Document and Entity Information - USD ($)	12 Months Ended
Document and Entity Information - USD ($)	Dec. 31, 2015	Feb. 19, 2016	Jun. 30, 2015
Document Documentand Entity Information [Abstract]
Document Type	10-K
Amendment Flag	false
Document Period End Date	Dec. 31, 2015
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	FY
Trading Symbol	ALGN
Entity Registrant Name	ALIGN TECHNOLOGY INC
Entity Central Index Key	0001097149
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding (shares)		79,625,640
Entity Well-known Seasoned Issuer	Yes
Entity Public Float			$ 3,646,077,546
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No

CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($)
shares in Thousands, $ in Thousands

12 Months Ended

Dec. 31, 2015

Dec. 31, 2014

Dec. 31, 2013

Income Statement [Abstract]

Net revenues

^[1]

$ 845,486

$ 761,653

$ 660,206

Cost of revenues

205,376

183,210

162,100

Gross profit

640,110

578,443

498,106

Operating expenses:

Selling, general and administrative

390,239

332,068

292,798

Research and development

61,237

52,799

44,083

Impairment of goodwill

40,693

Impairment of long lived assets

26,320

Total operating expenses

451,476

384,867

403,894

Income from operations

188,634

193,576

94,212

Interest and other income (expense), net

(2,533)

(3,207)

(1,073)

Net income before provision for income taxes

186,101

190,369

93,139

Provision for income taxes

42,081

44,537

28,844

Net income

$ 144,020

$ 145,832

$ 64,295

Net income per share:

Basic (usd per share)

$ 1.80

$ 1.81

$ 0.80

Diluted (usd per share)

$ 1.77

$ 0.78

Shares used in computing net income per share:

Basic (shares)

79,998

80,754

80,551

Diluted (shares)

81,521

82,283

82,589

[1]	2 Long-lived assets are attributed to countries based on entity that owns the assets.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Statement of Comprehensive Income [Abstract]
Net income	$ 144,020	$ 145,832	$ 64,295
Net change in cumulative translation adjustment	(154)	(196)	62
Change in unrealized gains (losses) on available-for sale securities, net of tax	(686)	(238)	29
Other comprehensive income (loss)	(840)	(434)	91
Comprehensive income (loss)	$ 143,180	$ 145,398	$ 64,386

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

+ References + Details

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Dec. 31, 2015	Dec. 31, 2014
Current assets:
Cash and cash equivalents	$ 167,714	$ 199,871
Marketable securities, short-term	359,581	254,787
Accounts receivable, net of allowance for doubtful accounts and returns of $2,472 and $1,563, respectively	158,550	129,751
Inventories	19,465	15,928
Prepaid expenses and other current assets	26,700	19,770
Deferred Tax Assets, Net, Current	0	37,053
Total current assets	732,010	657,160
Marketable securities, long-term	151,370	147,892
Property, plant and equipment, net	136,473	90,125
Goodwill	79,162	82,056
Deferred tax assets	51,416	3,099
Other assets	8,202	7,665
Total assets	1,158,633	987,997
Current liabilities:
Accounts payable	34,354	23,247
Accrued liabilities	107,765	87,880
Deferred revenues	129,553	90,684
Total current liabilities	271,672	201,811
Taxes Payable	37,512	30,483
Other long-term liabilities	1,523	2,932
Total liabilities	$ 310,707	$ 235,226
Commitments and contingencies (Notes 6 and 8)
Stockholders' equity:
Preferred stock, $0.0001 par value (5,000 shares authorized; none issued)	$ 0	$ 0
Common stock, $0.0001 par value (200,000 shares authorized; 79,500 and 80,205 issued and outstanding at 2015 and 2014, respectively)	8	8
Additional paid-in capital	821,507	783,410
Accumulated other comprehensive income, net	(980)	(140)
Accumulated deficit	27,391	(30,507)
Total stockholders' equity	847,926	752,771
Total liabilities and stockholders' equity	$ 1,158,633	$ 987,997

CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) shares in Thousands, $ in Thousands	Dec. 31, 2015	Dec. 31, 2014
Statement of Financial Position [Abstract]
Accounts receivable, allowance for doubtful accounts and returns	$ 2,472	$ 1,563
Preferred stock, par value (usd per share)	$ 0.0001	$ 0.0001
Preferred stock, shares authorized (shares)	5,000	5,000
Preferred stock, issued (shares)
Common stock, par value (usd per share)	$ 0.0001	$ 0.0001
Common stock, shares authorized (shares)	200,000	200,000
Common stock, issued (shares)	79,500	80,205
Common stock, outstanding (shares)	79,500	80,205

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($) shares in Thousands, $ in Thousands	Total	Common Stock	Additional Paid in Capital	Accumulated Other Comprehensive Income (Loss)	Accumulated Deficit
Beginning Balance (in shares) at Dec. 31, 2012		80,611
Beginning Balance at Dec. 31, 2012	$ 581,317	$ 8	$ 670,732	$ 203	$ (89,626)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	64,295				64,295
Net change in unrealized gain (loss) from available-for sale securities	29			29
Net change in cumulative translation adjustment	62			62
Issuance of common stock relating to employee equity compensation plans (in shares)		2,694
Issuance of common stock relating to employee equity compensation plans	34,196	$ 0	34,196
Tax withholdings related to net share settlements of restricted stock units	(4,363)		(4,363)
Common stock repurchased and retired (shares)		(2,722)
Common stock repurchased and retired	(95,107)		(24,528)		(70,579)
Excess tax benefit from share based payment arrangements	27,103		27,103
Stock based compensation	26,438		26,438
Ending Balance (in shares) at Dec. 31, 2013		80,583
Ending Balance at Dec. 31, 2013	633,970	$ 8	729,578	294	(95,910)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	145,832				145,832
Net change in unrealized gain (loss) from available-for sale securities	(238)			(238)
Net change in cumulative translation adjustment	(196)			(196)
Issuance of common stock relating to employee equity compensation plans (in shares)		1,536
Issuance of common stock relating to employee equity compensation plans	18,028	$ 0	18,028
Tax withholdings related to net share settlements of restricted stock units	(7,608)		(7,608)
Common stock repurchased and retired (shares)		(1,914)
Common stock repurchased and retired	(98,233)		(17,804)		(80,429)
Excess tax benefit from share based payment arrangements	21,393		21,393
Stock based compensation	39,823		39,823
Ending Balance (in shares) at Dec. 31, 2014		80,205
Ending Balance at Dec. 31, 2014	752,771	$ 8	783,410	(140)	(30,507)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	144,020				144,020
Net change in unrealized gain (loss) from available-for sale securities	(686)			(686)
Net change in cumulative translation adjustment	(164)		(10)	(154)
Issuance of common stock relating to employee equity compensation plans (in shares)		991
Issuance of common stock relating to employee equity compensation plans	11,325		11,325
Tax withholdings related to net share settlements of restricted stock units	(20,716)		(20,716)
Common stock repurchased and retired (shares)		(1,696)
Common stock repurchased and retired	(101,791)		(15,669)		(86,122)
Excess tax benefit from share based payment arrangements	10,224		10,224
Stock based compensation	52,943		52,943
Ending Balance (in shares) at Dec. 31, 2015		79,500
Ending Balance at Dec. 31, 2015	$ 847,926	$ 8	$ 821,507	$ (980)	$ 27,391

CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$ 144,020	$ 145,832	$ 64,295
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred taxes	(11,424)	4,088	(5,899)
Depreciation and amortization	18,004	17,856	16,825
Stock-based compensation	52,943	39,823	26,438
Tax (shortfalls) benefits from stock-based awards	10,224	21,393	27,103
Excess tax benefit from share-based payment arrangements	(10,396)	(21,393)	(27,103)
Impairment of goodwill	0	0	40,693
Impairment of long lived assets	0	0	26,320
Other	13,799	10,106	4,142
Changes in assets and liabilities, excluding the effects of business combinations:
Accounts receivable	(40,775)	(27,229)	(11,981)
Inventories	(3,563)	(1,999)	1,158
Prepaid expenses and other assets	(3,726)	(2,924)	(392)
Accounts payable	7,575	2,887	(186)
Accrued and other long-term liabilities	19,462	22,692	9,662
Deferred revenues	41,854	15,767	14,901
Net cash provided by operating activities	237,997	226,899	185,976
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition, net of cash acquired	0	0	(7,652)
Purchase of property, plant and equipment	(53,451)	(24,092)	(19,412)
Purchase of marketable securities	(447,092)	(437,152)	(303,917)
Proceeds from maturities of marketable securities	304,125	176,810	90,917
Proceeds from Sale and Maturity of Marketable Securities	30,011	82,990	31,741
Other assets	46	(183)	(2,411)
Net cash used in investing activities	(166,361)	(201,627)	(210,734)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock	11,325	18,028	34,196
Common stock repurchase	(101,791)	(98,233)	(95,107)
Excess tax benefit from share-based payment arrangements	10,396	21,393	27,103
Employees' taxes paid upon the vesting of restricted stock units	(20,716)	(7,608)	(4,363)
Net cash used in financing activities	(100,786)	(66,420)	(38,171)
Effect of foreign exchange rate changes on cash and cash equivalents	(3,007)	(1,934)	(504)
Net decrease in cash and cash equivalents	(32,157)	(43,082)	(63,433)
Cash and cash equivalents, beginning of year	199,871	242,953
Cash and cash equivalents, end of year	$ 167,714	$ 199,871	$ 242,953

Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2015

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Business Description

Align Technology, Inc. (“We”, “Our”, or “Align”) was incorporated in April 1997 in Delaware and focuses on designing, manufacturing and marketing innovative, technology-rich products to help dental professionals achieve the clinical results they expect and deliver effective, convenient cutting-edge dental treatment options to their patients. We are headquartered in San Jose, California with offices worldwide. Our international headquarters are located in Amsterdam, the Netherlands. We have two operating segments, (1) Clear Aligner, known as the Invisalign System, and (2) Scanners and Services ("Scanner"), known as the iTero intra-oral scanner and OrthoCAD services.

Basis of presentation and preparation

The consolidated financial statements include the accounts of Align and our wholly-owned subsidiaries after elimination of intercompany transactions and balances.

In connection with the preparation of the consolidated financial statements, we evaluated events subsequent to the balance sheet date through the financial statement issuance date and determined that all material transactions have been recorded and disclosed properly.

Out of period adjustment

In 2013, we recorded an out of period correction that resulted in decreases in cost of net revenues of approximately $1.7 million and operating expense of $0.7 million offset in part by an increase in the provision for income taxes of $0.5 million. We do not believe the increase of $1.9 million to net income related to the out of period adjustment is material to the consolidated financial statements for the fiscal year ended December 31, 2013 or to any prior years' consolidated financial statements.

In 2014, we recorded an out of period correction that resulted in an increase in the provision for income taxes of $1.8 million. We do not believe the decrease to net income related to the out of period adjustment is material to the consolidated financial statements for the fiscal year ended December 31, 2014 or to any prior years' consolidated financial statements.

Use of estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S.”) requires our management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ materially from those estimates. On an ongoing basis, we evaluate our estimates, including those related to the fair values of financial instruments, intangible assets and goodwill, useful lives of intangible assets and property and equipment, stock-based compensation, revenue recognition, income taxes, and contingent liabilities, among others. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities.

Fair value of financial instruments

The carrying amounts of our cash, accounts receivable, accounts payable and other current liabilities approximate their fair value.

We measure our cash equivalents, marketable securities, and our Israeli severance fund at fair value. Fair value is the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:

Level 1— Quoted (unadjusted) prices in active markets for identical assets or liabilities.

Level 2— Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liability.

Level 3 – Inputs that are generally unobservable and typically reflect management’s estimate of assumptions that market participants would use in pricing the asset or liability.

Cash and cash equivalents

We consider currency on hand, demand deposits, time deposits, and all highly liquid investments with an original maturity of three months or less at the date of purchase to be cash and cash equivalents. Cash and cash equivalents are held in various financial institutions in the U.S. and internationally.

Restricted cash

Our restricted cash balance as of December 31, 2015 was $3.5 million, of which $3.3 million was classified as a long term asset and $0.2 million as a current asset. Our restricted cash balance as of December 31, 2014 was $3.8 million, of which $3.6 million was classified as a long term asset and $0.2 million as a current asset. The restricted cash primarily consisted of funds reserved for legal requirements.

Marketable securities

We invest primarily in money market funds, commercial paper, corporate bonds, U.S. government agency bonds, asset-backed securities, municipal securities, U.S. dollar dominated foreign corporate bonds, U.S. government treasury bonds and certificates of deposits.

Marketable securities are classified as available-for-sale and are carried at fair value. Marketable securities classified as current assets have maturities of less than one year. Unrealized gains or losses on such securities are included in accumulated other comprehensive income, net in stockholders’ equity. Realized gains and losses from maturities of all such securities are reported in earnings and computed using the specific identification cost method. Realized gains or losses and charges for other-than-temporary declines in value, if any, on available-for-sale securities are reported in Interest and other income (expense), net as incurred. We periodically evaluate these investments for other-than-temporary impairment.

Derivative Financial Instruments

In September 2015, we began entering into foreign currency forward contracts to minimize the short-term impact of foreign currency exchange rate fluctuations on cash and certain trade and intercompany receivables and payables. These forward contracts are not designated as hedging instruments and do not subject us to material balance sheet risk due to fluctuations in foreign currency exchange rates. The gains and losses on these forward contracts are intended to offset the gains and losses in the underlying foreign currency denominated monetary assets and liabilities being economically hedged. We do not enter into foreign currency forward contracts for trading or speculative purposes. These instruments are marked to market through earnings every period and generally are one month in original maturity. The net gain or loss from the settlement of these foreign currency forward contracts is recorded in Interest and other income (expense), net in the Consolidated Statements of Operations.

Foreign currency

For our international subsidiaries where the U.S. dollar is the functional currency, we analyze on an annual basis or more often if necessary, if a significant change in facts and circumstances indicate that the primary economic currency has changed. Adjustments from translating certain European and Asia Pacific subsidiaries’ financial statements from the local currency to the U.S. dollar are recorded as a separate component of accumulated other comprehensive income (loss), net in the stockholders’ equity section of the Consolidated Balance Sheet. This foreign currency translation adjustment reflects the translation of the balance sheet at period end exchange rates, and the income statement at an average exchange rate in effect during the period. As of December 31, 2015 and 2014, there were no material amounts in accumulated other comprehensive income, net related to the translation of our foreign subsidiaries’ financial statements.

Some of our international entities operate in a U.S. dollar functional currency environment, and therefore, the foreign currency assets and liabilities are remeasured into the U.S. dollar at current exchange rates except for non-monetary assets and liabilities which are remeasured at historical exchange rates. Revenues and expenses are generally remeasured at an average exchange rate in effect during each period. Gains or losses from foreign currency remeasurement are included in Interest and other income (expense), net. For the year ended December 31, 2015 and 2014, we had foreign currency net losses of $4.0 million and $3.8 million.

Certain risks and uncertainties

Our operating results depend to a significant extent on our ability to market and develop our products. The life cycles of our products are difficult to estimate due, in part, to the effect of future product enhancements and competition. Our inability to successfully develop and market our products as a result of competition or other factors would have a material adverse effect on our business, financial condition and results of operations.

Our cash and investments are held primarily by two financial institutions. Financial instruments which potentially expose us to concentrations of credit risk consist primarily of cash equivalents, marketable securities and accounts receivable. We invest excess cash primarily in money market funds of major financial institutions, U.S. government agencies, U.S. dollar dominated foreign corporate bonds and domestic corporate bonds. If the carrying value of our investments exceeds the fair value, and the decline in fair value is deemed to be other-than-temporary, we will be required to write down the value of our investments, which could materially harm our results of operations and financial condition. Moreover, the performance of certain securities in our investment portfolio correlates with the credit condition of the U.S. economy. We provide credit to customers in the normal course of business. Collateral is not required for accounts receivable, but ongoing evaluations of customers’ credit worthiness are performed. We maintain reserves for potential credit losses and such losses have been within management’s expectations. No individual customer accounted for 10% or more of our accounts receivable at December 31, 2015 or 2014, or net revenues for the year ended December 31, 2015, 2014, or 2013.

