2. Revenue

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

On January 1, 2018, the Company adopted ASC 606, Revenue from Contracts with Customers (“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
Accounts receivable, net	$	79,881	$	6,130	$	86,011
Inventories		1,415,915		(5,142)		1,410,773
Prepaid expenses and other assets		32,721		4,508		37,229
Deferred tax assets, net		155,551		(303)		155,248
Liabilities
Accrued liabilities		101,929		1,021		102,950
Deferred revenues and gains, current		77,669		857		78,526
Deferred revenues and gains, non-current		64,061		(471)		63,590
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) adjustment of recognition period of RV service revenue from point-in-time to over time, iii) adjustment of capitalized direct-response advertising to expense when the advertising is mailed instead of over the expected benefit period, iv) reclassification of estimated product returns from inventory to prepaid expenses and other assets, v) reclassification of expected refunds previously included in deferred revenues and gains to accrued liabilities, and vi) 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 September 30, 2018 (in thousands):


	September 30, 2018
	As		Balances Without		Effect of Change
	Reported		Adoption of ASC 606		Higher/(Lower)
Assets
Accounts receivable, net	$	100,071	$	93,456	$	6,615
Inventories		1,495,041		1,501,772		(6,731)
Prepaid expenses and other assets		36,637		29,623		7,014
Deferred tax assets, net		145,751		146,054		(303)
Liabilities
Accrued liabilities		143,792		142,640		1,152
Deferred revenues and gains, current		92,391		91,440		951
Deferred revenues and gains, non-current		69,223		69,880		(657)
Equity
Retained earnings		35,730		33,945		1,785
Non-controlling interests		52,276		48,912		3,364

The following table details the impact of the adoption of ASC 606 on the consolidated statement of operations for the three and nine months ended September 30, 2018 (in thousands):


	Three Months Ended September 30, 2018						Nine Months Ended September 30, 2018
			Balances Without		Effect of				Balances Without		Effect of
	As Reported		Adoption of ASC 606		Change Higher/(Lower)		As Reported		Adoption of ASC 606		Change Higher/(Lower)
Revenue
Consumer services and plans	$	52,044	$	52,046	$	(2)	$	158,600	$	158,637	$	(37)
Dealership parts, services and other		71,607		70,942		665		210,024		209,634		390
Retail		184,543		184,562		(19)		460,637		460,512		125
Costs applicable to revenue
Consumer services and plans		21,499		21,643		(144)		65,056		65,360		(304)
Dealership parts, services and other		36,504		36,209		295		104,372		104,219		153
Retail		116,664		116,655		9		292,664		292,595		69
Operating and income tax expenses
Selling, general, and administrative		278,329		278,928		(599)		807,738		808,701		(963)
Income tax expense		11,385		11,271		114		30,706		30,546		160
Net income
Net income		47,909		46,940		969		147,000		145,637		1,363
Less: net income attributable to non-controlling interests		(33,893)		(33,262)		(631)		(101,772)		(100,884)		(888)
Net income attributable to Camping World Holdings, Inc.		14,016		13,678		338		45,228		44,753		475

For the three and nine months ended September 30, 2018, basic earnings per share of Class A common stock would have been $0.37 and $1.21 per share, respectively, without the adoption of ASC 606 compared to the as-reported amount of $0.38 and $1.22 per share, respectively. For the three and nine months ended September 30, 2018, diluted earnings per share of Class A common stock would have been $0.37 and $1.20 per share, respectively, without the adoption of ASC 606 compared to the as-reported amount of $0.38 and $1.20 per share, respectively.

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 club memberships, 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 and for acquiring new cardholders.

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 consist primarily of direct mail advertising expenses and renewal expenses and 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.

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

Dealership revenue consists of sales of new and used recreational vehicles, sales of RV parts and services, and commissions on the related finance and insurance contracts. 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 Dealership parts, services and other products sales is recognized over time as work is completed, and when parts are delivered to our customers. For service and parts revenues recorded over time, the Company utilizes a method that considers total costs incurred to date and the applicable margin in relation to total expected efforts to complete our performance obligation in order to determine the appropriate amount of revenue to recognize over time. Finance and insurance revenue is recorded net, since the Company is acting as an agent in the transaction, and 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.

Retail revenue consists of sales of products, parts and services and other products, including RV accessories and supplies, and camping, hunting, fishing, skiing, snowboarding, bicycling, skateboarding, marine and watersport equipment and supplies. Revenue from products, parts, and services sales is recognized over time as work is completed, and when parts are delivered to our customers. For service and parts revenues recorded over time, the Company utilizes a method that considers total costs incurred to date and the applicable margin in relation to total expected efforts to complete our performance obligation in order to determine the appropriate amount of revenue to recognize over time. E-commerce sales are recognized when the product is shipped.

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.

As of September 30, 2018 and January 1, 2018, a contract asset of $6.8 million and $6.3 million, respectively, relating to RV service revenues was included in accounts receivable in the accompanying unaudited condensed consolidated balance sheet. As of September 30, 2018 and January 1, 2018, the Company had capitalized costs to acquire a contract, consisting of sale commissions, of $5.8 million and $4.4 million, respectively.

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 increase in the deferred revenue balance for the nine months ended September 30, 2018 was primarily driven by cash payments received or due in advance of satisfying the Company’s performance obligations, partially offset by $64.8 million of revenues recognized that were included in the deferred revenue balance at the beginning of the period.

As of September 30, 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 September 30, 2018 and the periods during which the Company expects to recognize the amounts as revenue are presented as follows (in thousands):


	As of
	September 30, 2018
2018	$	37,322
2019		62,679
2020		24,151
2021		11,738
2022		6,046
Thereafter		9,096
Total	$	151,032

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, the Company requires 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.

The Company does 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 the Company recognizes revenue at the amount to which it has the right to invoice for services performed.