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Recently Issued Accounting Standards | 12 Months Ended
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Dec. 31, 2018
Accounting Changes and Error Corrections [Abstract] |
RECENTLY ISSUED ACCOUNTING STANDARDS | RECENTLY ISSUED ACCOUNTING STANDARDS Revenue Recognition In May 2014, the FASB issued ASU, Revenue from Contracts with Customers (Topic 606). FASB ASC Topic 606 supersedes the revenue recognition requirements under Topic 605, Revenue Recognition, and most industry-specific guidance throughout the Industry Topics of the ASC. The core principle of the guidance is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which an entity expects to be entitled in exchange for those goods or services. Under Topic 606, an entity is required to perform the following five steps: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when (or as) the entity satisfies a performance obligation. Additionally, the guidance requires improved disclosures as to the nature, amount, timing and uncertainty of revenue that is recognized. We adopted the provisions of this ASU on January 1, 2018 using the modified retrospective approach. As such, the comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods. Topic 606 did not materially affect the accounting for our revenue streams. Revenue from sales of preneed cemetery interment rights was previously recognized in the period in which the customer’s cumulative payments exceeded 10% of the contract price related to the interment right. Under Topic 606, we recognize revenue at the time the contract is signed. Customers select a specific location and space for their interment right, thus, restricting us from other use or transfer of the contracted cemetery property. The interment right is deeded to the customer when the contract is paid in full. Because we generally receive an initial down payment at the time the contract is signed, there is no significant difference in the timing of revenue recognition under Topic 606, as compared to previous guidance. Revenue from preneed sales of funeral and cemetery merchandise and services continues to be deferred and recognized when the merchandise is delivered or the service is performed. Topic 606 impacted our accounting for incremental selling costs, primarily commission costs, related to preneed cemetery merchandise and services and preneed funeral trust contracts. Under Topic 606, these costs are capitalized and amortized over the average maturity period for our preneed cemetery contracts and preneed funeral trust contracts. Previously, these costs were expensed in the period incurred. Our capitalized commissions on preneed contracts are included in Intangible and other non-current assets on our Consolidated Balance Sheet. See Note 13 to the Consolidated Financial Statements included herein for additional information. The selling costs related to the sales of cemetery interment rights, which include real property and other costs related to cemetery development activities, continue to be expensed using the specific identification method in the period in which the sale of the cemetery interment right is recognized as revenue. The selling costs related to preneed funeral insurance contracts continue to be expensed in the period incurred as these contracts are not included on our Consolidated Balance Sheet. Topic 606 also impacted our classification of amounts due from customers for undelivered performance obligations. Under Topic 606 amounts due on our preneed funeral trust contracts and preneed cemetery merchandise and services contracts have been reclassified to reduce amounts reported as Deferred preneed funeral revenue and Deferred preneed cemetery revenue, respectively, on our Consolidated Balance Sheet. These amounts were previously reported as Accounts receivable and Preneed receivables on our Consolidated Balance Sheet. The adoption of the provisions of this ASU did not have a material impact on our effective tax rate for the reporting period. The following table presents the impact of the adoption of Topic 606 on our Consolidated Balance Sheet (in thousands):
| As of December 31, 2018
| As Reported |  | Balances Without Adoption of Topic 606 |  | Effect of Change
Assets |  |  |  |  |
Accounts receivable, net of allowance for bad debts | $ | 18,897 |  |  | $ | 20,267 |  |  | $ | (1,370 | )
Preneed receivables, net of allowance for bad debts | $ | 18,441 |  |  | $ | 29,825 |  |  | $ | (11,384 | )
Intangible and other non-current assets | $ | 2,717 |  |  | $ | — |  |  | $ | 2,717 |
Liabilities |  |  |  |  |
Deferred preneed cemetery revenue, net | $ | 45,997 |  |  | $ | 50,445 |  |  | $ | (4,448 | )
