2. Summary of Significant Accounting Policies

Cash and Restricted Cash - Cash consists of bank deposits which may, at times, exceed federally insured limits. No losses have been experienced in such accounts. Restricted cash consists of funds held in a reserve account as required by the note payable agreement executed March 28, 2017 with Branch Banking and Trust Company (“BB&T”).

In November 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-18, “Classification of Restricted Cash,” which requires that amounts generally described as restricted cash and restricted cash equivalents be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. This ASU states that transfers between cash, cash equivalents and restricted cash are not part of the Company’s operating, investing and financing activities. The Company adopted this standard on January 1, 2018 and applied retrospectively. As a result, restricted cash reserves are included with cash on the Company’s statements of cash flows.

The following tables provide additional detail, by financial statement line item, of the ASU 2016-18 impacts in our the accompanying statements of cash flows for the twelve months ended December 31, 2018 and 2017.


	As Reported		ASU 2016 - 18		Reported
	(Pre-Adoption)		Impact		(Post-Adoption)
Twelve months ended December 31, 2017
Cash and restricted cash, end of period	$	787,554	$	1,505,642	$	2,293,196


	December 31, 2018		December 31, 2017
Cash	$	1,261,818	$	787,554
Restricted cash		2,516,248		1,505,642
Total cash and restricted cash, shown in statements of cash flows	$	3,778,066	$	2,293,196

Revenue and Deferred Revenue - In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)”. The ASU and all subsequently issued clarifying ASUs replaced most existing revenue recognition guidance under accounting principles generally accepted in the United States of America (“U.S. GAAP”). The ASU also requires expanded disclosures relating to the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The standard requires the use of either the full retrospective or modified retrospective adoption.

Because of the short-term day-to-day nature of our hotel revenues as well as the future treatment of revenues related to future events and membership, we determined that the pattern of revenue recognition did not change significantly. We evaluated how we recognize revenue related to initiation deposits when adopting ASU 2014-09 and determined that we will continue to recognize revenue over a period of time which represents the pattern of transfer of our services to our members. We will also continue recognizing revenue over the estimated life of the member and therefore the adoption of ASU 2014-09 did not impact how we recognize member revenue. The Company adopted this standard on its effective date of January 1, 2018 under the modified retrospective method. No adjustment has been recorded to our opening balance of retained earnings on January 1, 2018 as there was no impact to our net income. Revenue recognized during 2018 that was included in deferred revenue at December 31, 2017 approximated $3,167,000. We also expect that the effect of adoption of ASU 2014-09 will be immaterial to us on an on-going basis.

Revenue is derived from a variety of sources including, but not limited to, hotel, food and beverage operations, retail sales and golf course operations. With the exception of initiation fees and membership dues, all revenues net of any sales and other taxes collected are recognized as products are delivered or services are performed.

Revenue from performance obligations satisfied over time include membership dues, annual fees and initiation fees. The membership initiation fees at the Resort are nonrefundable and are initially recorded when received as deferred revenue and amortized over the average life of a membership which, based on historical information, is deemed to be ten years for full golf members and five years for resort and executive memberships. Membership dues and annual fees are recognized over the applicable membership period (three months to one year depending on type of membership).

Deferred revenue includes unrecognized initiation fee liabilities and unearned member dues. Deferred revenue was as follows as of December 31:


	2018		2017		2016
Deferred Revenue	$	4,204,647	$	3,999,452	$	4,228,300

Use of Estimates - The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Estimates that are critical to the accompanying financial statements include our belief that long-lived assets, including intangibles, are recoverable, and our estimates of the average lives of memberships from which we base our revenue recognition are reasonable. Estimates and assumptions are reviewed periodically and the effects of revisions are reflected in the period they are determined to be necessary. It is at least reasonably possible that our estimates could change in the near term. Future results could be materially affected if actual results differ from these estimates and assumptions.

Concentrations of Credit Risk - Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and accounts receivable. We frequently maintain cash balances in excess of federally insured limits. We have not experienced any losses in such accounts. The Company performs periodic credit evaluations of its customers’ financial condition and generally does not require collateral. Although due dates of receivables vary based on contract terms, credit losses have been within management’s estimates in determining the level of allowance for doubtful accounts. Overall financial strategies are reviewed periodically.

The following methods and assumptions were used by the Company in estimating its fair value disclosures for financial instruments:

Accounts receivable, accounts payable and accrued liabilities: Due to their short-term nature, the carrying amounts reported on the accompanying balance sheets for these accounts approximate their fair value.

Deferred revenues: The carrying amount of these accounts approximate their fair value because they have been recorded at their net present values considering relevant risk factors.

Liquidity – The Company believes that cash on hand, cash available from operations, or funding available from its sole member or affiliates’ current cash reserves will be sufficient to fund its operations for the foreseeable future.

Accounts Receivable, net – Trade accounts receivable represent amounts due from our memberships, resort guests and companies or individuals that held conferences or group stays at the Resort, net of the allowance for doubtful accounts. The Company performs credit evaluations of its membership’s financial condition. Companies with a recent prior direct billing positive history with the Resort are granted credit for billing. If companies have not been to the Resort within the past two years, an updated credit evaluation is conducted. Terms are negotiable by group contract, but invoices are typically due 30 days from the receipt of invoice.

