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Revenue Recognition | 3 Months Ended
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Mar. 31, 2018
Revenue Recognition [Abstract] |
Revenue Recognition | 4. Revenue Recognition On January 1, 2018, the Company adopted ASC 606 using the modified retrospective method applied to those contracts which were not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under ASC 606. The comparative information has not been restated and continues to be reported under the accounting standards in effect in those reporting periods. The Company recorded an adjustment to reduce opening retained earnings by $0.2 million, net of tax, due to the impact of adopting ASC 606, primarily related to the allocation of tuition revenue across various performance obligations involved in certain student contract arrangements. In accordance with ASC 606, the disclosure of the impact of adoption on the Company’s unaudited condensed consolidated income statement and balance sheet as of and for the three months ended March 31, 2018 was as follows (in thousands):
|  | For the Period Ended March 31, 2018
|  | As Reported |  | Balances without Adoption of ASC 606 |  | Effect of Change Higher/(Lower)
Income Statement |  |  |  |  |  |  |  |  |
Revenues |  | $ | 116,469 |  | $ | 116,338 |  | $ | 131
Instruction and educational support expense |  |  | 63,776 |  |  | 63,584 |  |  | 192
Provision for income taxes |  |  | 2,150 |  |  | 2,167 |  |  | (17)
Net income |  |  | 9,467 |  |  | 9,511 |  |  | (44)
|  | As of March 31, 2018
|  | As Reported |  | Balances without Adoption of ASC 606 |  | Effect of Change Higher/(Lower)
Balance Sheet |  |  |  |  |  |  |  |  |
Tuition receivable – net |  | $ | 24,997 |  | $ | 23,769 |  | $ | 1,228
Other current assets |  |  | 10,558 |  |  | 12,084 |  |  | (1,526)
Income taxes payable |  |  | 2,541 |  |  | 2,624 |  |  | (83)
Retained earnings |  |  | 168,413 |  |  | 168,628 |  |  | (215)
Revenue Recognition The Company’s educational programs typically are offered on a quarterly basis and such periods coincide with the Company’s quarterly financial reporting periods. Revenues are recognized when control of the promised goods or services is transferred to customers in an amount that reflects the consideration the Company expects to be entitled to receive in exchange for those goods and services. The Company applies the five-step revenue model under ASC 606 to determine when revenue is earned and recognized. Arrangements with students may have multiple performance obligations. For such arrangements, the Company allocates net tuition revenue to each performance obligation based on its relative standalone selling price. The Company generally determines standalone selling prices based on the prices charged to customers and observable market prices. The standalone selling price of material rights to receive free classes in the future is estimated based on class tuition price and likelihood of redemption based on historical student attendance and completion behavior. During the quarter ended March 31, 2018, the Company derived approximately $112.0 million, or 96% of its revenues from tuition revenue net of discounts, grants, and scholarships, which will continue to be recognized in the quarter of instruction. The Company also recognized approximately $3.1 million of revenues from academic fees, $0.9 million for textbook-related sales, and $0.5 million from other revenue streams. At the start of each academic term or program, a liability (contract liability) is recorded for academic services to be provided and a tuition receivable is recorded for the portion of the tuition not paid in advance. Any cash received prior to the start of an academic term or program is recorded as a contract liability. Some students may be eligible for scholarship awards, the estimated value of which will be realized in the future and is deducted from revenue when earned, based on historical student attendance and completion behavior. Contract liabilities are recorded as a current or long-term liability in the unaudited condensed consolidated balance sheets based on when the benefit is expected to be realized. Textbook-related income is recognized upon sale of the course material. Revenues also include certain academic fees recognized within the quarter of instruction, and certificate revenue and licensing revenue which are recognized as the services are provided. Contract Liabilities – Graduation Fund In 2013, the University introduced the Graduation Fund, which allows new undergraduate students to earn tuition credits that are redeemable in the final year of a student’s course of study if he or she successfully remains in the program. New students registering in credit-bearing courses in any undergraduate program receive one free course for every three courses that are successfully completed. Students must meet all of the University’s admission requirements, and must be enrolled in a bachelor’s degree program. The Company’s employees and their dependents are not eligible for the program. Students who have more than one consecutive term of non-attendance lose any Graduation Fund credits earned to date, but may earn and accumulate new credits if the student is reinstated or readmitted by the University in the future. Revenue from students participating in the Graduation Fund is recorded in accordance with ASC 606. The Company defers the value of the related performance obligation associated with the credits estimated to be redeemed in the future based on the underlying revenue transactions that result in progress by the student toward earning the benefit. The Company’s estimate of the benefits that will be redeemed in the future is based on its historical experience of student persistence toward completion of a course of study within this program and similar programs. Each quarter, the Company assesses its methodologies and assumptions underlying these estimates and, to date, any adjustments to the estimates have not been material. The amount estimated to be redeemed in the next 12 months is $21.3 million and is included as a current contract liability in the unaudited condensed consolidated balance sheets. The remainder is expected to be redeemed within two to four years. The table below presents activity in the contract liability related to the Graduation Fund for the three months ended March 31, 2017 and 2018 (in thousands):
|  | March 31, |  |  | March 31, |
|  | 2017 |  |  | 2018 |
Balance at beginning of period |  | $ | 29,499 |  |  | $ | 37,400 |
Revenue deferred |  |  | 5,702 |  |  |  | 5,885 |
Benefit redeemed |  |  | (3,563) |  |  |  | (4,967) |
Balance at end of period |  | $ | 31,638 |  |  | $ | 38,318 |
Unbilled receivables – Student tuition Academic materials may be shipped to certain new undergraduate students in advance of the term of enrollment. Under ASC 606, the materials represent a performance obligation to which the Company allocates revenue based on the fair value of the materials relative to the total fair value of all the performance obligations in the arrangement with the student. When control of the materials passes to the student in advance of the term of enrollment, an unbilled receivable and related revenue is recorded. Following adoption of ASC 606 on January 1, 2018, the balance of unbilled receivables related to such materials was $1.2 million as of March 31, 2018, and is included in tuition receivable.

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- Definition The entire disclosure of revenue from contract with customer to transfer good or service and to transfer nonfinancial asset. Includes, but is not limited to, disaggregation of revenue, credit loss recognized from contract with customer, judgment and change in judgment related to contract with customer, and asset recognized from cost incurred to obtain or fulfill contract with customer. Excludes insurance and lease contracts. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -URI http://asc.fasb.org/topic&trid=2122369 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -URI http://asc.fasb.org/topic&trid=49130388 + Details
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