Deferred preneed funeral revenue, net | $ | 28,606 |  |  | $ | 36,912 |  |  | $ | (8,306 | )
Deferred tax liability | $ | 31,263 |  |  | $ | 30,635 |  |  | $ | 628 |
Stockholders’ equity: |  |  |  |  |
Retained earnings | $ | 71,680 |  |  | $ | 69,591 |  |  | $ | 2,089 |
The following table presents the impact of the adoption of Topic 606 on our Consolidated Statement of Operations (in thousands, except per share data):
| Year Ended December 31, 2018
| As Reported |  | Balances Without Adoption of Topic 606 |  | Effect of Change
Field costs and expenses | $ | 192,045 |  |  | $ | 191,984 |  |  | $ | 61 |
Income before income taxes | $ | 18,266 |  |  | $ | 18,327 |  |  | $ | (61 | )
Net income | $ | 11,645 |  |  | $ | 11,687 |  |  | $ | (42 | )
Basic earnings per common share: | $ | 0.64 |  |  | $ | 0.64 |  |  | $ | — |
Diluted earnings per common share: | $ | 0.63 |  |  | $ | 0.63 |  |  | $ | — |
Dividends declared per common share | $ | 0.300 |  |  | $ | 0.300 |  |  | $ | — |
The following table presents the impact of the adoption of Topic 606 on our Consolidated Statement of Cash Flows (in thousands):
| Year Ended December 31, 2018
| As Reported |  | Balances Without Adoption of Topic 606 |  | Effect of Change
Adjustments to reconcile net income to net cash provided by operating activities: |  |  |  |  |
Amortization of capitalized commissions on preneed contracts | $ | 723 |  |  | $ | — |  |  | $ | 723 |
Changes in operating assets and liabilities that provided (required) cash: |  |  |  |  |
Intangible and other non-current assets | $ | (662 | ) |  | $ | — |  |  | $ | (662 | )
The cumulative effect of changes made to our opening Consolidated Balance Sheet on January 1, 2018 for the adoption of Topic 606 was as follows (in thousands):
| December 31, 2017 |  | Effect of Adoption of Topic 606 |  | January 1, 2018
Assets |  |  |  |  |
Accounts receivable, net of allowance for bad debts(1) | $ | 19,655 |  |  | $ | (1,399 | ) |  | $ | 18,256 |
Preneed receivables, net of allowance for bad debts(2)(3) | $ | 31,644 |  |  | $ | (11,129 | ) |  | $ | 20,515 |
Intangible and other non-current assets(4) | $ | — |  |  | $ | 2,778 |  |  | $ | 2,778 |
|  |  | $ | (9,750 | ) |  |
Liabilities |  |  |  |  |
Deferred preneed cemetery revenue(1)(2) | $ | 54,690 |  |  | $ | (4,594 | ) |  | $ | 50,096 |
Deferred preneed funeral revenue(3) | $ | 34,585 |  |  | $ | (7,934 | ) |  | $ | 26,651 |
Deferred tax liability(4) | $ | 31,159 |  |  | $ | 647 |  |  | $ | 31,806 |
Stockholders’ equity: |  |  |  |  |
Retained earnings(4) | $ | 57,904 |  |  | $ | 2,131 |  |  | $ | 60,035 |
|  |  | $ | (9,750 | ) |  |
(1) | Under Topic 606, receivables represent an entity’s unconditional right to consideration, billed or unbilled. Our balance of accounts receivable, net of allowance for bad debts, of $19.7 million at December 31, 2017, included the current portion of receivables for preneed cemetery merchandise and service contracts totaling $1.4 million. As these amounts represent undelivered performance obligations, they have been reclassified to reduce deferred preneed cemetery revenue on January 1, 2018.
(2) | Under Topic 606, receivables represent an entity’s unconditional right to consideration, billed or unbilled. Our balance of preneed receivables, net of allowance for bad debts, of $31.6 million at December 31, 2017, included the non-current portion of receivables for preneed cemetery merchandise and service contracts totaling $4.6 million. As these amounts represent undelivered performance obligations, they have been reclassified to reduce deferred preneed cemetery revenue on January 1, 2018.
(3) | Under Topic 606, receivables represent an entity’s unconditional right to consideration, billed or unbilled. Our balance of preneed receivables, net of allowance for bad debts, $31.6 million at December 31, 2017, included the non-current portion of receivables for preneed funeral trust contracts totaling $7.9 million. As these amounts represent undelivered performance obligations, they have been reclassified to reduce deferred preneed funeral revenue on January 1, 2018.
(4) | Under Topic 606, certain costs incurred to obtain or fulfill a contract with a customer are capitalized. Beginning January 1, 2018, we capitalize selling costs related to undelivered preneed cemetery merchandise and services and preneed funeral trust contracts. Previously, these costs were expensed in the period incurred. We recorded a cumulative adjustment of $2.1 million to our opening Retained earnings, which consisted of a $2.8 million adjustment to our Intangible and other non-current assets and a $0.6 million adjustment to our Deferred tax liability on our Consolidated Balance Sheet on January 1, 2018.