In the U.S., the Food and Drug Administration (“FDA”) regulates the design, manufacture, distribution, pre-clinical and clinical study, clearance and approval of medical devices. Products developed by us may require approvals or clearances from the FDA or other international regulatory agencies prior to commercialized sales. There can be no assurance that our products will receive any of the required approvals or clearances. If we were denied approval or clearance or such approval was delayed, it may have a material adverse impact on us.

We have manufacturing operations located outside the U.S. We currently rely on our manufacturing facility in Costa Rica to prepare digital treatment plans using a sophisticated, internally developed computer-modeling program. In addition, we manufacture our clear aligners and distribute our intra-oral scanners at our facility in Juarez, Mexico, and we produce our handheld scanner wand in Or Yehuda, Israel. Our reliance on international operations exposes us to related risks and uncertainties, including difficulties in staffing and managing international operations such as hiring and retaining qualified personnel; controlling production volume and quality of manufacture; political, social and economic instability, particularly as a result of increased levels of violence in Juarez, Mexico and Or Yehuda, Israel; interruptions and limitations in telecommunication services; product and material transportation delays or disruption; trade restrictions and changes in tariffs; import and export license requirements and restrictions; fluctuations in foreign currency exchange rates; and potential adverse tax consequences. If any of these risks materialize, our international manufacturing operations, as well as our operating results, may be harmed.

We purchase certain inventory from sole suppliers. Additionally, we rely on a limited number of hardware manufacturers. The inability of any supplier or manufacturer to fulfill our supply requirements could materially and adversely impact our future operating results.

Inventories

Inventories are valued at the lower of cost or market, with cost computed using either standard cost, which approximates actual cost, or average cost on a first-in-first-out basis. Excess and obsolete inventories are determined primarily based on future demand forecasts, and write-downs of excess and obsolete inventories are recorded as a component of cost of revenues.

Property, plant and equipment

Property, plant and equipment are stated at historical cost less accumulated depreciation and amortization. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the assets, generally three to ten years. We amortize leasehold improvements over the shorter of the remaining lease term or the estimated useful lives of the assets. We depreciate buildings over periods up to 20 years. Land is not depreciated. Construction in progress ("CIP") is related to the construction or development of property (including land) and equipment that have not yet been placed in service for their intended use. Upon sale or retirement, the asset’s cost and related accumulated depreciation are removed from the general ledger and any related gains or losses are reflected in expenses. Maintenance and repairs are expensed as incurred.

Goodwill and finite-lived acquired intangible assets

Goodwill represents the excess of the purchase price paid over the fair value of tangible and identifiable intangible net assets acquired in business combinations and is allocated to the respective reporting units based on relative synergies generated.

Our intangible assets primarily consist of intangible assets acquired as part of the Cadent acquisition. These assets are amortized using the straight-line method over their estimated useful lives ranging from one to fifteen years, reflecting the period in which the economic benefits of the assets are expected to be realized.

Impairment of goodwill and long-lived assets

Goodwill

We evaluate goodwill for impairment at least annually on November 30th or more frequently if indicators are present, an event occurs or circumstances changes that suggest an impairment may exist and that it would more likely than not reduce the fair value of a reporting unit below its carrying amount. The allocation of goodwill to the respective reporting unit is based on relative synergies generated as a result of an acquisition.

We perform an initial assessment of qualitative factors to determine whether the existence of events and circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. In performing the qualitative assessment, we identify and consider the significance of relevant key factors, events, and circumstances that affect the fair value of our reporting units. These factors include external factors such as macroeconomic, industry, and market conditions, as well as entity-specific factors, such as our actual and planned financial performance. We also give consideration to the difference between the reporting unit fair value and carrying value as of the most recent date a fair value measurement was performed. If, after assessing the totality of relevant events and circumstances, we determine that it is more likely than not that the fair value of the reporting unit exceeds its carrying value and there is no indication of impairment, no further testing is performed; however, if we conclude otherwise, the first step of the two-step impairment test is performed by estimating the fair value of the reporting unit and comparing it with its carrying value, including goodwill.

Step one of the goodwill impairment test consists of a comparison of the fair value of a reporting unit against its carrying amount, including the goodwill allocated to each reporting unit. We determine the fair value of our reporting units based on the present value of estimated future cash flows under the income approach of the reporting units as well as various price or market multiples applied to the reporting unit's operating results along with the appropriate control premium under the marketing approach, both of which are classified as level 3 within the fair value hierarchy (as described in Note 2). If the carrying amount of the reporting unit is in excess of its fair value, step two requires the comparison of the implied fair value of the reporting unit’s goodwill against the carrying amount of the reporting unit’s goodwill. Any excess of the carrying value of the reporting unit’s goodwill over the implied fair value of the reporting unit’s goodwill is recorded as an impairment loss.

Finite-lived intangible assets and long-lived assets

We evaluate long-lived assets (including finite-lived intangible assets) for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable. An asset or asset group is considered impaired if its carrying amount exceeds the future undiscounted net cash flows the asset or asset group is expected to generate. Factors we consider important which could trigger an impairment review include significant negative industry or economic trends, significant loss of customers and changes in the competitive environment. If an asset or asset group is considered to be impaired, the impairment to be recognized is calculated as the amount by which the carrying amount of the asset or asset group exceeds its fair market value. Our estimates of future cash flows attributable to our long-lived assets require significant judgment based on our historical and anticipated results and are subject to many assumptions. The estimation of fair value utilizing a discounted cashflow ("DCF") approach includes numerous uncertainties which require our significant judgment when making assumptions of expected growth rates and the selection of discount rates, as well as assumptions regarding general economic and business conditions, and the structure that would yield the highest economic value, among other factors. Refer to Note 5 for details of the impairment analysis.

There were no further triggering events in 2015 that would cause further impairments of our long-lived assets.

Development costs for internal use software

Internally developed software includes enterprise-level business software that we are customizing to meet our specific operational needs. Such capitalized costs include external direct costs utilized in developing or obtaining the applications and payroll and payroll-related costs for employees, who are directly associated with the development of the applications. In 2014, we started an ERP project which we have capitalized $25.4 million of costs as of December 31, 2015 which is included in construction in progress ("CIP"). When the ERP is placed into production, these costs will be amortized over 10 years.

The costs to develop software that is marketed externally have not been capitalized as we believe our current software development process is essentially completed concurrent with the establishment of technological feasibility. As such, all related software development costs are expensed as incurred and included in research and development expense in our Consolidated Statement of Operations.

Product Warranty

Clear Aligner

We warrant our Invisalign products against material defects until the Invisalign case is complete. We accrue for warranty costs in cost of net revenues upon shipment of products. The amount of accrued estimated warranty costs is primarily based on historical experience as to product failures as well as current information on replacement costs. Actual warranty costs could differ materially from the estimated amounts. We regularly review the accrued balances and update these balances based on historical warranty cost trends.

Scanners and Services

We warrant our intra-oral scanners for a period of one year, which include materials and labor. We accrue for these warranty costs based on average historical repair costs. An extended warranty may be purchased for additional fees.

Allowance for Doubtful Accounts and Returns

We maintain allowances for doubtful accounts, for customers that are not able to make payments, and for sales returns. We periodically review these allowances, including an analysis of the customers’ payment history and information regarding the customers’ creditworthiness, as well as historical sales returns as a percentage of revenue. Actual write-offs have not materially differed from the estimated allowance.

Revenue Recognition

We measure and allocate revenue according to the accounting guidance for multiple-deliverable revenue arrangements in Accounting Standards Update (“ASU”) 2009-13, Multiple-Deliverable Revenue Arrangements-a consensus of the Financial Accounting Standard Board (“FASB”) Emerging Issues Task Force.

