In May 2014, the FASB issued Accounting Standards Update No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”), a converged standard on revenue recognition. The new pronouncement requires revenue recognition to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance also specifies the accounting for some costs to obtain or fulfill a contract with a customer, as well as enhanced disclosure requirements. The FASB also subsequently issued several amendments to the standard, including clarification on principal versus agent guidance, identifying performance obligations, and immaterial goods and services in a contract.

The new accounting standard update must be applied using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a modified retrospective approach with the cumulative effect of initially adopting the standard recognized at the date of adoption (which requires additional footnote disclosures).

The new accounting standard is effective for reporting periods beginning after December 15, 2017. We adopted the accounting standard effective October 1, 2018, using the modified retrospective approach applied only to contracts not completed as of the date of adoption, with no restatement of comparative periods. Therefore, the comparative information has not been adjusted and continues to be reported under ASC Topic 605. We recognized a net after-tax cumulative effect adjustment to retained earnings of $399,000 as of the date of adoption. The details and quantitative impacts of the significant changes are described below.

We previously recognized revenue for parts and service operations (boat maintenance and repairs) when the services were completed and recorded amounts due to us as receivables. Under ASC Topic 606, performance obligations associated with parts and service operations are satisfied over time, which results in the acceleration of revenue recognition, and amounts due to us are reflected as a contract asset until the right to such consideration becomes unconditional, at which time amounts due to us are reclassified to receivables.

Consolidated Balance Sheet Line Items
	Impact of changes in accounting policies
			Balances without		Impact of
			adoption of ASC		adoption
March 31, 2019	As Reported		Topic 606		Higher/(Lower)
Inventories, net	$	454,557	$	454,607	$	(50	)
Prepaid expenses and other current assets		8,839		5,722		3,117
Deferred tax assets, net		1,767		1,904		(137	)
Accounts payable		11,626		11,626		-
Accrued expenses		37,098		34,567		2,531
Retained earnings	$	176,683	$	176,284	$	399

Consolidated Statements of Operations Line Items
	Impact of changes in accounting policies
			Balances without		Impact of
			adoption of ASC		adoption
Three Months Ended March 31, 2019	As Reported		Topic 606		Higher/(Lower)
Revenue	$	303,586	$	304,900	$	(1,314	)
Cost of sales		229,384		230,098		(714	)
Income from operations		10,226		10,826		(600	)
Income before income tax provision		7,193		7,793		(600	)
Income tax provision		1,890		2,027		(137	)
Net Income	$	5,303	$	5,766	$	(463	)

	Impact of changes in accounting policies
			Balances without		Impact of
			adoption of ASC		adoption
Six Months Ended March 31, 2019	As Reported		Topic 606		Higher/(Lower)
Revenue	$	545,523	$	546,030	$	(507	)
Cost of sales		407,843		408,350		(507	)
Income from operations		19,212		19,212		-
Income before income tax provision		13,663		13,663		-
Income tax provision		3,450		3,450		-
Net Income	$	10,213	$	10,213	$	-

Consolidated Statements of Cash flows
	Impact of changes in accounting policies
				Balances without			Impact of
				adoption of ASC			adoption
Six Months Ended March 31, 2019	As Reported			Topic 606			Higher/(Lower)
Net income	$	10,213		$	10,213		$	-
(Increase) decrease in —
Inventories, net		(78,038	)		(77,533	)		(505	)
Prepaid expenses and other assets		(3,109	)		(1,083	)		(2,026	)
Increase (decrease) in —
Accounts payable		(11,508	)		(11,508	)		-
Accrued expenses and other long-term liabilities	$	5,389		$	2,858		$	2,531

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)” (“ASU 2016-02”). This update requires organizations to recognize lease assets and lease liabilities on the balance sheet and also disclose key information about leasing arrangements. ASU 2016-02 is effective for annual reporting periods beginning on or after December 15, 2018, and interim periods within those annual periods. Earlier application is permitted for all entities as of the beginning of an interim or annual period. While we are continuing to evaluate the impact of the adoption of ASU 2016-02 on our unaudited condensed consolidated financial statements, we believe the adoption of ASU 2016-02 will have a significant and material impact to our unaudited condensed consolidated balance sheet given our current lease agreements for our leased retail locations. We are continuing to evaluate the impact the adoption of ASU 2016-02 will have on our other unaudited condensed consolidated financial statements. Based on our current assessment, we expect that most of our operating lease commitments will be subject to the new guidance and recognized as operating lease liabilities and right-of-use assets upon adoption, resulting in a material increase in the assets and liabilities recorded on our unaudited condensed consolidated balance sheet.

A subsequent amendment to the standard provides an additional and optional transition method that allows entities to initially apply the new standard at the adoption date and recognize a cumulative effect adjustment to the opening balance of retained earnings in the period of adoption. Consequently, an entity’s reporting for the comparative periods presented in the financial statements in which it adopts the new leases standard will continue to be in accordance with current GAAP (ASC Topic 840) if the optional transition method is elected. While we are still evaluating the method of adoption, we currently anticipate adopting the standard using the optional transition method with no restatement of comparative periods and a cumulative effect adjustment, if any, recognized as of the date of adoption. We are continuing our assessment, which may identify additional impacts this standard will have on our unaudited condensed consolidated financial statements and related disclosures and internal control over financial reporting. We plan to adopt ASU 2016-02 in fiscal 2020.