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New Accounting Pronouncements (Tables) | 9 Months Ended
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Sep. 30, 2018
ASU 2014-09 |
Schedule of impact of adoption of ASU-2014-09 on condensed statements of income and condensed consolidated balance sheets | In accordance with the new revenue standard requirement, the disclosure of the impact of adoption on our condensed consolidated statements of income and condensed consolidated balance sheets at and for the period ended September 30, 2018 are as follows (in thousands):
|  | Three Months Ended September 30, 2018 As Reported |  | Loyalty Point Impact (1) |  | Promotional Allowance Impact (2) |  | Reimbursable Expense - Casino Rama Impact (3) |  | Racing Revenue Impact (4) |  | Balances Without Adoption of ASC 606 |  | Effect of Change Higher / (Lower)
Income Statement |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Revenues |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Gaming |  | $ | 646,335 |  | $ | (88) |  | $ | 42,744 |  | $ | - |  | $ | - |  | $ | 688,991 |  | $ | (42,656)
Food, beverage, hotel and other |  |  | 138,769 |  |  | (52) |  |  | 4,794 |  |  | - |  |  | 8,323 |  |  | 151,834 |  |  | (13,065)
Management service fees |  |  | 637 |  |  | - |  |  | - |  |  | - |  |  | - |  |  | 637 |  |  | -
Reimbursable management costs |  |  | 3,910 |  |  | - |  |  | - |  |  | (3,910) |  |  | - |  |  | - |  |  | 3,910
Revenues |  |  | 789,651 |  |  | (140) |  |  | 47,538 |  |  | (3,910) |  |  | 8,323 |  |  | 841,462 |  |  | (51,811)
Less: promotional allowances |  |  | - |  |  | - |  |  | (47,538) |  |  | - |  |  | - |  |  | (47,538) |  |  | 47,538
Net Revenue |  |  | 789,651 |  |  | (140) |  |  | - |  |  | (3,910) |  |  | 8,323 |  |  | 793,924 |  |  | (4,273)
Operating expenses |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Gaming |  |  | 351,995 |  |  | (97) |  |  | - |  |  | - |  |  | - |  |  | 351,898 |  |  | 97
Food, beverage, hotel and other |  |  | 95,967 |  |  | - |  |  | - |  |  | - |  |  | 8,323 |  |  | 104,290 |  |  | (8,323)
General and administrative |  |  | 125,084 |  |  | - |  |  | - |  |  | - |  |  | - |  |  | 125,084 |  |  | -
Reimbursable management costs |  |  | 3,910 |  |  | - |  |  | - |  |  | (3,910) |  |  | - |  |  | - |  |  | 3,910
Depreciation and amortization |  |  | 56,852 |  |  | - |  |  | - |  |  | - |  |  | - |  |  | 56,852 |  |  | -
Total operating expenses |  |  | 633,808 |  |  | (97) |  |  | - |  |  | (3,910) |  |  | 8,323 |  |  | 638,124 |  |  | (4,316)
Income from operations |  |  | 155,843 |  |  | (43) |  |  | - |  |  | - |  |  | - |  |  | 155,800 |  |  | 43
Income from operations before income taxes |  |  | 45,195 |  |  | (43) |  |  | - |  |  | - |  |  | - |  |  | 45,152 |  |  | 43
Income tax provision (benefit) |  |  | 9,070 |  |  | (9) |  |  | - |  |  | - |  |  | - |  |  | 9,061 |  |  | 9
Net income |  | $ | 36,125 |  | $ | (34) |  | $ | - |  | $ | - |  | $ | - |  | $ | 36,091 |  | $ | 34
|  | Nine Months Ended September 30, 2018 As Reported |  | Loyalty Point Impact (1) |  | Promotional Allowance Impact (2) |  | Reimbursable Expense - Casino Rama Impact (3) |  | Racing Revenue Impact (4) |  | Balances Without Adoption of ASC 606 |  | Effect of Change Higher / (Lower)
Income Statement |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Revenues |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Gaming |  | $ | 1,965,923 |  | $ | (2,070) |  | $ | 111,807 |  | $ | - |  | $ | - |  | $ | 2,075,660 |  | $ | (109,737)
Food, beverage, hotel and other |  |  | 403,402 |  |  | (150) |  |  | 27,884 |  |  | - |  |  | 27,149 |  |  | 458,285 |  |  | (54,883)
Management service fees |  |  | 6,043 |  |  | - |  |  | - |  |  | - |  |  | - |  |  | 6,043 |  |  | -
Reimbursable management costs |  |  | 57,281 |  |  | - |  |  | - |  |  | (46,822) |  |  | - |  |  | 10,459 |  |  | 46,822
Revenues |  |  | 2,432,649 |  |  | (2,220) |  |  | 139,691 |  |  | (46,822) |  |  | 27,149 |  |  | 2,550,447 |  |  | (117,798)
Less: promotional allowances |  |  | - |  |  | - |  |  | (139,691) |  |  | - |  |  | - |  |  | (139,691) |  |  | 139,691
Net Revenue |  |  | 2,432,649 |  |  | (2,220) |  |  | - |  |  | (46,822) |  |  | 27,149 |  |  | 2,410,756 |  |  | 21,893
Operating expenses |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Gaming |  |  | 1,043,205 |  |  | (1,532) |  |  | - |  |  | - |  |  | - |  |  | 1,041,673 |  |  | 1,532
Food, beverage, hotel and other |  |  | 284,059 |  |  | - |  |  | - |  |  | - |  |  | 27,149 |  |  | 311,208 |  |  | (27,149)
General and administrative |  |  | 379,006 |  |  | - |  |  | - |  |  | - |  |  | - |  |  | 379,006 |  |  | -
Reimbursable management costs |  |  | 57,281 |  |  | - |  |  | - |  |  | (46,822) |  |  | - |  |  | 10,459 |  |  | 46,822
Depreciation and amortization |  |  | 175,801 |  |  | - |  |  | - |  |  | - |  |  | - |  |  | 175,801 |  |  | -
Recovery for loan loss and unfunded commitments to the JIVDC and impairment losses |  |  | (16,367) |  |  | - |  |  | - |  |  | - |  |  | - |  |  | (16,367) |  |  | -
Insurance recoveries |  |  | (68) |  |  | - |  |  | - |  |  | - |  |  | - |  |  | (68) |  |  | -
Total operating expenses |  |  | 1,922,917 |  |  | (1,532) |  |  | - |  |  | (46,822) |  |  | 27,149 |  |  | 1,901,712 |  |  | 21,205
Income from operations |  |  | 509,732 |  |  | (688) |  |  | - |  |  | - |  |  | - |  |  | 509,044 |  |  | 688