Multiple-Element Arrangements (“MEAs”): Arrangements with customers may include multiple deliverables, including any combination of products/equipment and services. The deliverables included in the MEAs are separated into more than one unit of accounting when (i) the delivered product/equipment has value to the customer on a stand-alone basis, and (ii) delivery of the undelivered service element(s) is probable and substantially in our control. Arrangement consideration is then allocated to each unit, delivered or undelivered, based on the relative selling price of each unit of accounting based first on vendor-specific objective evidence (“VSOE”) if it exists, second on third-party evidence (“TPE”) if it exists, or on best estimated selling price (“BESP”) if neither VSOE or TPE exist.


•	VSOE - In most instances, this applies to products and services that are sold separately in stand-alone arrangements. We determine VSOE based on pricing and discounting practices for the specific product or service when sold separately, considering geographical, customer, and other economic or marketing variables, as well as renewal rates or stand-alone prices for the service element(s).


•	TPE - If we cannot establish VSOE of selling price for a specific product or service included in a multiple-element arrangement, we use third-party evidence of selling price. We determine TPE based on sales of comparable amount of similar products or service offered by multiple third parties considering the degree of customization and similarity of product or service sold.

•

BESP - The best estimated selling price represents the price at which we would sell a product or service if it were sold on a stand-alone basis. When VSOE or TPE do not exist for all elements, we determine BESP for the arrangement element based on sales, cost and margin analysis, as well as other inputs based on our pricing practices. Adjustments for other market and Company-specific factors are made as deemed necessary in determining BESP. We regularly review our estimates of selling price and maintain internal controls over the establishment and update of these estimates.

Revenue is recognized when persuasive evidence of the arrangement exists, the price is fixed or determinable, collectability is reasonably assured, title and risk of loss has passed to customers based on the shipping terms, and allowances for discounts, returns, and customer incentives can be reliably estimated. Provisions for discounts and rebates to customers are provided for in the same period that the related product sales are recorded.

Clear Aligner

We enter into arrangements (“treatment plans”) that involve multiple future product deliverables. Invisalign Full, Invisalign Teen, and Invisalign Assist products include optional Additional Aligners at no charge for a period of up to five years after initial shipment. Invisalign Teen also includes up to six optional replacement aligners in the price of the product and may be ordered by the dental professional any time throughout treatment. Invisalign Lite includes one optional case refinement in the price of the product. Case refinement is a finishing tool used to adjust a patient's teeth to the desired final position and may be elected by the dental professional at any time during treatment, however, it is generally ordered in the last stages of orthodontic treatment.

We determined that our treatment plans, except Invisalign Assist with progress tracking, comprise the following deliverables which also represent separate units of accounting: single-batched aligners, additional aligners, case refinement, and replacement aligners. We allocate revenue for each treatment plan based on each unit's relative selling price based on BESP and recognize the revenue upon the delivery of each unit in the treatment plan.

For Invisalign Assist with the progress tracking feature, aligners and services are provided to the dental professional every nine stages (“a batch”). We are able to reliably estimate the number of batches which are expected to be shipped for each case based upon our historical experience. The amounts allocated to this deliverable are recognized on a prorated basis as each batch is shipped.

Scanners and Services

We recognize revenues from the sales of iTero intra-oral scanners and CAD/CAM services. CAD/CAM services include scanning services, extended warranty for the intra-oral scanners, a range of iTero restorative services, and OrthoCAD services such as OrthoCAD iRecord. We sell intra-oral scanners and services through both our direct sales force and distribution partners. The intra-oral scanner sales price includes one year of warranty, and for additional fees, the customer may select an unlimited scanning service agreement over a fixed period of time or extended warranty periods. When intra-oral scanners are sold with either an unlimited scanning service agreement and/or extended warranty, we allocate revenue based on each element's relative selling price. We estimate the selling price of each element, as if it is sold on a stand-alone basis, taking into consideration historical prices as well as our discounting strategies.

Scanner revenue, net of related discounts and allowances, is recognized when products or equipment have been shipped and no significant obligations for installation or training remain. For certain distributors who provide installation and training to the customer, we recognize scanner revenue when the intra-oral scanner is shipped to the distributor assuming all of the other revenue recognition criteria have been met. Discounts are deducted from revenue at the time of sale. Returns of products, excluding warranty related returns, are infrequent and insignificant.

Service revenue, including iTero restorative and all OrthoCAD services are recognized upon delivery or ratably over the contract term as the specified services are performed. If a customer selects a pay per use basis for scanning service fees, the revenue is recognized as the service is provided.

We offer customers an option to purchase extended warranties on certain products. We recognize revenue on these extended warranty contracts ratably over the life of the contract. The costs associated with these extended warranty contracts are recognized when incurred.

Shipping and Handling Costs

Shipping and handling charges to customers are included in net revenues, and the associated costs incurred are recorded in cost of revenues.

Legal Proceedings and Litigations

We are involved in legal proceedings on an ongoing basis. If we believe that a loss arising from such matters is probable and can be reasonably estimated, we accrue the estimated liability in our financial statements. If only a range of estimated losses can be determined, we accrue an amount within the range that, in our judgment, reflect the most likely outcome; if none of the estimates within that range is a better estimate than any other amount, we accrue the low end of the range.

Research and development

Research and development expense is expensed as incurred and includes the costs associated with the research and development of new products and enhancements to existing products. These costs primarily include compensation costs, including stock-based compensation expense, outside consulting expenses, costs associated with conducting clinical and pre-commercialization trial and testing, allocations of corporate overhead expenses including facilities and IT costs, equipment costs and depreciation and amortization.

Advertising costs

The cost of advertising and media is expensed as incurred. For the year ended December 31, 2015, 2014 and 2013 advertising costs totaled $23.4 million, $26.9 million and $26.0 million, respectively.

Common stock repurchase

We repurchase our own common stock from time to time in the open market when our Board of Directors approve a stock repurchase program. We account for these repurchases under the accounting guidance for equity where we allocate the total repurchase value that are in excess over par between additional paid in capital and retained earnings. All shares repurchased are retired.

Operating leases

We currently lease office spaces, automobiles and equipment under operating leases with original lease periods of up to 9 years. Certain of these leases have free or escalating rent payment provisions and lease incentives provided by the landlord. We recognize rent expense under such leases on a straight-line basis over the term of the lease as certain leases have adjustments for market provisions.

Income taxes

We make certain estimates and judgments in determining income tax expense for financial statement purposes. These estimates and judgments occur in the calculation of certain tax assets and liabilities, which arise from differences in the timing of recognition of revenue and expense for tax and financial statement purposes.

As part of the process of preparing our consolidated financial statements, we are required to estimate our income taxes in each of the jurisdictions in which we operate. This process involves us estimating our current tax exposure under the applicable tax laws and assessing temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included in our Consolidated Balance Sheets.

We account for uncertainty in income taxes pursuant to authoritative guidance based on a two-step approach to recognize and measure uncertain tax positions taken or expected to be taken in a tax return. The first step is to determine if the weight of available evidence indicates that it is more likely than not that the tax position will be sustained on audit based on its technical merits, 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% likely to be realized upon ultimate settlement. We adjust reserves for our uncertain tax positions due to changing facts and circumstances, such as the closing of a tax audit, or refinement of estimates due to new information. To the extent that the final outcome of these matters is different than the amounts recorded, such differences will impact our tax provision in our Consolidated Statements of Operations in the period in which such determination is made.

We assess the likelihood that we will be able to realize our deferred tax assets. Should there be a change in our ability to realize our deferred tax assets, our tax provision would increase in the period in which we determine that it is more likely than not that we cannot realize our deferred tax assets. We consider all available evidence, both positive and negative, including historical levels of income, expectations and risks associated with estimates of future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for a valuation allowance. If it is more likely than not that we will not realize our deferred tax assets, we will increase our provision for taxes by recording a valuation allowance against the deferred tax assets that we estimate will not ultimately be realizable. The available positive evidence at December 31, 2015 included historical operating profits and a projection of future income sufficient to realize most of our remaining deferred tax assets. As of December 31, 2015, it was considered more likely than not that our deferred tax assets would be realized with the exception of certain foreign loss carryovers as we are unable to forecast sufficient future profits to realize the deferred tax assets.

