Significant Accounting Policies (Policy)

3 Months Ended

Mar. 31, 2018

Significant Accounting Policies [Abstract]

Recently Issued Accounting Pronouncements

Recently Issued Accounting Pronouncements - In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842) (“ASU 2016-02”). The objective of ASU 2016-02 is to recognize lease assets and lease liabilities by lessees for those leases classified as operating leases under previous US GAAP. ASU 2016-02 requires lessees to account for leases as finance leases or operating leases. Both finance and operating leases will result in the lessee recognizing a right-of-use asset and corresponding lease liability. For finance leases, the lessee would recognize interest expense and amortization of the right-of-use asset and, for operating leases, the lessee would recognize a straight-line lease expense. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption of ASU 2016-02 is permitted. The standard must be adopted by recognizing and measuring leases at the beginning of the earliest period being presented using a modified retrospective approach. The Company has begun analyzing its operating lease agreements, and management anticipates the Company’s assets and liabilities will increase proportionally after the adoption of ASU 2016-02. In addition, management expects an increase to interest expense will result from the new standard resulting from the new calculation of interest pertaining to operating leases. These changes to the Company’s consolidated balance sheet may be material.

In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment (“ASU 2017-04”). The objective of ASU 2017-04 is to simplify the subsequent measurement of goodwill by entities performing their annual goodwill impairment tests by comparing the fair value of a reporting unit, including income tax effects from any tax-deductible goodwill, with its carrying amount and recognizing an impairment charge for the amount by which the carrying amount exceeds fair value. ASU 2017-04 is effective for fiscal years beginning after December 31, 2021, and interim periods within those fiscal years. Early adoption of ASU 2017-04 is permitted on goodwill impairment tests performed after January 1, 2017. ASU 2017-04 should be applied on a prospective basis. The Company is currently evaluating the impact of adopting ASU 2017-04; however, the standard is not expected to have a material impact on its consolidated financial statements.

In February 2018, the FASB issued ASU 2018-02, Reporting Comprehensive Income (“ASU 2018-02”). The objective of ASU 2018-02 is to provide guidance on the impacts of the Tax Cuts and Jobs Act (“Tax Act”). The guidance permits the reclassification of certain income tax effects of the Tax Act from other comprehensive income to retained earnings (stranded tax effects). The guidance also requires certain new disclosures. The guidance is effective for annual periods beginning after December 15, 2018, and interim periods within that reporting period. Early adoption is permitted. Entities may adopt the guidance using one of two transition methods: retrospective to each period or periods in which the income tax effects of the Tax Act related to the items remaining in other comprehensive income are recognized, or at the beginning of the period of adoption. The Company does not expect the adoption of this standard to have a material impact on its consolidated financial statements.

In March 2018, the FASB issued ASU 2018-05, Income Taxes (Topic 740) (“ASU 2018-05”). The objective of ASU 2018-05 is to amend guidance on the Tax Act provided in Staff Accounting Bulletin No. 118. The guidance is effective immediately upon issuance. The Company reviewed the guidance and determined that it applied the guidance effectively in its Annual Report on Form 10-K for the year ended December 31, 2017.

Changes Related to Adoption of ASU 2016-18

In November 2016, the FASB issued ASU 2016-18, Restricted Cash (“ASU 2016-18”). The objective of ASU 2016-18 is to require the statement of cash flows to include restricted cash in explaining the change during the period in the total of cash and cash equivalents. The Company adopted ASU 2016-18 in its consolidated financial statements for the year ended December 31, 2017. The standard impacts the presentation of the Company’s condensed consolidated statement of cash flows in its condensed consolidated financial statements for the three months ended March 31, 2018 and March 31, 2017, and the Company has added the following additional disclosures in this Note 2 about its restricted cash balances to its discussion of cash and cash equivalents.

Cash and Cash Equivalents

A reconciliation of cash, cash equivalents and restricted cash as stated in the Company’s statement of cash flows is presented in the following table:


	March 31,		March 31,
Amounts in thousands	2018		2017
Cash and cash equivalents	$	65,939	$	39,743
Restricted cash		1,062		—
Restricted cash included in deposits and other		729		191
Total cash, cash equivalents, and restricted cash shown in the statement of cash flows	$	67,730	$	39,934

For the three months ended March 31, 2018, restricted cash included $1.1 million related to completion of leasehold improvements at SCCL, $0.6 million in deposits and other related to a cash guarantee for the Company’s SCCL credit agreement and $0.1 million in deposits and other related to payments of prizes and giveaways for Casinos Poland.

The prior period amounts within the Company’s condensed consolidated statement of cash flows have been revised to reflect the new presentation of restricted cash after the adoption of ASU 2016-18. The information below presents the impact of this presentation change on the Company’s condensed consolidated statement of cash flows for the three months ended March 31, 2017.


