Significant Accounting Policies (Policy)

9 Months Ended

Sep. 30, 2018

Significant Accounting Policies [Abstract]

Reclassification Of Prior Period Presentation

Reclassification of Prior Period Presentation

Certain amounts for prior periods have been reclassified to conform to the current period presentation. 

Revenue Recognition

Revenue Recognition

Sales of VOIs.  Revenue is recognized for sales of VOIs after control of the VOI is deemed transferred to the customer, which is when the legal rescission period has expired on a binding executed VOI sales agreement and the collectability of the note receivable from the buyer, if any, is reasonably assured.  Transfer of control of the VOI to the buyer is deemed to occur when the legal rescission period expires as the risk and rewards associated with VOI ownership are transferred to the buyer at that time.  We record customer deposits from contracts within the legal rescission period in Restricted cash and Accrued liabilities and other in our Consolidated Balance Sheets as such amounts are refundable until the legal rescission period has expired.  In cases where construction and development of our developed resorts has not been substantially completed, we defer all of the revenues and associated expenses for the sales of VOIs until construction is substantially complete and the resort may be occupied.

We generally, offer qualified purchasers financing for up to 90% of the purchase price of VOIs.  The typical financing provides for a term of ten years and a fixed interest rate, is fully amortizing in equal installments and may be prepaid without penalty.  For sales of VOIs for which we provide financing, we have reduced the transaction price for expected loan losses which we consider to be variable consideration. Our estimates of the variable consideration are based on the results of our static pool analysis, which relies on historical payment data for similar VOI notes receivable. Our policies regarding the estimation of variable consideration on our notes receivable are discussed in further detail under “Notes Receivable” below. VOI Sales where no financing was provided do not have any material significant payment terms. 

Under timeshare accounting rules, rental operations, including accommodations provided through the use of our sampler program, are accounted for as incidental operations whereby incremental carrying costs in excess of incremental revenues are expensed as incurred. During each of the periods presented, our aggregate rental revenue and sampler revenue was less than the aggregate carrying cost of our VOI inventory.  Accordingly, we recorded such revenue as a reduction to the carrying cost of VOI inventory which is included in Cost of other fee-based services in our Consolidated Statements of Income and Comprehensive Income for each period.

Fee-based sales commission revenue.  Fee-based sales commission revenue is recognized when a sales transaction with a VOI purchaser is consummated in accordance with the terms of the fee-based sales agreement with the third-party developer, it is probable that a significant reversal of such revenue will not occur and the related consumer rescission period has expired.

Other fee-based services revenue and cost reimbursements.  Revenue in connection with our other fee-based services (which are described below) is recognized as follows:

· Resort and club management revenue and related cost reimbursements are recognized as services are rendered.  These services provided to the resort homeowner associations (“HOAs”) are comprised of day-to-day services to operate the resort, including management services and certain accounting and administrative functions.  Management services provided to the Vacation Club include managing the reservation system and providing owner, billing and collection services.  Our management contracts are typically structured as cost-plus with an initial term of three years and automatic one-year renewals. We believe these services to be a series of distinct goods and services to be accounted for as a single performance obligation over time and recognize revenue as the customer receives the benefits of our services.  We allocate variable consideration to the distinct good or service within the series, such that revenue from management fees and cost reimbursements is recognized in each period as the uncertainty with respect to such variable consideration is resolved.

· Resort title fee revenue is recognized when escrow amounts are released and title documents are completed.

· Rental revenues are recognized on a daily basis which is consistent with the period for which the customer benefits from such service.  Revenue from the sampler program is typically recognized within a year from sale as guests complete stays at the resorts.

· Mortgage servicing revenue is recognized over time as services are rendered.

Our cost of other fee-based services consists of the costs associated with the various activities described above, as well as developer subsidies and maintenance fees on our unsold VOIs.

Interest Income.  We provide financing for a significant portion of sales of our owned VOIs.  We recognize interest income from financing VOI sales on the accrual method as earned based on the outstanding principal balance, interest rate and terms stated in each individual financing agreement.  See “Notes Receivable” below for further discussion of the policies applicable to our VOI notes receivable. 

