In May 2014, the FASB issued a new standard related to revenue recognition, ASU 2014-09, Revenue from Contracts with Customers. We adopted the standard effective January 1, 2018, using the full retrospective method, which requires the Company to recast each prior reporting period presented consistent with the new standard. The most significant effects of adopting the new standard related to the accounting for our Caesars Rewards customer loyalty program and casino promotional allowances.

Caesars Rewards affects revenue from our four core businesses: casino entertainment, food and beverage, rooms and hotel, and entertainment and other business operations. Previously, the Company accrued a liability based on the estimated cost of fulfilling the redemption of Reward Credits, after consideration of estimated forfeitures (referred to as “breakage”), based upon the cost of historical redemptions. Upon adoption of the new accounting standard, Reward Credits are no longer recorded at cost, and a

deferred revenue model is used to account for the classification and timing of revenue recognized as well as the classification of related expenses when Reward Credits are redeemed. This results in a portion of casino revenues being recorded as deferred revenue as Reward Credits are earned. Revenue is recognized in a future period based on when and for what good or service the Reward Credits are redeemed (e.g., a hotel room).

Additionally, we previously recorded promotional allowances in a separate line item within net revenues. As part of adopting the new standard, promotional allowances are no longer presented separately. Alternatively, revenue is recognized based on relative standalone selling prices for transactions with more than one performance obligation. For example, when a casino customer is given a complimentary room, we are required to allocate a portion of the casino revenues earned from the customer to rooms revenues based on the standalone selling price of the room. As a result of this change, we are reporting substantially lower casino revenues; however, this change, and other less significant adjustments that were required upon adoption, did not have an aggregate material effect on total net revenues, operating income, net income, or cash flows.

Effect of Adopting New Revenue Recognition Standard - Balance Sheets

(In millions)	Previously Reported			ASC Adjustments			As Recast
December 31, 2017
Receivables, net	$	496		$	(2	)	$	494
Property and equipment, net⁽¹⁾	16,228			(74		)	16,154
Accrued expenses and other current liabilities ⁽²⁾	1,459			(133		)	1,326
Contract liabilities⁽²⁾	—			129			129
Financing obligations⁽¹⁾	9,429			(74		)	9,355
Deferred credits and other liabilities	1,473			1			1,474
Stockholders’ equity	3,296			1			3,297
December 31, 2016
Stockholders’ deficit	(1,609		)	2			(1,607		)
December 31, 2015
Stockholders’ equity	2,039			3			2,042

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Effect of Adopting New Revenue Recognition Standard - Statements of Operations

	Year Ended December 31, 2017						Year Ended December 31, 2016
(In millions)	Prior to Adoption			Post Adoption			Prior to Adoption			Post Adoption
Revenues
Casino	$	2,865		$	2,168		$	2,177		$	1,608
Food and beverage	938			982			788			822
Rooms	1,054			1,074			923			950
Other revenue	626			584			527			497
Management fees	—			12			—			—
Reimbursed management costs	48			48			—			—
Casino promotional allowances	(679		)	—			(538		)	—
Net revenues	4,852			4,868			3,877			3,877
Operating expenses
Direct
Casino	1,521			1,213			1,128			890
Food and beverage	446			693			383			572
Rooms	276			360			249			318
Property, general, administrative, and other	1,133			1,124			1,166			1,147
Reimbursable management costs	48			48			—			—
Depreciation and amortization	628			626			439			439
Corporate expense	204			202			194			194
Other operating costs	64			65			91			91
Total operating expenses	4,320			4,331			3,650			3,651
Income from operations	532			537			227			226
Interest expense	(774		)	(773		)	(599		)	(599		)
Gain on deconsolidation of subsidiaries	30			31			—			—
Restructuring and support expenses	(2,028		)	(2,028		)	(5,729		)	(5,729		)
Loss on extinguishment of debt	(232		)	(232		)	—			—
Other income/(loss)	95			95			(29		)	(29		)
Loss from continuing operations before income taxes	(2,377		)	(2,370		)	(6,130		)	(6,131		)
Income tax benefit/(provision)	1,995			1,995			(327		)	(327		)
Loss from continuing operations, net of income taxes	(382		)	(375		)	(6,457		)	(6,458		)
Discontinued operations, net of income taxes	—			—			3,380			3,380
Net loss	(382		)	(375		)	(3,077		)	(3,078		)
Net loss attributable to noncontrolling interests	7			7			29			29
Net loss attributable to Caesars	$	(375	)	$	(368	)	$	(3,048	)	$	(3,049	)

We analyze our revenues based upon the type of services we provide and the geographic location of the related property. We recognize revenue when control over the goods and services we provide has transferred to the customer, which is generally when the services are performed and when we have no substantive performance obligation remaining. Sales and other taxes collected from customers on behalf of governmental authorities are accounted for on a net basis and are not included in net revenues or operating expenses.

Casino revenues include revenues generated by our casino operations and casino related activities such as poker, pari-mutuel wagering, and tournaments, less sales incentives and other adjustments. Casino revenues are measured by the aggregate net difference between gaming wins and losses. Jackpots, other than the incremental amount of progressive jackpots, are recognized at the time they are won by customers. We accrue the incremental amount of progressive jackpots as the progressive machine is played, and the progressive jackpot amount increases, with a corresponding reduction to casino revenues. Funds deposited by

Rooms revenue, food and beverage revenue, and entertainment and other revenue include: (i) the actual amounts paid for such services (less any amounts allocated to unperformed performance obligations, such as Reward Credits described below); (ii) the value of Reward Credits redeemed for such services; and (iii) the portion of the transaction price allocated to complimentary goods or services provided in conjunction with other revenue-generating activities. Rooms revenue is generally recognized over time, consistent with the customer’s reservation period. Food and beverage and entertainment and other revenues are recognized at the point in time the services are performed or events are held. Amounts paid in advance, such as advance deposits on rooms and advance ticket sales, are recorded as a liability until the goods or services are provided to the customer (see Contract Liabilities below).