As of December 31, 2015, U.S. income taxes and foreign withholding taxes associated with the repatriation of undistributed earnings of foreign subsidiaries were not provided for on a cumulative total of $359.8 million. We intend to reinvest these earnings indefinitely in our foreign subsidiaries. If these earnings were distributed in the form of dividends or otherwise, or if the shares of the relevant foreign subsidiaries were sold or otherwise transferred, we would be subject to additional U.S. income taxes subject to an adjustment for foreign tax credit, and foreign withholding taxes. Determination of the amount of unrecognized deferred income tax liability related to these earnings is not practicable.

Accounting guidance for stock-based compensation prohibits recognition of a deferred income tax asset for excess tax benefits due to stock option exercises that have not yet been realized through a reduction in income taxes payable. We follow the tax law ordering method to determine when excess tax benefits have been realized and consider only the direct impacts of awards when calculating the amount of windfalls or shortfalls.

Stock-based compensation

We recognize stock-based compensation cost for only those shares ultimately expected to vest on a straight-line basis over the requisite service period of the award. We use the Black-Scholes option pricing model to determine the fair value of employee stock purchase plan shares. We estimate the fair value of market-performance based restricted stock units using a Monte Carlo simulation model which requires the input of assumptions, including expected term, stock price volatility and the risk-free rate of return. In addition, judgment is also required in estimating the number of stock-based awards that are expected to be forfeited. Forfeitures are estimated based on historical experience at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The assumptions used in calculating the fair value of share-based payment awards represent management’s best estimates, but these estimates involve inherent uncertainties and the application of management’s judgment. As a result, if factors change and we use different assumptions, our stock-based compensation expense could be materially different in the future.

Medical Device Excise Taxes

In accordance with the Patient Protection and Affordable Care Act, effective January 1, 2013, we began to incur an excise tax on sales of medical devices in the U.S. In March 2014, we were informed by IRS that our aligners are not subject to the medical device excise tax ("MDET") which we had been paying and expensing in selling, general and administrative expenses in the Consolidated Statements of Operations since January 1, 2013; however, our scanners are still subject to the MDET. Beginning in March 2014, we ceased expensing and paying the MDET for aligners. In the first quarter of 2015, the IRS approved our MDET refund claim of $6.8 million refund of MDET paid in 2013 related to our aligners; reducing expense for the year ended December 31, 2015.

Comprehensive income

Comprehensive income includes all changes in equity during a period from non-owner sources. Comprehensive income, including unrealized gains and losses on available-for-sale securities and foreign currency translation adjustments, are reported net of their related tax effect.

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (" FASB") released Accounting Standards Update ("ASU") 2014-9 "Revenue from Contracts with Customers" to supersede nearly all existing revenue recognition guidance under GAAP. The core principle of the standard is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for the goods or services. The new standard defines a five step process to achieve this core principle and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition process than required under existing GAAP including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. In addition, the new standard requires that reporting companies disclose the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers.

In August 2015, the FASB deferred the effective date of the update by one year, with early adoption on the original effective date permitted. We are required to adopt this standard starting in the first quarter of fiscal year 2018 using either of two methods: (i) retrospective to each prior reporting period presented with the option to elect certain practical expedients as defined within the standard; or (ii) retrospective with the cumulative effect of initially applying the standard recognized at the date of initial application and providing certain additional disclosures as defined per the standard. We have not yet selected a transition method, and are in the process of determining the impact that the new standard will have on our consolidated financial statements.

In April 2015, the FASB issued ASU No. 2015-05, "Customer's Accounting for Fees Paid in a Cloud Computing Arrangement." providing guidance to entities about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, the entity should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the entity should account for the arrangement as a service contract. The new guidance does not change the accounting for an entity's accounting for service contracts. The updated standard becomes effective for interim and annual reporting periods beginning after December 15, 2015. We adopted this ASU in January, 2016, and we do not expect it to have a material impact on our consolidated financial statements and related disclosures.

In November 2015, the FASB issued ASU 2015-17, "Income Taxes" (Topic 740), to simplify the presentation of deferred income taxes. Under the new standard, both deferred tax liabilities and assets are required to be classified as noncurrent in a classified balance sheet. ASU 2015-17 will become effective for fiscal years, and the interim periods within those years, beginning after December 15, 2016, with early adoption permitted. The new guidance has been adopted on a prospective basis by the Company for the year ended December 31, 2015, thus resulting in the reclassification of $30.1 million of current deferred tax assets to noncurrent on the accompanying Consolidated Balance Sheets. The prior reporting period was not retrospectively adjusted. The adoption of this guidance had no impact on our Consolidated Statements of Operations or Consolidated Statements of Comprehensive Income.

In February 2016, the FASB issued ASU No. 2016-02, “Leases” (topic 842). The FASB issued this update to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The updated guidance is effective for annual periods beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption of the update is permitted. The Company is evaluating the impact of the adoption of this update on our consolidated financial statements and related disclosures.

Marketable Securities and Fair Value Measurements

12 Months Ended

Dec. 31, 2015

Investments, All Other Investments [Abstract]

Marketable Securities and Fair Value Measurements

As of December 31, 2015 and 2014, the estimated fair value of our short-term and long-term investments, classified as available for sale, are as follows (in thousands):

Short-term



December 31, 2015	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Commercial paper	$	38,537	$	—	$	—		$	38,537
Corporate bonds	179,765		6		(251		)	179,520
U.S. dollar dominated foreign corporate bonds	510		—		(2		)	508
Municipal securities	14,209		7		(2		)	14,214
U.S. government agency bonds	75,172		—		(53		)	75,119
U.S. government treasury bonds	51,763		1		(81		)	51,683
Total Marketable Securities, Short-Term	$	359,956	$	14	$	(389	)	$	359,581

Long-term



December 31, 2015	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. government agency bonds	$	43,853	$	—	$	(178	)	$	43,675
Corporate bonds	64,012		9		(217		)	63,804
U.S. government treasury bonds	37,673		—		(107		)	37,566
Municipal securities	3,993		—		(2		)	3,991
Asset-backed securities	2,338		—		(3		)	2,335
Total Marketable Securities, Long-Term	$	151,869	$	9	$	(507	)	$	151,371

Short-term



December 31, 2014	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Commercial paper	$	33,998	$	—	$	—		$	33,998
Corporate bonds	152,055		27		(116		)	151,966
U.S. dollar dominated foreign corporate bonds	901		—		—			901
Municipal securities	9,147		13		—			9,160
U.S. government agency bonds	41,574		14		(1		)	41,587
U.S.government treasury bonds	15,770		7		—			15,777
Asset-backed securities	1,398		—		—			1,398
Total Marketable Securities, Short-Term	$	254,843	$	61	$	(117	)	$	254,787

Long-term



December 31, 2014	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. government agency bonds	$	48,233	$	12	$	(28	)	$	48,217
Corporate bonds	57,195		6		(112		)	57,089
U.S. dollar dominated foreign corporate bonds	523		—		(2		)	521
U.S. government treasury bonds	20,814		5		(6		)	20,813
Municipal securities	9,552		5		(6		)	9,551
Asset-backed securities	11,713		—		(12		)	11,701
Total Marketable Securities, Long-Term	$	148,030	$	28	$	(166	)	$	147,892

For the year ended December 31, 2015 and 2014, realized losses were immaterial. Cash and cash equivalents were not included in the table above as the gross unrealized gains and losses were not material. We have no material short-term or long-term investments that have been in continuous unrealized loss positions for greater than twelve months as of December 31, 2015. Amounts reclassified to earnings from unrealized gain or losses were immaterial in 2015 and 2014.

Our fixed-income securities investment portfolio consists of corporate bonds, U.S. dollar dominated foreign corporate bonds, commercial paper, municipal securities, U.S. government agency bonds, U.S. government treasury bonds and asset-backed securities that have a maximum maturity of two years. The securities that we invest in are generally deemed to be low risk based on their credit ratings from the major rating agencies. The longer the duration of these securities, the more susceptible they are to changes in market interest rates and bond yields. As interest rates increase, those securities purchased at a lower yield show a mark-to-market unrealized loss. The unrealized losses are due primarily to changes in credit spreads and interest rates. We expect to realize the full value of all these investments upon maturity or sale. The weighted average remaining duration of these securities was approximately 9 months and 10 months as of December 31, 2015 and 2014, respectively.