Revenue disaggregated by category was as follows (in thousands):

	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2018		2017		2018		2017
Sales of VOIs (1)	$	70,698	$	62,453	$	195,412	$	176,094
Fee-based sales commission revenue (2)		61,641		69,977		167,581		179,046
Resort and club management revenue (2)		25,744		23,170		75,257		67,857
Cost reimbursements (2)		16,900		14,097		47,157		40,660
Title fees (1)		3,491		2,373		9,355		10,927
Other revenue (2)		1,822		1,843		4,860		4,658
Revenue from customers		180,296		173,913		499,622		479,242
Interest income (1)		21,531		21,296		63,771		65,673
Other income, net		378		—		1,269		—
Total revenues	$	202,205	$	195,209	$	564,662	$	544,915

(1) Included in our sales of VOIs and financing segment described in Note 11.

(2) Included in our resort operations and club management segment described in Note 11.

Notes Receivable

Notes Receivable

Our notes receivable are carried at amortized cost less an allowance for loan losses. Interest income is suspended, and previously accrued but unpaid interest income is reversed, on all delinquent notes receivable when principal or interest payments are more than 90 days contractually past due and is not resumed until such loans are less than 90 days past due.  As of September 30, 2018 and December 31, 2017, $17.0 million and $12.9 million, respectively, of our VOI notes receivable were more than 90 days past due, and accordingly, consistent with our policy, were not accruing interest income.  After 120 days, our VOI notes receivable are generally written off against the allowance for loan losses.

To the extent we determine that it is probable that a significant reversal of cumulative revenue recognized may occur, we record an estimate of variable consideration as a reduction to the transaction price of the sales of VOIs until the uncertainty associated with the variable consideration is resolved.  Our estimates of the variable consideration are based on the results of our static pool analysis, which relies on historical payment data for similar VOI notes receivable and tracks uncollectibles for each period’s sales over the entire life of the notes. We also consider whether historical economic conditions are comparable to then current economic conditions, as well as variations in underwriting standards. We review our estimate of variable consideration on at least a quarterly basis.  Loan origination costs are deferred and recognized over the life of the related notes receivable.

Recently Adopted Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (ASC 606)” as subsequently amended (“ASU 2014-09”). ASU 2014-09 replaced numerous requirements in GAAP, including industry-specific requirements, and provides companies with a single revenue recognition model for recognizing revenue from contracts with customers.  The new standard specifies how and when to recognize revenue from contracts with customers by providing a principle-based framework and requires additional disclosures about the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. We adopted the new guidance on January 1, 2018 using the retrospective method and accordingly, prior period results have been adjusted to apply the new standard, as shown below. 

We have elected to use the following practical expedients in connection with our adoption of ASU 2014-09: 

· We utilize the transaction price upon completion of the contract for certain contracts with customers.

· We do not disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or less or unsatisfied performance obligations or unsatisfied promises to transfer a distinct good or service that forms a part of a single performance obligation recognized over time.  See above for further description of variable consideration identified in our contracts with customers.

· We expense all marketing and sales costs as they are incurred.

· We exclude all taxes assessed by a governmental authority that are imposed on a specified transaction concurrent with the closing thereof and are collected by us from a customer.

We do not believe that the use of these practical expedients materially impacted the unaudited consolidated financial statements and disclosures herein.

The following represents the impact of the adoption of ASU 2014-09 on our consolidated balance sheets as of December 31, 2017 and December 31, 2016 and our consolidated statements of income for the three and nine months ended September 30, 2017 and the years ended December 31, 2017 and 2016 (in thousands, except per share data):

	For the Three Months Ended September 30, 2017
	Prior to Adoption		New Revenue Standard Adjustment		As Adjusted
Income Statement:
Sales of VOIs	$	61,687	$	766	$	62,453
Cost reimbursements		—		14,097		14,097
Cost reimbursements		—		14,097		14,097
Cost of VOIs sold		6,284		160		6,444
Selling, general and administrative expenses		114,637		297		114,934
Income before non-controlling interest and provision   for income taxes		34,066		309		34,375
Provision for income taxes		12,520		64		12,584
Net income		21,546		245		21,791
Less: Net income attributable to non-controlling interest		3,110		141		3,251
Net income attributable to Bluegreen Vacations Corporation   shareholders	$	18,436	$	104	$	18,540
Basic and diluted earnings per share	$	0.26	$	—	$	0.26