Caesars’ customer loyalty program, Caesars Rewards, grants Reward Credits to Caesars Rewards Members based on on-property spending, including gaming, hotel, dining, and retail shopping at all Caesars-affiliated properties. Members may redeem Reward Credits for complimentary or discounted goods and services such as rooms, food and beverages, merchandise, free play, entertainment, and travel accommodations. Members are able to accumulate Reward Credits over time that they may redeem at their discretion under the terms of the program. A member’s Reward Credit balance is forfeited if the member does not earn at least one Reward Credit during a continuous six-month period.

Because of the significance of the Caesars Rewards program and the ability for customers to accumulate Reward Credits based on their past play, we have determined that Reward Credits granted in conjunction with other earning activity represent a performance obligation. As a result, for transactions in which Reward Credits are earned, we allocate a portion of the transaction price to the Reward Credits that are earned based upon the relative standalone selling prices (“SSP”) of the goods and services involved. When the activity underlying the “earning” of the Reward Credits has a wide range of selling prices and is highly variable, such as in the case of gaming activities, we use the residual approach in this allocation by computing the value of the Reward Credits as described below and allocating the residual amount to the gaming activity. This allocation results in a significant portion of the transaction price being deferred and presented as a Contract liability on our accompanying Balance Sheets. Any amounts allocated to Contract liabilities are recognized as revenue when the Reward Credits are redeemed in accordance with the specific recognition policy of the activity for which the credits are redeemed. This balance is further described below under Contract Liabilities.

Our Caesars Rewards loyalty program includes various tiers that offer different benefits, and members are able to earn credits towards tier status, which generally enables them to receive discounts similar to those provided as complimentaries described below. We have determined that any such discounts received as a result of tier status do not represent material rights, and therefore, we do not account for them as distinct performance obligations.

We have determined the SSP of a Reward Credit by computing the redemption value of credits expected to be redeemed. Because Reward Credits are not otherwise independently sold, we analyzed all Reward Credit redemption activity over the preceding calendar year and determined the redemption value based on the fair market value of the goods and services for which the Reward Credits were redeemed. We have applied the practical expedient under the portfolio approach to our Reward Credit transactions because of the similarity of gaming and other transactions and the homogeneity of Reward Credits.

As part of our normal business operations, we often provide lodging, transportation, food and beverage, entertainment, free play and other goods and services to our customers at no additional charge. Alternatively, Reward Credits can be redeemed for these services. Both are considered complimentaries. Such complimentaries are provided in conjunction with other revenue‑earning activities and are generally provided to encourage additional customer spending on those activities. Accordingly, we allocate a portion of the transaction price we receive from such customers to the complimentary goods and services. We perform this allocation based on the SSP of the underlying goods and services, which is determined based upon the weighted-average cash sales prices received for similar services at similar points during the year.

Marker play represents a significant portion of our overall table games volume. We maintain strict controls over the issuance of markers and aggressively pursue collection from those customers who fail to pay their marker balances timely. These collection efforts include the mailing of statements and delinquency notices, personal contacts, the use of outside collection agencies and civil litigation. Markers are generally legally enforceable instruments in the United States. Markers are not legally enforceable instruments in some foreign countries, but the United States assets of foreign customers may be reached to satisfy judgments entered in the United States. We consider the likelihood and difficulty of enforceability, among other factors, when we issue credit to customers who are not residents of the United States.

Accounts are written off when management deems the account to be uncollectible. Recoveries of accounts previously written off are recorded when received. We reserve an estimated amount for gaming receivables that may not be collected to reduce the Company’s receivables to their net carrying amount. Methodologies for estimating the allowance for doubtful accounts range from specific reserves to various percentages applied to aged receivables. Historical collection rates are considered, as are customer relationships, in determining specific reserves. As with many estimates, management must make judgments about potential actions by third parties in establishing and evaluating our reserves for allowance for doubtful accounts. Receivables are reported net of the allowance for doubtful accounts.

Allowance for Doubtful Accounts

(In millions)	Contracts			Other			Total
Balance as of January 1, 2016	$	35		$	13		$	48
Provision for doubtful accounts	11			—			11
Write-offs less recoveries	(25		)	7			(18		)
Balance as of December 31, 2016	21			20			41
Provision for doubtful accounts	9			(1		)	8
Write-offs less recoveries	14			(32		)	(18		)
OpCo consolidation ⁽¹⁾	—			20			20
Balance as of December 31, 2017	44			7			51
Provision for doubtful accounts	17			4			21
Write-offs less recoveries	(18		)	(7		)	(25		)
Balance as of December 31, 2018	$	43		$	4		$	47

Contract Liabilities

(In millions)	Caesars Rewards			Customer Advances			Total
Balance as of January 1, 2017	$	—		$	63		$	63
Amount recognized from the beginning balance	—			(56		)	(56		)
Amount earned and recognized within the period	(19		)	34			15
OpCo consolidation ⁽¹⁾	81			28			109
Balance as of December 31, 2017 ⁽²⁾	62			69			131
Amount recognized during the period ⁽³⁾	(144		)	(440		)	(584		)
Amount accrued during the period	148			454			602
Balance as of December 31, 2018 ⁽⁴⁾	$	66		$	83		$	149

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