As the carrying value approximates the fair value for our short-term and long-term marketable securities shown in the tables above, the following table summarizes the fair value of our short-term and long-term marketable securities classified by maturity as of December 31, 2015 and 2014 (in thousands):



	December 31,		December 31,
	2015		2014
One year or less	$	359,581	$	254,787
Due in greater than one year	151,370		147,892
Total available for short-term and long-term marketable securities	$	510,951	$	402,679

Fair Value Measurements

We measure the fair value of our cash equivalents and marketable securities as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. We use the U.S. GAAP fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. This hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The three levels of inputs that may be used to measure fair value:

Level 1—Quoted (unadjusted) prices in active markets for identical assets or liabilities.

Our Level 1 assets consist of money market funds and U.S government treasury bonds. We did not hold any Level 1 liabilities as of December 31, 2015 or 2014.

Level 2—Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liability.

Our Level 2 assets consist of commercial paper, corporate bonds, U.S. dollar denominated foreign corporate bonds, municipal securities, U.S. government agency bonds, asset-backed securities, and our Israeli funds that are mainly invested in insurance policies and foreign currency forward contracts. We obtain these fair values for level 2 investments from our asset manager for each of our portfolios. Our custody bank and asset managers independently use professional pricing services to gather pricing data which may include quoted market prices for identical or comparable financial instruments, or inputs other than quoted prices that are observable either directly or indirectly, and we are ultimately responsible for these underlying estimates. The foreign currency forward contracts are valued using observable inputs such as quotations on forward foreign exchange rates.

Level 3—Unobservable inputs to the valuation methodology that are supported by little or no market activity and that are significant to the measurement of the fair value of the assets or liabilities. Level 3 assets and liabilities include those whose fair value measurements are determined using pricing models, discounted cash flow ("DCF") methodologies or similar valuation techniques, as well as significant management judgment or estimation.

We did not hold any Level 3 assets or liabilities as of December 31, 2015 and 2014.

The following tables summarizes our financial assets measured at fair value on a recurring basis as of December 31, 2015 and 2014 (in thousands):



Description	Balance as of December 31, 2015		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)
Cash equivalents:
Money market funds	$	70,148	$	70,148	$	—
Commercial paper	36,887		—		36,887
U.S. government Agency bonds	3,599				3,599
Corporate bonds	625		—		625
Short-term investments:
Commercial paper	38,537		—		38,537
Corporate bonds	179,520		—		179,520
U.S. dollar denominated foreign corporate bonds	508		—		508
Municipal securities	14,214		—		14,214
U.S. government agency bonds	75,119		—		75,119
U.S. government treasury bonds	51,683		51,683		—
Long-term investments:
Corporate bonds	63,804		—		63,804
U.S. government agency bonds	43,675		—		43,675
U.S. government treasury bonds	37,566		37,566		—
Municipal securities	3,991		—		3,991
Asset-backed securities	2,335		—		2,335
Long-term other assets:
Israeli funds	2,436		—		2,436
	$	624,647	$	159,397	$	465,250



Description	Balance as of December 31, 2014		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)
Cash equivalents:
Money market funds	$	80,786	$	80,786	$	—
Commercial paper	21,997		—		21,997
Corporate bonds	1,745				1,745
Short-term investments:
Commercial paper	33,998		—		33,998
Corporate bonds	151,966		—		151,966
U.S. dollar denominated foreign corporate bonds	901		—		901
Municipal securities	9,160		—		9,160
U.S. government agency bonds	41,587		—		41,587
U.S. government treasury bonds	15,777		15,777		—
Certificate of Deposits	1,398				1,398
Long-term investments:
Corporate bonds	57,089		—		57,089
U.S. government agency bonds	48,217		—		48,217
U.S. dollar denominated foreign corporate bonds	521		—		521
U.S. government treasury bonds	20,813		20,813		—
Municipal securities	9,551		—		9,551
Asset-backed securities	11,701		—		11,701
Long-term other assets:
Israeli funds	2,307		—		2,307
	$	509,514	$	117,376	$	392,138

Derivative Financial Instruments

In September 2015, we began entering into foreign currency forward contracts to minimize the short-term impact of foreign currency exchange rate fluctuations on certain trade and intercompany receivables and payables, which are classified within level 2 of the fair value hierarchy. The net loss on these forward contracts was immaterial for the year ended December 31, 2015. As of December 31, 2015, the fair value of foreign exchange forward contracts outstanding was immaterial.

The following table presents the gross notional value of all our foreign exchange forward contracts outstanding as of December 31, 2015 (in thousands):



	As of December 31, 2015
	Local Currency Amount		Notional Contract Amount (USD)
US dollar	$	20,700	$	20,700
Euro	€22,100		24,222
Japanese yen	¥583,000		4,839
Australian dollar	A$4,700		3,426
Hong Kong dollar	HK$	51,000	6,579
			$	59,766

Balance Sheet Components

12 Months Ended

Dec. 31, 2015

Balance Sheet Related Disclosures [Abstract]

Balance Sheet Components

Inventories

Inventories consist of the following (in thousands):



	December 31,
	2015		2014
Raw materials	$	9,950	$	8,143
Work in process	7,067		2,970
Finished goods	2,448		4,815
Total Inventories	$	19,465	$	15,928

Work in process includes costs to produce our clear aligner and intra-oral scanner products. Finished goods primarily represent our intra-oral scanners and ancillary products that support our clear aligner products.

Property, plant and equipment

Property, plant and equipment consist of the following (in thousands):



	December 31,
	2015			2014
Clinical and manufacturing equipment	$	128,044		$	107,707
Computer hardware	25,843			24,092
Computer software	21,451			22,044
Furniture and fixtures	8,855			7,386
Leasehold improvements	20,172			15,358
Building	4,227			1,868
Land	3,072			1,162
CIP	42,846			18,310
Total	254,510			197,927
Less: Accumulated depreciation and amortization and impairment charges	(118,037		)	(107,802		)
Total Property, plant and equipment, net	$	136,473		$	90,125

As of December 31, 2015, CIP consists primarily of costs for capital equipment to be placed in service in the next year. In late 2014, we started an ERP project and have capitalized $25.4 million as of December 31, 2015, which we anticipate will be placed in service in 2016. Depreciation and amortization was $18.0 million, $17.9 million, and $16.8 million, for the year ended December 31, 2015, 2014 and 2013, respectively.

Accrued liabilities

Accrued liabilities consist of the following (in thousands):



	December 31,
	2015		2014
Accrued payroll and benefits	$	55,430	$	44,610
Accrued accounts payable	13,834		5,736
Accrued sales rebate	8,486		11,110
Accrued sales and marketing expenses	7,071		5,979
Accrued sales tax and value added tax	4,801		5,456
Accrued professional fees	2,775		2,494
Accrued income taxes	2,646		2,027
Accrued warranty	2,638		3,148
Other accrued liabilities	10,084		7,320
Total Accrued Liabilities	$	107,765	$	87,880

Warranty

We regularly review the accrued balances and update these balances based on historical warranty trends. Actual warranty costs incurred have not materially differed from those accrued. However, future actual warranty costs could differ from the estimated amounts.

Clear Aligner

Scanners

We warrant our scanners for a period of one year from the date of training and installation. We accrue for these warranty costs which includes materials and labor based on estimated historical repair costs. Extended service packages may be purchased for additional fees.