	For the Nine Months Ended September 30, 2017
	Prior to Adoption		New Revenue Standard Adjustment		As Adjusted
Income Statement:
Sales of VOIs	$	172,839	$	3,255	$	176,094
Cost reimbursements		—		40,660		40,660
Cost reimbursements		—		40,660		40,660
Cost of VOIs sold		10,737		615		11,352
Selling, general and administrative expenses		311,402		855		312,257
Income before non-controlling interest and provision   for income taxes		106,299		1,785		108,084
Provision for income taxes		37,844		643		38,487
Net income		68,455		1,142		69,597
Less: Net income attributable to non-controlling interest		9,398		20		9,418
Net income attributable to Bluegreen Vacations Corporation   shareholders	$	59,057	$	1,122	$	60,179
Basic and diluted earnings per share	$	0.83	$	0.02	$	0.85

	As of and for the Year Ended December 31, 2017
	As Previously Reported		New Revenue Standard Adjustment		As Adjusted
Balance Sheet:
Notes receivable, net	$	431,801	$	(4,943)	$	426,858
Deferred income		36,311		(19,418)		16,893
Deferred income taxes		83,628		5,338		88,966
Total shareholders' equity	$	424,517	$	9,137	$	433,654
Income Statement:
Sales of VOIs	$	239,662	$	2,355	$	242,017
Cost reimbursements		—		52,639		52,639
Cost reimbursements		—		52,639		52,639
Cost of VOIs sold		17,439		240		17,679
Selling, general and administrative expenses		420,746		453		421,199
Income before non-controlling interest and provision   for income taxes		135,336		1,662		136,998
Provision (benefit) for income taxes		(2,974)		629		(2,345)
Net income		138,310		1,033		139,343
Less: Net income attributable to non-controlling interest		12,784		(24)		12,760
Net income attributable to Bluegreen Vacations Corporation   shareholders	$	125,526	$	1,057	$	126,583
Basic and diluted earnings per share	$	1.76	$	0.01	$	1.77

	As of and for the Year Ended December 31, 2016
	As Previously Reported		New Revenue Standard Adjustment		As Adjusted
Balance Sheet:
Notes receivable, net	$	430,480	$	(4,680)	$	425,800
Deferred income		37,015		(17,493)		19,522
Deferred income taxes		126,278		4,711		130,989
Total shareholders' equity	$	290,208	$	8,103	$	298,311
Income Statement:
Sales of VOIs	$	266,142	$	7,732	$	273,874
Cost reimbursements		—		49,557		49,557
Cost reimbursements		—		49,557		49,557
Cost of VOIs sold		27,346		1,483		28,829
Selling, general and administrative expenses		418,357		1,572		419,929
Income before non-controlling interest and provision   for income taxes		124,948		4,676		129,624
Provision for income taxes		40,172		1,448		41,620
Net income		84,776		3,228		88,004
Less: Net income attributable to non-controlling interest		9,825		300		10,125
Net income attributable to Bluegreen Vacations Corporation   shareholders	$	74,951	$	2,928	$	77,879
Basic and diluted earnings per share	$	1.06	$	0.04	$	1.10

On March 7, 2018, we filed our 2017 Annual Report which included in Item 8 – Note 2 to the consolidated financial statements the expected impacts to the reported results of the retrospective adjustments to our financial statements for the years ended December 31, 2017 and 2016 due to the adoption of ASU 2014-09.  Subsequent to the March 7, 2018 filing date, we revised our calculation of the expected impact of the retrospective adoption of this standard, and the amounts included in the above tables reflect these revisions.  Adoption of the standard related to revenue recognition did not impact our consolidated cash flow statements. 

In January 2017, the FASB issued ASU 2017-01, “Business Combinations – Clarifying the Definition of a Business,” which is intended to clarify the determination of whether a company has acquired or sold a business.  The definition of a business affects many areas of accounting, including acquisitions, disposals, goodwill and consolidations, and the standard aims to help entities determine whether transactions should be accounted for as acquisitions or disposals of assets or businesses.  The standard is expected to result in more acquisitions being accounted for as asset purchases instead of business combinations.  The guidance became effective for fiscal years beginning after December 15, 2017.  We adopted this standard on January 1, 2018 using the prospective transition method.  The adoption of this standard resulted in our acquisition of Éilan Hotel & Spa in April 2018 being accounted for as an asset acquisition and consequently, all transaction costs were capitalized as part of the assets acquired.

