CPSI 2017 Annual Report

51 Payment due by period (In thousands) Total Less than 1 year 1-3 Years 3-5 Years More than 5 Years Operating lease obligations . . . . . . . . . . . . . . . . . . . . . . $ 7,506 $ 1,959 $ 2,136 $ 1,489 $ 1,922 Capital lease obligations . . . . . . . . . . . . . . . . . . . . . . . . 565 315 250 — — Debt obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143,521 5,850 15,356 122,315 — Interest on debt obligations . . . . . . . . . . . . . . . . . . . . . . 29,762 7,007 13,009 9,746 — Total contractual obligations . . . . . . . . . . . . . . . . . . . . . $ 181,354 $ 15,131 $ 30,751 $ 133,550 $ 1,922 Interest on debt obligations for floating rate instruments, as calculated above, assumes rates in effect at December 31, 2017 remain constant. Critical Accounting Policies General. Our discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. We are required to make some estimates and judgments that affect the preparation of these financial statements. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, but actual results may differ from these estimates under different assumptions or conditions. Revenue Recognition. We generate revenue from the following sources: • The sale of information systems and the provision of related support services, including perpetual software licenses, conversion, installation and training services, hardware and peripherals, SaaS services, forms and supplies, software application support, hardware maintenance, and continuing education. • The provision of business management services, which includes electronic billing, statement processing, payroll processing, accounts receivable management, contract management and insurance services, as well as Internet service provider ("ISP") services and consulting and managed IT services (collectively, "other professional IT services"). We recognize revenue in accordance with the accounting principles required by the Software topic and Revenue Recognition subtopic of the Financial Accounting Standards Board ("FASB") Accounting Standards Codification (the "Codification") and those prescribed by the Securities and Exchange Commission, as well as the accounting principles relevant to multiple-element arrangements in the Revenue Recognition topic and Multiple-Element Arrangements subtopic of the Codification. These standards require that four basic criteria must be met before revenues can be recognized: (1) persuasive evidence that an arrangement exists; (2) delivery has occurred or services have been rendered; (3) the fee is fixed and determinable; and (4) collectability is reasonably assured. The recognition of revenue pursuant to these criteria involves estimates and judgments regarding: 1) The allocation of total arrangement consideration to the various elements of our multiple-element arrangements, including, for certain elements, estimates and judgments regarding vendor-specific objective evidence ("VSOE") of fair value, which we base on either the price charged when the same element is sold separately or the price established by management having the relevant authority to do so, for an element not yet sold separately. VSOE calculations are updated and reviewed regularly depending on the nature of the product or service. We base VSOE for the related undelivered elements on either renewals or stand-alone sales as appropriate. 2) Our determination that total fees for our products and services are fixed or determinable, which we base on signed contracts and orders. 3) Our assessment that collection of amounts due is reasonably assured, which we base on our standard payment terms and collection history. Risks associated with these estimates and judgments and the effects thereof include: (1) if VSOE of fair value of any undelivered element does not exist, all revenue is deferred until VSOE of fair value of the undelivered element is established or the element has been delivered and (2) if the fees are not fixed or determinable, or if collection is not reasonably assured, then the revenue recognized in various periods will be less than amounts that would have been otherwise recognizable using the residual method provided under the Codification. See Note 2 to the financial statements for further discussion of our revenue recognition policies.