Condensed Consolidated Statement of Cash Flows
Amounts in thousands	As Previously Reported		Changes Related to Adoption of ASU 2016-18		Revised
For the three months ended March 31, 2017
Cash Flows from Operating Activities:
Prepaid expenses and other assets	$	450	$	(6)	$	444

Effect of Exchange Rate Changes on Cash		306		14		320

Increase in Cash, Cash Equivalents and Restricted Cash		906		8		914

Cash, Cash Equivalents and Restricted Cash at Beginning of Period		38,837		183		39,020
Cash, Cash Equivalents and Restricted Cash at End of Period	$	39,743	$	191	$	39,934

Changes Related to Adoption of ASU 2014-19

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”). The objective of ASU 2014-09 is to clarify the principles for recognizing revenue and to develop a common revenue standard under US GAAP and International Financial Reporting Standards. The Company adopted ASU 2014-09 in its condensed consolidated financial statements for the three months ended March 31, 2018 using the modified retrospective approach. The Company applied ASU 2014-09 to contracts that were not completed as of January 1, 2018. The Company determined that all contractual performance obligations were completed as of December 31, 2017 and that no adjustment to retained earnings was required. The Company determined there was no impact to its condensed consolidated balance sheet, condensed consolidated statement of comprehensive (loss) income or condensed consolidated statement of cash flows. The standard impacts the presentation of the Company’s condensed consolidated statement of earnings in its condensed consolidated financial statements for the three months ended March 31, 2018, and the Company has added the following additional disclosures in this Note 2 related to the impact of ASU 2014-09.

The most significant impacts of adoption of the new accounting standard were as follows:

Promotional Allowances: The Company will recognize revenue for goods and services provided to customers for free as an inducement to gamble as gaming revenue with an offset to gaming revenue based on the stand-alone selling price rather than an offset to promotional allowances. This change primarily resulted in a reclassification between revenue line items.

Loyalty Accounting: Accounting for complimentary points earned through game play at the Company’s casinos will be identified as separate performance obligations and recorded as a reduction in gaming revenue when earned at the retail value of the benefits owed to the customer (less estimated breakage) and an increase to the loyalty program liability representing outstanding performance obligations. Such amounts are recognized as revenue in the line item of the corresponding good or service provided when the performance obligation is fulfilled.

Estimated Cost of Promotional Allowances: The Company will no longer reclassify the estimated direct cost of providing promotional allowances from other expense line items to the gaming expense line item. This change will result in a reclassification between expense line items and reduced gaming expense and increased hotel and food and beverage expenses by $0.3 million for the three months ended March 31, 2018.

Revenue

The Company derives revenue from:

(1)

contracts with customers,

(2)

financial instruments,

(3)

cost recovery payments, and

(4)

dividends from its cost investment.


	For the three months
	ended March 31,
Amounts in thousands	2018		2017
Revenue from contracts with customers	$	40,620	$	36,398
Interest income		19		21
Cost recovery income		—		—
Dividend revenue		—		—
Total revenue	$	40,639	$	36,419

The Company’s performance obligations related to contracts with customers consist of the following:

Gaming

The majority of the Company’s revenue is derived from gaming transactions involving wagers wherein, upon settlement, the Company either retains the customer’s wager, or returns the wager to the customer. Gaming revenue is reported as the net difference between wins and losses. Gaming revenue is reduced by the incremental amount of unpaid progressive jackpots in the period during which the jackpot increases and the dollar value of points earned through tracked play. In Canada, gaming revenue is also reduced by amounts retained by the Alberta Gaming and Liquor Commission (“AGLC”) and Horse Racing Alberta (“HRA”). Performance obligations are satisfied upon completion of the wager with liabilities recognized for points earned through play. The Company does not extend lines of credit to customers.

Hotel accommodations and food and beverage furnished without charge, coupons and downloadable credits provided to customers to entice play are considered marketing incentives to induce play and are presented as a reduction to gaming revenue at the retail value on the date of redemption. Members of the Company’s casinos’ player clubs earn points based on, among other things, their volume of play at the Company’s casinos. Players can accumulate points over time that they may redeem at their discretion under the terms of the program. The value of the points is offset against the revenue in the period in which the points were earned. The Company records a liability based on the redemption value of the points earned with an estimate for breakage, and records a corresponding reduction in gaming revenue. The value of unused or unredeemed points is included in accrued liabilities on the Company’s consolidated balance sheets.

Hotel, Bowling, Food and Beverage and Other Sales

Goods and services provided include hotel room rentals, food and beverage sales, bowling lane rentals and retail sales. Revenue is recognized over time as specified in the contract, however, the majority of the contracts are satisfied on the same day and revenue is recognized on the date of the sale. Revenue that is collected before the date of sale is recorded as deferred revenue. In the normal course of business, the Company does not accept product returns. The Company has elected the practical expedient permitted under ASU 2014-09 and excludes taxes assessed by a governmental authority and collected by the Company from the transaction price.