In March 2018, the FASB issued ASU 2018-05, “Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118” (“ASU 2018-05”). ASU 2018-05 amended ASC Topic 740, “Income Taxes” (“ASC 740”), for the guidance previously provided by SEC Staff Accounting Bulletin No. 118 (“SAB 118”), related to the application of ASC 740 in the reporting period in which the U.S. Tax Cuts and Jobs Act (the “Tax Cuts and Jobs Act”) was signed into law. Our adoption of ASU 2018-05 as of March 31, 2018 had no impact on our accounting for income taxes for the nine months ended September 30, 2018. See Note 9 for additional information regarding the accounting for income taxes for the Tax Cuts and Jobs Act.

Future Adoption of Recently Issued Accounting Pronouncement

Future Adoption of Recently Issued Accounting Pronouncements

The FASB has issued the following accounting pronouncements and guidance relevant to our operations which have not been adopted as of September 30, 2018: 

“ASU 2016-02” – “Leases (Topic 842)”, as subsequently amended by ASU 2018-01 and ASU 2018-11. This standard will require assets and liabilities to be recognized on the balance sheet of a lessee for the rights and obligations created by leases of assets with terms of more than 12 months. For income statement purposes, the standard retained a dual model which requires leases to be classified as either operating or finance based on largely similar criteria to those applied in current lease accounting, but without explicit bright lines. This standard also requires extensive quantitative and qualitative disclosures, including significant judgments made by management, to provide greater insight into the extent of revenue and expense recognized and expected to be recognized from existing leases.

This standard, which will be effective for us on January 1, 2019, permits two methods of adoption: a modified retrospective transition method or an optional transition method. The modified retrospective transition method applies the standard’s transition guidance as of the beginning of the earliest comparable period presented in an entity’s financial statements, which results in financial statements for current periods that are comparable to the financial statements for the prior periods presented. The optional transition method applies the transition guidance on the date of adoption with a cumulative-effect adjustment to the opening balance of retained earnings. Under this transition method, comparable periods in an entity’s financial statements in the year of adoption would continue to be reported in accordance with Topic 840, including the disclosures of Topic 840.

We expect that the implementation of this new standard will have a material impact on our consolidated financial statements and related disclosures as we had aggregate future minimum lease payments of $40.2 million at September 30, 2018 under our current non-cancelable lease agreements with various expirations dates between 2018 and 2056.We anticipate the recognition of additional assets and corresponding liabilities related to these leases on our consolidated balance sheets.

We anticipate adopting the standard on January 1, 2019 under the optional transition method and, accordingly, will not apply the new guidance in comparable periods presented in our financial statements in the year of adoption. We anticipate electing certain practical expedients available under the transition guidance within the standard, including the package of practical expedients which would allow us to not have to reassess under the new standard prior conclusions about lease identification, classification, and initial direct costs.We also expect to make accounting policy elections by class of underlying asset (i) to not apply the recognition requirements of this standard to leases which qualify with a term of twelve months or less and (ii) to not separate non-lease components from lease components. If the election is made to not separate non-lease components from lease components,  each separate lease component and non-lease component associated with that lease component will instead be accounted for as a single lease component for lease classification, recognition, and measurement purposes.

We are currently in the process of evaluating our existing lease portfolio, including accumulating all of the necessary information required to properly account for leases under this standard. Other significant implementation matters include assessing the impact on our internal control over financial reporting and documenting and implementing new processes for accounting for our lease agreements. 

ASU No. 2016-13 – “Financial Instruments – Credit Losses (Topic 326)” (“ASU 2016-13”). This standard introduces an approach based on expected losses to estimate credit losses on certain types of financial instruments and will expand the disclosure requirements regarding an entity’s assumptions, models, and methods for estimating its allowance for loan losses. In addition, the standard will require entities to disclose the amortized cost balance for each class of financial asset by credit quality indicator, disaggregated by the year of origination (i.e., by vintage year). This standard will be effective for us on January 1, 2020. Early adoption is permitted beginning on January 1, 2019. We are currently evaluating the impact that adopting ASU 2016-13 may have on our consolidated financial statements.