Warranty accrual as of December 31, 2015 and 2014 consists of the following activity (in thousands):



Warranty accrual, December 31, 2013	$	3,104
Charged to cost of revenues	1,990
Actual warranty expenditures	(1,946		)
Warranty accrual, December 31, 2014	3,148
Charged to cost of revenues	1,796
Actual warranty expenditures	(2,306		)
Warranty accrual, December 31, 2015	$	2,638

Business Combinations	12 Months Ended
Business Combinations	Dec. 31, 2015
Business Combinations [Abstract]
Business Combinations	Business Combinations ICA Holdings Pty Limited On April 30, 2013, we completed the acquisition of ICA Holdings Pty Limited ("ICA") upon the expiration of the distribution agreement between certain subsidiaries of ICA and Align Technology B.V., for a total cash consideration of approximately $8.6 million, of which $7.4 million was attributed to assets acquired, $2.4 million in liabilities assumed and $3.6 million to goodwill. Goodwill as a result of this acquisition represents the excess of the purchase price over the fair value of the underlying net assets acquired and represents the knowledge and experience of the workforce in place. None of this goodwill will be deductible for tax purposes. Under the applicable accounting guidance, goodwill will not be amortized but will be tested for impairment on an annual basis or more frequently if certain indicators are present. Pro forma results of operations for this acquisition have not been presented as it is not material to our results of operations, either individually or in aggregate, for the year ended 2013.

- Definition

The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable).

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 805
-SubTopic 10
-Section 50
-Paragraph 5
-URI http://asc.fasb.org/extlink&oid=56956515&loc=d3e1497-128463

Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 805
-SubTopic 10
-Section 50
-Paragraph 4
-URI http://asc.fasb.org/extlink&oid=56956515&loc=d3e1490-128463

Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 805
-SubTopic 10
-Section 50
-Paragraph 2
-URI http://asc.fasb.org/extlink&oid=56956515&loc=d3e1392-128463

Reference 4: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 805
-SubTopic 30
-Section 50
-Paragraph 4
-URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e7008-128479

Reference 5: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 805
-SubTopic 10
-Section 50
-Paragraph 3
-URI http://asc.fasb.org/extlink&oid=56956515&loc=d3e1486-128463

Reference 6: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 805
-SubTopic 30
-Section 50
-Paragraph 1
-URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e6927-128479

Reference 7: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 805
-SubTopic 20
-Section 50
-Paragraph 1
-URI http://asc.fasb.org/extlink&oid=56956791&loc=d3e4845-128472

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+ Details

Goodwill and Intangible Assets

12 Months Ended

Dec. 31, 2015

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets

Goodwill

The change in the carrying value of goodwill for the year ended December 31, 2015 for the Clear Aligner segment, which are also our reporting units, are as follows (in thousands):



	Total
Balance as of December 31, 2013	$	61,623
Adjustments ¹	(254		)
Balance as of December 31, 2014	61,369
Adjustments ¹	(295		)
Balance as of December 31, 2015	$	61,074


¹	The adjustments to goodwill were a result of foreign currency translation.

Impairment of Goodwill

2013 Impairment

We performed a step one analysis for our Scanner reporting unit which consists of a comparison of the fair value of the Scanner reporting unit against its carrying amount, including the goodwill allocated to it. In deriving the fair value of the Scanner reporting unit, we utilized the income approach which is classified as Level 3 within the fair value hierarchy. As a result of our step one analysis, we concluded that the fair value of the Scanner reporting unit was less than its carrying value; therefore, we proceeded to step two of the goodwill impairment analysis. We use a discounted cash flow (“DCF”) approach to estimate the fair value of a reporting unit, utilizing the harvest model, which we believe is the most reliable indicator of fair value of this business, and is most consistent with the approach a market place participant would use. Based on our analysis, there was no implied goodwill for the Scanner reporting unit; therefore, we recorded a goodwill impairment charge of $40.7 million in March, 2013, which represents the remaining goodwill balance in the Scanner reporting unit. None of the goodwill impairment charge was deductible for tax purposes.

Annual Impairment Test

The remaining goodwill is entirely attributable to our Clear Aligner reporting unit. During the fourth quarter of fiscal 2015, we performed the annual goodwill impairment testing and found no impairment events as the fair value of our Clear Aligner reporting unit was significantly in excess of the carrying value.

Acquired Intangible Assets

We amortize our intangible assets over their estimated useful lives. We evaluate long-lived assets, which includes property, plant and equipment and intangible assets, for impairment whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable. The carrying value is not recoverable if it exceeds the undiscounted cash flows resulting from the use of the asset and its eventual disposition. Our estimates of future cash flows attributable to our long-lived assets require significant judgment based on our historical and anticipated results and are subject to many factors. Factors we consider important which could trigger an impairment review include significant negative industry or economic trends, significant loss of customers and changes in the competitive environment of our intra-oral scanning business.

During March 2013, changes in the competitive environment for intra-oral scanners, including announcements from our competitors of new low-priced scanners targeted at orthodontists and general practitioner dentists in North America, that caused us to lower our expectations for growth and profitability for our Scanner reporting unit. As a result, we determined that the carrying value of the Scanner long-lived assets was not recoverable as compared to the value of the undiscounted cash flows of our revised projections for the asset group. In order to determine the impairment amount of our long-lived assets, we fair valued each key component of our long-lived assets within the asset group, which involved the use of significant estimates and assumptions including replacement costs, revenue growth rates, operating margins, and plant and equipment cost trends. Upon completion of this analysis, we recorded a total impairment charge of $26.3 million of which $19.3 million represented the impairment related to our Scanner intangible assets and $7.0 million related to plant and equipment. There was no triggering event related to the Clear Aligner asset group.

There were no triggering events in 2015 that would cause further impairments of our long-lived assets.

Intangible assets arising either as a direct result from the Cadent acquisition or individually acquired are being amortized as follows (in thousands):



	Weighted Average Amortization Period (in years)	Gross Carrying Amount as of December 31, 2015		Accumulated Amortization			Impairment Charge			Net Carrying Value as of December 31, 2015
Trademarks	15	$	7,100	$	(1,492	)	$	(4,179	)	$	1,429
Existing technology	13	12,600		(3,577		)	(4,328		)	4,695
Customer relationships	11	33,500		(10,957		)	(10,751		)	11,792
Other	8	285		(113		)	—			172
Total Intangible Assets		$	53,485	$	(16,139	)	$	(19,258	)	$	18,088



	Weighted Average Amortization Period (in years)	Gross Carrying Amount as of December 31, 2014		Accumulated Amortization			Impairment Charge			Net Carrying Value as of December 31, 2014
Trademarks	15	$	7,100	$	(1,354	)	$	(4,179	)	$	1,567
Existing technology	13	12,600		(3,015		)	(4,328		)	5,257
Customer relationships	11	33,500		(9,095		)	(10,751		)	13,654
Other	8	285		(76		)	—			209
Total Intangible Assets		$	53,485	$	(13,540	)	$	(19,258	)	$	20,687

The total estimated annual future amortization expense for these acquired intangible assets as of December 31, 2015 is as follows (in thousands):



Fiscal Year
2016	$	2,600
2017	2,600
2018	2,600
2019	2,592
2020	2,582
Thereafter	5,114
Total	$	18,088