The following accounting pronouncements were adopted on January 1, 2018 with no impact to our Consolidated Financial Statements: Compensation (Topic 718): Stock Compensation – Scope of Modification Accounting The amendments in this ASU provide guidance about which changes to the terms and conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. An entity should account for the effects of a modification unless the fair value, vesting conditions and classification of the modified award are the same as the original award immediately before the award is modified. Business Combinations (Topic 805): Clarifying the Definition of a Business This ASU applies to all entities that must determine whether they have acquired or sold a business. The amendments in this ASU clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments This ASU applies to all entities that are required to present a statement of cash flows under Topic 230. The amendments provide guidance on eight specific cash flow issues and includes clarification on how these items should be classified in the statement of cash flows and is designed to help eliminate diversity in practice as to where items are classified in the cash flow statement. In November 2016, the FASB issued additional guidance on this topic that requires amounts generally described as restricted cash and restricted cash equivalents to be included with cash and cash equivalents when reconciling the statement of cash flows. Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities The amendments in this ASU address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments and apply to all entities that hold financial assets or owe financial liabilities. The amendments in this ASU also simplify the impairment assessment of equity investments without readily determinable fair values by requiring assessment for impairment qualitatively at each reporting period. That impairment assessment is similar to the qualitative assessment for long-lived assets, goodwill, and indefinite-lived intangible assets. Accounting Pronouncements Not Yet Adopted Financial Instruments - Credit Losses In June 2016, the FASB issued ASU, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This ASU applies to all entities holding financial assets and net investment in leases that are not accounted for at fair value through net income. The main objective of the ASU is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. This amendment replaces the incurred loss impairment methodology in the current standard with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. This ASU is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, with earlier application permitted for all entities. We plan to adopt the provisions of this ASU for our fiscal year beginning January 1, 2020 and are currently evaluating the impact the adoption of this new accounting standard will have on our Consolidated Financial Statements. Leases In February 2016, January 2018, July 2018, and December 2018, the FASB issued and amended ASU's related to Leases (Topic 842). These ASU's supersede the current lease accounting requirements for lessees and lessors within Topic 840, Leases. Lessees will be required to recognize all leases, including operating leases, on the balance sheet and record a liability to make lease payments and a corresponding right-of-use (“ROU”) asset representing its right to use the underlying asset for the lease term, recognize a single lease cost, which is allocated over the lease term, generally on a straight line basis, and classify all cash payments within operating activities in the statement of cash flows. Accounting for lessors is substantially unchanged from current accounting principles. Lessees will be required to classify leases as either finance leases or operating leases. Initial balance sheet measurement is similar for both types of leases; however, expense recognition and amortization of ROU assets will differ. This ASU provides optional practical expedients in transition. We expect to elect the ‘package of practical expedients’ that would allow us to carryforward the historical lease classification. We also expect to elect the use-of-hindsight practical expedient and to include both the lease and non-lease components as a single component. The new standard also provides practical expedients for an entity’s ongoing accounting. We currently expect to elect the short-term lease recognition exemption for all leases that qualify, which means leases with initial terms of 12 months or less will not be recorded on the balance sheet. We are substantially complete with our reassessment, and as a result, certain arrangements will no longer be considered a lease under Topic 842. This ASU also provides an optional transition practical expedient that allows companies to adopt the ASU with a cumulative effect adjustment as of the beginning of the year of adoption with prior year comparative financial information and disclosures remaining as previously reported. We plan to elect this practical expedient and do not expect a material adjustment to beginning retained earnings. We plan to adopt the provisions of this ASU for our fiscal year beginning January 1, 2019. While we continue to assess all of the effects of adoption of this ASU, we currently expect the following impact: i) the recognition of new ROU assets and lease liabilities on our balance sheet, which are expected to range from $15 million to $17 million; and ii) providing new disclosures regarding key information about leasing arrangements. We do not expect this ASU to have a material impact on our results of operations, cash flows, or liquidity measures, such as debt covenant ratios.

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- Definition The entire disclosure for a new accounting pronouncement that has been issued but not yet adopted. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 250 -URI http://asc.fasb.org/topic&trid=2122394 + Details
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