NOTE 3 — Summary of Significant Accounting Policies

Property and equipment—Property and equipment is stated at cost. Depreciation is provided using the straight-line method over the asset’s estimated useful life. Accumulated depreciation was $58,220,000 and $57,114,000 as of June 30, 2017 and December 31, 2016, respectively.

In the fourth quarter of 2016, we began removing certain grandstand seating that had been taken out of service and written off in 2015. We incurred costs of $286,000 in the first quarter of 2017 to remove the seating which is included in costs to remove long-lived assets in our consolidated statements of earnings. As of March 31, 2017, these assets had been removed and no further costs have been incurred.

In the first quarter of 2016, we began a renovation project of certain track related assets that was completed in the first quarter of 2017. As a result, we adjusted the service lives of those assets to properly reflect their shortened estimated useful life. We recorded depreciation expense of $68,000 and $159,000, respectively, in the three and six-month periods ended June 30, 2016 related to these assets and these assets were fully depreciated as of December 31, 2016.

Revenue recognition—We classify our revenues as admissions, event-related, broadcasting and other. “Admissions” revenue includes ticket sales for all of our events. “Event-related” revenue includes amounts received from sponsorship fees; luxury suite rentals; hospitality tent rentals and catering; concessions and vendor commissions for the right to sell concessions and souvenirs at our facilities; sales of programs; track rentals; broadcasting rights other than domestic television broadcasting revenue and other event-related revenues. Additionally, event related revenue includes amounts received for the use of our property and a portion of the concession sales we manage from the Firefly Music Festival. “Broadcasting” revenue includes rights fees obtained for domestic television broadcasts of events held at our speedway.

Revenues pertaining to specific events are deferred until the event is held. Concession and souvenir revenues are recorded at the time of sale. Revenues and related expenses from barter transactions in which we provide sponsorship packages in exchange for goods or services are recorded at fair value. Barter transactions accounted for $239,000 and $222,000 of total revenues for the three and six-month periods ended June 30, 2017 and 2016, respectively.

Under the terms of our sanction agreements with NASCAR, we receive a portion of the broadcast revenue NASCAR negotiates with various television networks. NASCAR retains 10% of the gross broadcast rights fees allocated to each NASCAR-sanctioned event as a component of its sanction fee. The remaining 90% is recorded as revenue. The event promoter is required to pay 25% of the gross broadcast rights fees to the event as part of the awards to the competitors, which we record as operating expenses.

Expense recognition—The cost of non-event related advertising, promotion and marketing programs is expensed as incurred. Certain direct expenses pertaining to specific events, including prize and point fund monies and sanction fees paid to NASCAR, a majority of our marketing expenses and other expenses associated with the promotion of our racing events are deferred until the event is held, at which point they are expensed. Advertising expenses were $592,000 and $632,000 for the three and six-month periods ended June 30, 2017 and 2016, respectively.

Net earnings per common share—Nonvested share-based payment awards that include rights to dividends or dividend equivalents, whether paid or unpaid, are considered participating securities, and the two-class method of computing basic and diluted net earnings per common share (“EPS”) is applied for all periods presented. The following table sets forth the computation of EPS (in thousands, except per share amounts):

	Three Months Ended June 30,				Six Months Ended June 30,
	2017		2016		2017		2016
Net earnings per common share — basic and diluted:
Net earnings	$	5,203	$	5,066	$	2,798	$	2,723
Allocation to nonvested restricted stock awards	82		80		44		43

Net earnings available to common stockholders	$	5,121	$	4,986	$	2,754	$	2,680


Weighted-average shares outstanding — basic and diluted	36,308		36,245		36,307		36,248


Net earnings per common share — basic and diluted	$	0.14	$	0.14	$	0.08	$	0.07

There were no options outstanding and we paid no dividends during the three and six-month periods ended June 30, 2017 or 2016.

Accounting for stock-based compensation—We recorded total stock-based compensation expense for our restricted stock awards of $59,000 and $245,000, and $62,000 and $171,000 as general and administrative expenses for the three and six-month periods ended June 30, 2017 and 2016, respectively. We recorded income tax benefits of $24,000 and $119,000, and $26,000 and $70,000 for the three and six-month periods ended June 30, 2017 and 2016, respectively, related to vesting of our restricted stock awards.

Recent accounting pronouncements—In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers, which supersedes nearly all existing revenue recognition guidance under accounting principles generally accepted in the United States of America. The FASB has recently issued several amendments to the standard, including clarification on accounting for and identifying performance obligations. The standard can be applied using the full retrospective method or retrospectively with the cumulative effect initially applying the guidance recognized at the date of initial application. We anticipate adopting the ASU using the retrospective with cumulative effect method. The new standard requires a company to recognize revenue when it transfers goods or services to customers in an amount that reflects the consideration that the company expects to receive for those goods or services. Additionally, the guidance requires improved disclosures to help users of financial statements better understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The update is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. We anticipate adopting this standard effective January 1, 2018. We are currently analyzing the impact of this ASU on our results of operations and, at this time, we are unable to determine the impact of the new standard, if any, on our consolidated financial statements.

Reclassifications—Certain amounts in the prior year financial statements have been reclassified to conform to the current-year presentation. The impact of the reclassifications made to prior year amounts are not material and did not affect net earnings.