2. Revenue

Adoption of Accounting Standards Codification (“ASC”) 606 — Revenue from Contracts with Customers

On January 1, 2018, the Company adopted ASC 606 using the modified retrospective method applied to those contracts that were not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under ASC 606, while prior period amounts are not adjusted and continue to be reported in accordance with the Company’s historical accounting under ASC 605.

The following table details the cumulative effect of the changes made to the consolidated January 1, 2018 balance sheet for the adoption of ASC 606 (in thousands):


	Balance at		Adjustments		Balance at
	December 31,		Due to		January 1,
	2017		ASU 2014-09		2018
Assets
Inventories, net	$	1,415,915	$	(2,634)	$	1,413,281
Prepaid expenses and other assets		32,721		7,062		39,783
Deferred tax assets, net		155,551		(443)		155,108
Liabilities
Accrued liabilities		101,929		1,021		102,950
Deferred revenues and gains, current		77,669		667		78,336
Deferred revenues and gains, non-current		64,061		(1,489)		62,572
Equity
Retained earnings		6,192		1,310		7,502
Non-controlling interests		34,332		2,476		36,808

The adjustments above related primarily to i) the deferral of sales commissions expenses relating to multiyear consumer services and plans and the recording of such expenses over the same period as the recognition of the related revenues, ii) reclassification of estimated product returns from inventory to prepaid expenses and other assets, iii) reclassification of expected refunds previously included in deferred revenues and gains to accrued liabilities, and iv) reclassification and adjustment of the point obligation for the Coast to Coast service from accrued liabilities to deferred revenues and gains.

The following table details the impact of the adoption of ASC 606 on the consolidated balance sheet as of March 31, 2018 (in thousands):


	March 31, 2018
	As		Balances Without		Effect of Change
	Reported		Adoption of ASC 606		Higher/(Lower)
Assets
Inventories, net	$	1,574,059	$	1,576,699	$	(2,640)
Prepaid expenses and other assets		34,668		27,322		7,346
Deferred tax assets, net		154,553		154,996		(443)
Liabilities
Accrued liabilities		134,437		133,311		1,126
Deferred revenues and gains, current		73,440		72,765		675
Deferred revenues and gains, non-current		65,530		67,090		(1,560)
Equity
Retained earnings		5,025		3,633		1,392
Non-controlling interests		32,468		29,838		2,630

The following table details the impact of the adoption of ASC 606 on the consolidated statement of operations for the three months ended March 31, 2018 (in thousands):


	Three Months Ended March 31, 2018
	As		Balances Without		Effect of Change
	Reported		Adoption of ASC 606		Higher/(Lower)
Revenue
Consumer services and plans	$	53,808	$	53,822	$	(14)
Costs applicable to revenue
Consumer services and plans		22,725		22,712		13
Operating and income tax expenses
Selling, general, and administrative		245,114		245,405		(291)
Income tax expense		7,219		7,191		28
Net income
Net income		17,276		17,040		236
Less: net income attributable to non-controlling interests		(14,095)		(13,941)		(154)
Net income attributable to Camping World Holdings, Inc.		3,181		3,099		82

For the three months ended March 31, 2018, basic earnings per share of Class A common stock would have been $0.08 per share without the adoption of ASC 606 compared to the as-reported amount of $0.09 per share. For the three months ended March 31, 2018, the adoption of ASC 606 had no impact on diluted earnings per share of Class A common stock.

Revenue Recognition

Revenues are recognized by the Company when control of the promised goods or services is transferred to its customers in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. Sales and other taxes collected from the customer concurrent with revenue-producing activities are excluded from revenue. Incidental items that are immaterial in the context of the contract are recognized as expense. The Company presents disaggregated revenue on its consolidated statements of operations.