The Company’s management reviews accounts receivable monthly to determine if any receivables are uncollectible. Any receivable considered to be doubtful is included in the allowance for doubtful accounts. The balance in the allowance for doubtful accounts was $17,546 and $31,843 as of December 31, 2018 and 2017, respectively. After all attempts to collect the receivable have failed, the receivable is written off against the allowance.

Inventories and Supplies - Inventories and supplies are recorded at the lower of cost, on a first-in, first-out basis, or market.

Property, Buildings and Equipment, net – Property, buildings and equipment are stated at cost less accumulated depreciation. The Company capitalizes any asset purchase of $1,000 or more with an estimated useful life of at least three years. Depreciation and amortization are recorded using the straight-line basis over the shorter of the estimated useful lives of the assets, or the lease terms. Estimated useful lives are generally as follows:


		Average Lives
Category		(in Years)
Buildings		40
Land improvements		20
Machinery and equipment		3 to 7
Assets recorded under capital leases		3 to 4

Costs of maintenance and repairs of property and equipment used in operations are charged to expense as incurred, while renewals and betterments are capitalized. When property and equipment are replaced, retired or otherwise disposed of, the costs are deducted from the asset and accumulated depreciation accounts. Gains or losses on sales or retirements of equipment are recorded in operating income.

Impairment of Long-Lived Assets - The Company regularly reviews its long-lived assets for impairment by comparing the carrying values of the assets with their estimated future undiscounted cash flows. If it is determined that an impairment loss has occurred, the loss is recognized during that period. The impairment loss is calculated as the difference between asset carrying values and fair value as determined by prices of similar items and other valuation techniques, giving consideration to recent operating performance and pricing trends. There were no impairment losses related to long-lived assets for the periods included herein.

Intangibles - Our indefinite life intangibles consist of our trade name valued at $2,300,000 and a water contract valued at $2,030,001. The Company evaluates intangible assets for impairment annually or earlier if a significant event occurs or circumstances indicate that the assets may not be recoverable. Factors the Company considers important, which could indicate impairment, include the following: (1) significant under-performance relative to historical or projected future operating results; (2) significant changes in the manner of the Company’s use of the acquired assets or the strategy for the Company’s overall business; and (3) significant negative industry or economic trends. During the fourth quarter of 2018, the Company completed its annual intangible impairment assessment, and based on the results, the Company determined that no impairment of intangible assets existed at December 31, 2018 or 2017.

Loss Contingencies - We estimate loss contingencies in accordance with FASB ASC 450‑20, Loss Contingencies, which states that a loss contingency shall be accrued by a charge to income if both of the following conditions are met: (a) information available before the financial statements are issued or are available to be issued indicates that it is probable that a liability had been incurred at the date of the financial statements and (b) the amount of loss can be reasonably estimated. There have been no adjustments for loss contingencies to the accompanying financial statements as of and for the years ended December 31, 2018 and 2017.

Advertising - Advertising costs are expensed as incurred and amounted to $1,125,131 and $792,306 for the years ended December 31, 2018 and 2017, respectively.

Leases - Leases which transfer substantially all of the benefits and risks of ownership of property are classified as capital leases. Assets and liabilities are recorded at amounts equal to the present value of the minimum lease payments at the beginning of the lease term. Interest expense relating to the lease liabilities is recorded to affect constant rates of interest over the terms of the leases.

Leases which do not transfer substantially all of the benefits and risks of ownership of property are classified as operating leases, and the related rentals are charged to expense as incurred. Refer to “Recently Issued Accounting Pronouncements” for further discussion on leases.

Income Taxes - The Company is a single-member limited liability company, and therefore, no provision or liability for federal or state income taxes has been included in the accompanying financial statements as our results of operations are included in the income tax return of our member.

We have adopted the provisions of FASB ASC 740‑10, Accounting for Uncertainty in Income Taxes. Under ASC 740‑10, we are required to evaluate each of our tax positions to determine if they are more likely than not to be sustained if the taxing authority examines the respective position. A tax position includes an entity’s tax status as a pass through entity, and the decision not to file a tax return. We have evaluated each of our tax positions and have determined that no provision or liability for income taxes is necessary.

We evaluate the validity of our conclusions regarding uncertain income tax positions on an annual basis to determine if facts or circumstances have arisen that might cause us to change our judgment regarding the likelihood of a tax position’s sustainability under examination. Our member files income tax returns in the U.S. federal jurisdiction and the State of Virginia. At December 31, 2018, we do not believe that any uncertain tax positions exist. We remain subject to examination by tax authorities for all years since our inception on June 14, 2007.

Recently Issued Accounting Pronouncements - The FASB has recently issued the following Accounting Standard Update:

In February 2016, the FASB issued ASU No. 2016-02, Leases, requiring lessees to recognize a right-of-use asset and a lease liability on the balance sheet for all leases with the exception of short-term leases. For lessees, leases will continue to be classified as either operating or finance leases in the income statement. The effective date of the new standard for public companies is for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. Early adoption was permitted. The Company adopted this standard on its effective date of January 1, 2019 under the modified retrospective method and using the optional transition method to apply the new lease accounting standard prospectively as of January 1, 2019, rather than as of the earliest period presented. Adoption of this standard resulted in the recording of net operating lease right-of-use (“ROU”) assets of approximately $251,000 included in property, building and equipment, net, and corresponding operating lease liabilities of approximately $247,000. The adoption did not materially impact the Company’s statements of operations or cash flows.

Reclassifications – Certain amounts in the 2017 financial statements have been reclassified to conform to the presentation in the 2018 financial statements