers and inverters for the Company's solar activities. |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair value of financial instruments |
ac.Fair
value of financial instruments:
The
following methods and assumptions were used by the Company in estimating the fair value of its financial instruments:
The
carrying value of cash and cash equivalents, short-term bank deposits, restricted bank deposits, trade receivables, net, long term bank
loans and current maturities, prepaid expenses and other current assets, trade payables, net, employee and payroll accruals and accrued
expenses and other current liabilities approximate their fair values due to the short-term maturities of such instruments.
Assets
measured at fair value on a recurring basis as of December 31, 2022 and 2021 are comprised of money market funds, derivative
instruments and marketable securities (see Note 12).
The
Company applies ASC 820 “Fair Value Measurements and Disclosures”, with respect to fair value measurements of all financial
assets and liabilities. Fair value is an exit price, representing the amount that would be received for the sale of an asset or paid to
transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should
be determined based on assumptions that market participants would use in pricing an asset or a liability.
A three-tiered fair value hierarchy is established as a basis for considering such assumptions and for inputs used in the valuation methodologies in measuring fair value: Level
1 -Observable inputs that reflect quoted prices (unadjusted) for identical assets
or liabilities in active markets.
Level
2 -Include other inputs that are directly or indirectly observable in the marketplace.
Level
3 -Unobservable inputs which are supported by little or no market activity.
The
fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when
measuring fair value.
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation |
ad.Stock-based
compensation:
The
Company uses the closing trading price of its common stock on the day before the grant date as the fair value of awards of restricted
stock units ("RSUs"), and performance stock units that are based on the Company's financial performance targets ("PSUs"). The compensation
expense for RSUs is recognized using a straight-line attribution method over the requisite employee service period while compensation
expense for PSUs is recognized using an accelerated amortization model. The Company estimates the forfeitures at the time of grant and
revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Estimated forfeitures are based on actual
historical pre-vesting forfeitures.
The Company granted under its 2015 Plan, PSU awards to certain employees and officers which vest upon the achievement of certain performance or market conditions subject to their continued employment with the Company.
The market condition for the PSUs is based on the Company’s total shareholder return ("TSR") compared to the TSR of companies listed in the S&P 500 index over a one to three year performance period. The Company uses a Monte-Carlo simulation to determine the grant date fair value for these awards, which takes into consideration the market price of a share of the Company’s common stock on the date of grant less the present value of dividends expected during the requisite service period, as well as the possible outcomes pertaining to the TSR market condition. The Company recognizes such compensation expenses on an accelerated vesting method. The
Company selected the Black-Scholes-Merton option-pricing model as the most appropriate fair value method for its stock-option awards and
Employee Stock Purchase Plan (“ESPP”). The option-pricing model requires a number of assumptions, of which the most significant
are the fair market value of the underlying common stock, expected stock price volatility, and the expected option term. Expected volatility
for stock-option awards and ESPP was calculated based upon the Company’s stock prices. The expected term of options granted is based
upon historical experience and represents the period between the options’ grant date and the expected exercise or expiration date.
The risk-free interest rate is based on the yield from U.S. treasury bonds with an equivalent term. The Company does not use dividend
yield rate since the Company has not declared or paid any dividends on its common stock and does not expect to pay any dividends in the
foreseeable future.
A
modification of the terms of a stock-based award is treated as an exchange of the original award for a new award with total compensation
cost equal to the grant-date fair value of the original award plus the incremental value of the modification to the award.
The fair value for options granted to employees and ESPP in the years ended December 31, 2022, 2021 and 2020, is estimated at the date of grant using the following assumptions:
(1)
No new options were granted in 2022. |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Earnings per share |
ae.Earnings
per share
Basic
net EPS is computed by dividing the net earnings attributable to SolarEdge Technologies, Inc. by the weighted-average number of shares
of common stock outstanding during the period.
Diluted
net EPS is computed by giving effect to all potential shares of common stock, to the extent dilutive, including stock options, RSUs, PSUs,
shares to be purchased under the Company’s ESPP, and the Notes due 2025, all in accordance with ASC No. 260, "Earnings Per Share."
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Income taxes |
af.Income
taxes:
The
Company and its subsidiaries account for income taxes in accordance with ASC 740, “Income Taxes”. ASC 740 prescribes the use
of the liability method, whereby deferred tax asset and liability account balances are determined based on differences between financial
reporting and tax bases of assets and liabilities and are measured using the enacted tax rates that will be in effect when the differences
are expected to reverse.
Deferred
income tax balances reflect the effects of temporary differences between the carrying amounts of assets and liabilities and their tax
bases and are stated at enacted tax rates expected to be in effect when taxes are actually paid or recovered. Deferred tax assets are
evaluated for future realization and reduced by a valuation allowance to the extent the Company believes they will not be realized. The
Company considers all available evidence, including historical information, long range forecast of future taxable income and evaluation
of tax planning strategies. Amounts recorded for valuation allowance can result from a complex series of judgments about future events
and can rely on estimates and assumptions.
Tax has not been recorded for (a) taxes that would apply in the event of disposal of investments in subsidiaries, as it is generally the Company’s intention to hold these investments, not to realize them; and (b) taxes that would apply on the distribution of unremitted earnings from foreign subsidiaries, as these are retained for reinvestment in the Group. The
Company accounts for uncertain tax positions in accordance with ASC 740-10 two-step approach to recognizing and measuring uncertain tax
positions. The first step is to evaluate the tax position taken or expected to be taken in a tax return by determining if the weight of
available evidence indicates that it is more likely than not that, on an evaluation of the technical merits, the tax position will be
sustained on audit, including resolution of any related appeals or litigation processes. The second step is to measure the tax benefit
as the largest amount that is more than 50% (cumulative probability) likely to be realized upon ultimate settlement.
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| New accounting pronouncements not yet effective |
ag.New
accounting pronouncements not yet effective:
From
time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board ("FASB") or other standard setting
bodies are adopted by the Company as of the specified effective date. The Company believes that the impact of recently issued standards
that are not yet effective will not have a material impact on its financial position or results of operations upon adoption.
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Recently issued and adopted pronouncements |
ah.Recently
issued and adopted pronouncements:
In
October 2021, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2021-08, Accounting for Contract Assets and
Contract Liabilities from Contracts with Customers (Topic 805). This ASU requires an acquirer in a business combination to recognize and
measure contract assets and contract liabilities (deferred revenue) from acquired contracts using the revenue recognition guidance in
Topic 606. At the acquisition date, the acquirer applies the revenue model as if it had originated the acquired contracts. The ASU is
effective for annual periods beginning after December 15, 2022, including interim periods within those fiscal years. Adoption of the ASU
should be applied prospectively. Early adoption is also permitted, including adoption in an interim period. The Company elected to early
adopt ASU 2021-08 on January 1, 2022, and will apply this new guidance to all business combinations consummated subsequent to this date.
Currently, this ASU has no impact on the Company's consolidated financial statements.
In
November 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2021-10, Government
Assistance (Topic 832): Disclosures by Business Entities about Government Assistance. Under ASU 2021-10, the accounting entities with
transactions with a government that are accounted for by analogy to a grant or contribution accounting model are required to annually
disclose certain information regarding the transaction including: (i) nature and related accounting policy used; (ii) line items on the
balance sheet and income statement affected by the transactions; (iii) amounts applicable to each line item; and (iv) significant terms
and conditions. This guidance is effective for financial statements issued for annual periods beginning after December 15, 2021. The adoption
of this ASU has a minor impact on the disclosures to the annual consolidated financial statements. ai.Certain
prior period amounts have been reclassified to conform to the current period presentation. |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||