- Definition

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

+ References + Details

Legal Proceedings	12 Months Ended
Legal Proceedings	Dec. 31, 2015
Commitments and Contingencies Disclosure [Abstract]
Legal Proceedings	Legal Proceedings Securities Class Action Lawsuit On November 28, 2012, plaintiff City of Dearborn Heights Act 345 Police & Fire Retirement System filed a lawsuit against Align, Thomas M. Prescott (“Mr. Prescott”), Align’s former President and Chief Executive Officer, and Kenneth B. Arola (“Mr. Arola”), Align’s former Vice President, Finance and Chief Financial Officer, in the United States District Court for the Northern District of California on behalf of a purported class of purchasers of our common stock (the “Securities Action”). On July 11, 2013, an amended complaint was filed, which named the same defendants, on behalf of a purported class of purchasers of our common stock between January 31, 2012 and October 17, 2012. The amended complaint alleged that Align, Mr. Prescott and Mr. Arola violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder, and that Mr. Prescott and Mr. Arola violated Section 20(a) of the Securities Exchange Act of 1934. Specifically, the amended complaint alleged that during the purported class period defendants failed to take an appropriate goodwill impairment charge related to the April 29, 2011 acquisition of Cadent Holdings, Inc. in the fourth quarter of 2011, the first quarter of 2012 or the second quarter of 2012, which rendered our financial statements and projections of future earnings materially false and misleading and in violation of U.S. GAAP. The amended complaint sought monetary damages in an unspecified amount, costs and attorneys’ fees. On December 9, 2013, the court granted defendants’ motion to dismiss with leave for plaintiff to file a second amended complaint. Plaintiff filed a second amended complaint on January 8, 2014 on behalf of the same purported class. The second amended complaint states the same claims as the amended complaint. On August 22, 2014, the court granted our motion to dismiss without leave to amend. On September 22, 2014, Plaintiff filed a notice of appeal to the Ninth Circuit Court of Appeals. Align intends to vigorously defend itself against these allegations. Align is currently unable to predict the outcome of this amended complaint and therefore cannot determine the likelihood of loss nor estimate a range of possible loss, if any. Shareholder Derivative Lawsuit On February 1, 2013, plaintiff Gary Udis filed a shareholder derivative lawsuit against several of Align’s current and former officers and directors in the Superior Court of California, County of Santa Clara. The complaint alleges that our reported income and earnings were materially overstated because of a failure to timely write down goodwill related to the April 29, 2011 acquisition of Cadent Holdings, Inc., and that defendants made allegedly false statements concerning our forecasts. The complaint asserts various state law causes of action, including claims of breach of fiduciary duty, unjust enrichment, and insider trading, among others. The complaint seeks unspecified damages on behalf of Align, which is named solely as nominal defendant against whom no recovery is sought. The complaint also seeks an order directing Align to reform and improve its corporate governance and internal procedures, and seeks restitution in an unspecified amount, costs, and attorneys’ fees. On July 8, 2013, an Order was entered staying this derivative lawsuit until an initial ruling on our first motion to dismiss the Securities Action. On January 15, 2014, an Order was entered staying this derivative lawsuit until an initial ruling on our second motion to dismiss the Securities Action. On October 14, 2014, an Order was entered staying this derivative lawsuit until a ruling by the Ninth Circuit in the Securities Action discussed above. Align is currently unable to predict the outcome of this complaint and therefore cannot determine the likelihood of loss nor estimate a range of possible losses. In addition, in the course of Align's operations, Align is involved in a variety of claims, suits, investigations, and proceedings, including actions with respect to intellectual property claims, patent infringement claims, government investigations, labor and employment claims, breach of contract claims, tax, and other matters. Regardless of the outcome, these proceedings can have an adverse impact on us because of defense costs, diversion of management resources, and other factors. Although the results of complex legal proceedings are difficult to predict and Align's view of these matters may change in the future as litigation and events related thereto unfold; Align currently does not believe that these matters, individually or in the aggregate, will materially affect Align's financial position, results of operations or cash flows.

Credit Facilities	12 Months Ended
Credit Facilities	Dec. 31, 2015
Debt Disclosure [Abstract]
Credit Facilities	Credit Facility On March 22, 2013, we entered into a credit facility with Wells Fargo Bank. The credit facility provides for a $50.0 million revolving line of credit, with a $10.0 million letter of credit sublimit, and has a maturity date on March 22, 2016. The credit facility also requires us to maintain a minimum unrestricted cash balance of $50.0 million and comply with specific financial conditions and performance requirements. The loans bear interest, at our option, at a fluctuating rate per annum equal to the daily one-month adjusted LIBOR rate plus a spread of 1.75% or an adjusted LIBOR rate (based on one, three, six or twelve-month interest periods) plus a spread of 1.75%. As of December 31, 2015, we had no outstanding borrowings under this credit facility and were in compliance with the conditions and performance requirements.

Commitments and Contingencies

12 Months Ended

Dec. 31, 2015

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Operating leases

We lease our facilities and certain equipment and automobiles under non-cancelable operating lease arrangements that expire at various dates through 2022 and provide for pre-negotiated fixed rental rates during the terms of the lease. The terms of some of our leases provide for rental payments on a graduated scale. We recognize rent expense on a straight-line basis over the lease period and accrue for any rent expense incurred but not paid. Total rent expense was $8.2 million, $7.6 million and $7.3 million, for the year ended December 31, 2015, 2014 and 2013, respectively.

Minimum future lease payments for non-cancelable leases as of December 31, 2015, are as follows (in thousands):



Fiscal Year	Operating leases
2016	$	10,236
2017	6,078
2018	2,475
2019	527
2020	326
Thereafter	108
Total minimum lease payments	$	19,750

Off-balance Sheet Arrangements

As of December 31, 2015, we had no off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on our consolidated financial condition, results of operations, liquidity, capital expenditures or capital resources.

Indemnification Provisions

In the normal course of business to facilitate transactions in our services and products, we indemnify certain parties: customers, vendors, lessors, and other parties with respect to certain matters, including, but not limited to, services to be provided by us and intellectual property infringement claims made by third parties. In addition, we have entered into indemnification agreements with our directors and certain of our officers that will require us, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors or officers. Several of these agreements limit the time within which an indemnification claim can be made and the amount of the claim.

It is not possible to make a reasonable estimate of the maximum potential amount under these indemnification agreements due to the unique facts and circumstances involved in each particular agreement. Additionally, we have a limited history of prior indemnification claims and the payments we have made under such agreements have not had a material adverse effect on our results of operations, cash flows, or financial position. However, to the extent that valid indemnification claims arise in the future, future payments by us could be significant and could have a material adverse effect on our results of operations or cash flows in a particular period. As of December 31, 2015, we did not have any material indemnification claims that were probable or reasonably possible.

Stockholders' Equity

12 Months Ended

Dec. 31, 2015

Stockholders' Equity Note [Abstract]

Stockholders' Equity

Stockholders’ Equity

Common Stock

The holders of common stock are entitled to receive dividends whenever funds are legally available and when and if declared by the Board of Directors. We have never declared or paid dividends on our common stock.

Stock-based Compensation Plans

Our 2005 Incentive Plan, as amended, provides for the granting of incentive stock options, non-statutory stock options, restricted stock units, market stock units, stock appreciation rights, performance units and performance shares to employees, non-employee directors, and consultants. Shares granted on or after May 16, 2013 as an award of restricted stock, restricted stock unit, market stock units, performance share or performance unit ("full value awards") are counted against the authorized share reserve as one and nine-tenths (19/10) shares for every one (1) share subject to the award, and any shares canceled that were counted as one and nine-tenths against the plan reserve will be returned at the same ratio. Full value awards granted prior to May 16, 2013 were counted against the authorized share reserve as one and one half (1 1/2) share for every one (1) share subject to the award, and any shares canceled that were counted as one and one half against the plan reserve will be returned at this same ratio.

As of December 31, 2015, the 2005 Incentive Plan (as amended) has a total reserve of 23,283,379 shares for issuance of which 4,869,639 shares are available for issuance. No shares were added to the plan in 2015 or 2014. We issue new shares from our pool of authorized but unissued shares to satisfy the exercise and vesting obligations of our stock-based compensation plans.

Stock-based Compensation

Stock-based compensation is based on the estimated fair value of awards, net of estimated forfeitures, and recognized over the requisite service period. Estimated forfeitures are based on historical experience at the time of grant and may be revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The stock-based compensation related to all of our stock-based awards and employee stock purchases for the year ended December 31, 2015, 2014 and 2013 is as follows (in thousands):



	For the Year Ended December 31,
	2015		2014		2013
Cost of net revenues	$	3,938	$	3,616	$	2,565
Selling, general and administrative	40,813		29,625		20,354
Research and development	8,192		6,582		3,519
Total stock-based compensation	$	52,943	$	39,823	$	26,438

Stock Options

We have not granted options since 2011, thus all options outstanding are fully vested. Activity for the year ended December 31, 2015, under the stock option plans are set forth below (in thousands, except years and per share amounts):

Stock Options

Number of

Underlying

Stock Options

Weighted

Average

Exercise

Price per Share

Weighted Average

Remaining

Contractual Term

(in years )

Aggregate

Intrinsic

Value

Outstanding as of December 31, 2014

668

15.57

Granted

—