Income from operations before income taxes |  |  | 175,551 |  |  | (688) |  |  | - |  |  | - |  |  | - |  |  | 174,863 |  |  | 688
Income tax provision (benefit) |  |  | 40,001 |  |  | (157) |  |  | - |  |  | - |  |  | - |  |  | 39,844 |  |  | 157
Net income |  | $ | 135,550 |  | $ | (531) |  | $ | - |  | $ | - |  | $ | - |  | $ | 135,019 |  | $ | 531
As a result of the adoption of the new revenue standard, the following areas resulted in significant changes to the Company’s accounting:
| (1) |  | The new revenue standard changed the accounting for loyalty points earned by our customers. The Company’s loyalty reward programs allow members to utilize their reward membership cards to earn loyalty points that are redeemable for slot play and complimentaries such as food and beverage at our restaurants, lodging at our hotels, and products offered at our retail stores across the vast majority of the Company’s casino properties. Under the new revenue standard, the Company is required to utilize a deferred revenue model and defer revenue at the estimated fair value when the loyalty points are earned by our customers and recognize revenue when the loyalty points are redeemed. The deferred revenue liability is based on the estimated standalone selling price of the loyalty points earned after factoring in the likelihood of redemption. Prior to the adoption of the new revenue standard, the estimated liability for unredeemed points was accrued based on expected redemption rates and the estimated costs of the service or merchandise to be provided.
| (2) |  | The new revenue standard changed the accounting for promotional allowances. Under the new revenue standard, the Company will no longer be permitted to report revenue for goods and services provided to customers for free as an inducement to gamble as gross revenue with a corresponding reduction in promotional allowances to arrive at net revenues. The new revenue standard requires complimentaries related to an inducement to gamble to be recorded as a reduction to gaming revenues, and as such promotional allowances provided to customers as an inducement to gamble is no longer netted on our condensed consolidated statements of income.
In addition, the new revenue standard changed the accounting for promotional allowances with respect to non-discretionary complimentaries (i.e., a customer’s redemption of loyalty points). Under the new revenue standard, the Company is no longer permitted to report revenue for goods and services provided to a customer resulting from loyalty point redemption with a corresponding reduction in promotional allowances to arrive at net revenue, as the new revenue standard requires the utilization of a deferred revenue model in which previously deferred revenue is recognized as revenue when the loyalty points are redeemed. As such, promotional allowances related to a customer’s redemption of loyalty points is no longer netted on our condensed consolidated statements of income.
| (3) |  | The Company revised its accounting for reimbursable costs associated with our management service contract for Casino Rama, which expired during the third quarter of 2018. Under the new revenue standard, reimbursable costs, which primarily consist of payroll costs, must be recognized as revenue on a gross basis, with an offsetting amount charged to reimbursable management costs within operating expenses, as we are the controlling entity to the arrangement. Prior to this revision, the Company recorded these reimbursable amounts on a net basis.
| (4) |  | The new revenue standard changed the accounting for racing revenues. Under the new revenue standard, we concluded that the Company is not the controlling entity to the arrangement(s), but rather functions as an agent to the pari-mutuel pool. As such, fees and obligations related to the Company’s share of purse funding requirements, simulcasting fees, tote fees, certain pari-mutuel taxes and other fees directly related to the Company’s racing operations must be reported on a net basis and included as a deduction to food, beverage, hotel and other revenue. Prior to the adoption of the new revenue standard, the Company recorded these fees and obligations in food, beverage, hotel and other expense.
|  | As Reported At September 30, 2018 |  | Balances Without the Adoption of ASC 606 |  | Effect of Change Higher (Lower)
Balance Sheet |  |  |  |  |  |
Other assets |  |  |  |  |  |
Deferred income taxes | $ | 385,108 | $ | 383,447 | $ | 1,661
Current liabilities |  |  |  |  |  |
Accrued expenses |  | 126,874 |  | 115,868 |  | 11,006
Shareholders' equity |  |  |  |  |  |
Retained deficit |  | (925,918) |  | (916,799) |  | (9,119)
The cumulative effect of the changes made to our consolidated January 1, 2018 balance sheet for the adoption of ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)” were as follows (in thousands):
|  | Balance at December 31, 2017 |  | Adjustment Due to ASU 2014-09 |  | Balance at January 1, 2018
Balance Sheet |  |  |  |  |  |
Other assets |  |  |  |  |  |
Deferred income taxes | $ | 390,943 | $ | 2,044 | $ | 392,987
Current liabilities |  |  |  |  |  |
Accrued expenses |  | 125,688 |  | 11,694 |  | 137,382
Shareholders' (deficit) |  |  |  |  |  |
Retained deficit |  | (1,051,818) |  | (9,650) |  | (1,061,468)

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