Pari-Mutuel

Pari-mutuel revenue involves wagers on horse racing. The Company facilitates wagers on horse racing through live racing at the Company’s racetrack, off-track betting parlors at the Company’s casinos, and the operation of the Southern Alberta off-track betting network. The Company has determined that it is the principal in the performance obligations through which amounts are wagered on horse races run at the Company’s racetrack. For these performance obligations, the Company records revenue as the commission retained on wagers with revenue recognized on the date of the wager. The Company has determined that it is acting as the agent for all wagers placed through the Company’s off-track betting parlors and the off-track betting network. For these performance obligations, the Company records pari-mutuel revenue as the commission retained on wagers less the expense for host fees to the host racetrack with revenue recognized on the date of the wager. Expenses related to licenses and HRA levies are expensed in the same month as revenue is recognized. The Company takes future bets for the Kentucky Derby only and recognizes wagers on the Kentucky Derby as deferred revenue.

Management and Consulting Fees

Revenue from the Company’s management agreement with MCE is recorded monthly as services are provided. Payments are typically due within 30 days of the month to which the services relate. The agreed upon price in the contract does not contain variable consideration. The Company did not incur any costs to obtain its current management agreement with MCE.

The Company operates gaming establishments as well as related lodging, restaurant, horse racing (including off-track betting) and entertainment facilities around the world. The Company generates revenue at its properties by providing the following types of products and services: gaming, hotel, food and beverage, and pari-mutuel and other. Disaggregation of the Company’s revenue from contracts with customers by type of revenue and geographical location is presented in the tables below.


	For the Three Months Ended March 31, 2018
Amounts in thousands		Canada		United States		Poland		Corporate Other		Total
Gaming	$	9,747	$	6,419	$	17,073	$	768	$	34,007
Hotel		136		318		—		—		454
Food and Beverage		2,490		885		184		—		3,559
Other		2,299		84		125		92		2,600
Net Operating Revenue	$	14,672	$	7,706	$	17,382	$	860	$	40,620


	For the Three Months Ended March 31, 2017
Amounts in thousands		Canada		United States		Poland		Corporate Other		Total
Gaming	$	9,020	$	8,200	$	14,550	$	717	$	32,487
Hotel		136		301		—		—		437
Food and Beverage		2,347		830		164		—		3,341
Other		1,933		77		90		475		2,575
Promotional Allowances (1)		(276)		(1,908)		(258)		—		(2,442)
Net Operating Revenue	$	13,160	$	7,500	$	14,546	$	1,192	$	36,398

(1)

With the adoption of ASU 2014-19, promotional allowances are presented as a reduction in gaming revenue for the three months ended March 31, 2018.

For the majority of the Company’s contracts with customers, payment is made in advance of the services and contracts are settled on the same day the sale occurs with revenue recognized on the date of the sale. For contracts that are not settled, a contract liability is created. The expected duration of the performance obligation is less than one year.

The amount of revenue recognized that was included in the opening contract liability balance was $0.2 million for each of the three months ended March 31, 2018 and 2017. This revenue consists primarily of the Company’s deferred gaming revenue from player points earned through play at the Company’s casinos located in the United States.


	For the three months						For the three months
	ended March 31, 2018						ended March 31, 2017
Amounts in thousands	Receivables		Contract Asset		Contract Liability		Receivables		Contract Asset		Contract Liability
Opening	$	266	$	—	$	235	$	270	$	—	$	232
Closing		286		—		212		284		—		215
Increase/(Decrease)	$	20	$	—	$	(23)	$	14	$	—	$	(17)

Receivables are included in accounts receivable and contract liabilities are included in accrued liabilities on the Company’s condensed consolidated balance sheets. There were no impairment losses for the Company’s receivables or contract liabilities recognized for the three months ended March 31, 2018.

Substantially all of the Company’s contracts and contract liabilities have an original duration of one year or less. The Company applies the practical expedient for such contracts and does not consider the effects of the time value of money. Further, because of the short duration of these contracts, the Company has not disclosed the transaction price for the remaining performance obligations as of the end of each reporting period or when the Company expects to recognize this revenue.

The current period amounts within the Company’s condensed consolidated statement of earnings have been revised to provide a comparison of revenue and the direct cost of providing promotional allowances to the Company’s condensed consolidated statement of earnings for the three months ended March 31, 2018.


Condensed Consolidated Statement of Earnings
Amounts in thousands	As Reported		Changes Related to Adoption of ASU 2014-09		Revised
For the three months ended March 31, 2018
Operating revenue:
Gaming	$	34,007	$	2,658	$	36,665
Operating revenue		40,620		2,658		43,278
Less: Promotional allowances		—		(2,658)		(2,658)
Net operating revenue		40,620		—		40,620
Operating costs and expenses
Gaming		17,741		282		18,023
Hotel		174		(14)		160
Food and beverage	$	3,636	$	(268)	$	3,368