Consumer Services and Plans revenue consists of revenue from membership clubs, publications, consumer shows, and marketing and royalty fees from various consumer services and plans. Certain Consumer Services and Plans revenue is generated from annual, multiyear and lifetime memberships. The revenue and expenses associated with these memberships are deferred and amortized over the membership period. Unearned revenue and profit are subject to revisions as the membership progresses to completion. Revisions to membership period estimates would change the amount of income and expense amortized in future accounting periods. For lifetime memberships, an 18 year period is used, which is the actuarially determined estimated fulfillment period. Roadside Assistance (“RA”) revenues are deferred and recognized over the contractual life of the membership. RA claim expenses are recognized when incurred.

Royalty revenue is earned under the terms of an arrangement with a third party credit card provider based on a percentage of the Company’s co-branded credit card portfolio retail spending with such third party credit card provider.

Marketing fees for finance, insurance, extended service and other similar products are recognized as variable consideration, net of estimated cancellations, if applicable, when a product contract payment has been received or financing has been arranged.

Promotional expenses, consisting primarily of direct mail advertising expenses, are deferred and expensed over the period of expected future benefit, typically three months based on historical actual response rates. Renewal expenses are expensed at the time related materials are mailed.

Newsstand sales of publications and related expenses are recorded as variable consideration at the time of delivery, net of estimated returns. Subscription sales of publications are reflected in income over the lives of the subscriptions. The related selling expenses are expensed as incurred. Advertising revenues and related expenses are recorded at the time of delivery. Subscription and newsstand revenues and expenses related to annual publications are deferred until the publications are distributed.

Revenue and related expenses for consumer shows are recognized when the show occurs.

Retail revenue consists of sales of new and used recreational vehicles, commissions on related finance and insurance contracts, and sales of parts, services and other products. Revenue from the sale of recreational vehicles is recognized upon completion of the sale to the customer. Conditions to completing a sale include having an agreement with the customer, including pricing, whereby the sales price must be reasonably expected to be collected and having control transferred to the customer. Revenue from parts, services and other products sales is recognized upon the delivery of the part or completion of the service.

Finance and insurance revenue is recognized when a finance and insurance product contract payment has been received or financing has been arranged. The proceeds the Company receives for arranging financing contracts, and selling insurance and service contracts, are subject to chargebacks if the customer terminates the respective contract earlier than a stated period. These proceeds are recorded as variable consideration, net of estimated chargebacks.

The Company’s contracts with customers may include multiple performance obligations. For such arrangements, the Company allocates revenue to each performance obligation based on its relative standalone selling price. The Company generally determines standalone selling prices based on the prices charged to customers or using the adjusted market assessment approach.

Deferred Revenues

The Company records deferred revenues when cash payments are received or due in advance of the Company’s performance, net of estimated refunds that are presented separately as a component of accrued liabilities. The decrease in the deferred revenue balance for the three months ended March 31, 2018 was primarily driven by $27.9 million of revenues recognized that were included in the deferred revenue balance at the beginning of the period, partially offset by cash payments received or due in advance of satisfying the Company’s performance obligations.

As of March 31, 2018, the Company has unsatisfied performance obligations relating to multiyear plans for its Good Sam Club, RA, Coast to Coast memberships, and magazine publication revenue streams. The total unsatisfied performance obligation for these revenue streams at March 31, 2018 and the periods during which the Company expects to recognize the amounts as revenue are presented as follows (in thousands):


	As of
	March 31, 2018
2018	$	55,970
2019		34,477
2020		15,507
2021		7,168
2022		3,880
Thereafter		6,518
Total	$	123,520

The Company’s payment terms vary by the type and location of its customer and the products or services offered. The term between invoicing and when payment is due is not significant. For certain products or services and customer types, we require payment before the products or services are delivered to the customer.

Practical Expedients and Exemptions

The Company does not adjust the promised amount of consideration for the effects of a significant financing component if the Company expects, at contract inception, that the period of time between payment and transfer of the promised goods or services will be one year or less.

The Company expenses sales commissions when incurred in cases where the amortization period of those otherwise capitalized sales commissions would have been one year or less.

We do not disclose the value of unsatisfied performance obligations for revenue streams for (i) contracts with an original expected length of one year or less and (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed.