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Basis of Presentation
3 Months Ended
Mar. 31, 2018
Accounting Policies [Abstract]  
Basis of Presentation
Principles of consolidation—The accompanying condensed consolidated financial statements include the accounts of the Holding Company and the accounts of all subsidiaries in which the Holding Company has a controlling interest and the consolidated accounts of variable interest entities (“VIEs”) in which the Holding Company is deemed to be the primary beneficiary. All intercompany transactions and balances have been eliminated in consolidation.
Unaudited interim financial information—The accompanying condensed consolidated financial statements are unaudited and have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information, the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. These condensed consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2017. In the opinion of management, all adjustments (including normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2018 are not necessarily indicative of the results that may be expected for the full year.
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, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Management evaluates its estimates on an ongoing basis and makes revisions to these estimates and related disclosures as experience develops or new information becomes known. Actual results could differ from those estimates.
Miscellaneous other income—Miscellaneous other income consisted of the following (in thousands):
 
Three Months Ended March 31,
 
2018
 
2017
Gain on sale of golf club operating property
$
6,700

 
$

Gain on insurance claim
1,000

 

Net periodic pension benefit
81

 
23

Total miscellaneous other income
$
7,781

 
$
23



Recently issued accounting pronouncements—In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842) (“ASU No. 2016-02”). This ASU requires that lessees recognize assets and liabilities for leases with lease terms greater than twelve months in the balance sheet and also requires improved disclosures to help users of financial statements better understand the amount, timing and uncertainty of cash flows arising from leases. This update is effective for public entities in fiscal years beginning after December 15, 2018, including interim reporting periods within those fiscal years. In January 2018, the FASB issued a proposed amendment to ASU No. 2016-02 that would allow lessors to elect, as a practical expedient, not to separate lease and nonlease components (such as services rendered) in a
contract for the purpose of revenue recognition and disclosure. The practical expedient as proposed can only be applied to leasing arrangements for which (i) the timing and pattern of revenue recognition are the same for the lease and nonlease components and (ii) the combined single lease component results in classification as an operating lease. The proposed amendment also would provide for an additional (and optional) transition method to adopt the new lease requirements by allowing entities to initially apply the requirements by recognizing a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. For leases in which the Company is the lessee, the Company will recognize a right-of-use asset and a lease liability equal to the present value of the minimum lease payments. The Company is still evaluating the full impact of the adoption of ASU No. 2016-02 on January 1, 2019 to its consolidated financial statements.
In June 2016, the FASB issued ASU No. 2016-13, Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU No. 2016-13”) which amends the guidance on the impairment of financial instruments, including most debt instruments, trade receivables and loans. ASU No. 2016-13 adds to U.S. GAAP an impairment model known as the current expected credit loss model that is based on expected losses rather than incurred losses. Under the new guidance, an entity recognizes as an allowance its estimate of expected credit losses for instruments measured at amortized cost, resulting in a net presentation of the amount expected to be collected on the financial asset. ASU No. 2016-13 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company is currently evaluating the impact of adopting ASU No. 2016-13 on its consolidated financial statements.
Recently adopted accounting pronouncements—In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (“ASU No. 2014-09”), which requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Company adopted ASU No. 2014-09 and the related ASUs that formed Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers, on January 1, 2018 using the modified retrospective approach with the cumulative effect recorded as an adjustment to opening capital. The new guidance was applied to contracts not completed at the transition date. Results for reporting periods beginning after January 1, 2018 are presented under ASC Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with historic accounting under ASC Topic 605, Revenue Recognition and other industry specific guidance.
The impact of adopting the new guidance primarily relates to (i) the recognition of variable incentive compensation consideration associated with the Company’s development management agreement with the Great Park Venture, which previously was recognized when contingencies associated with the amount and timing of the consideration were resolved, but under the new guidance estimates of the amount of variable consideration that the Company expects to be entitled to receive in revenue are recognized over time as management services are provided; (ii) the recognition of variable consideration from land sale contracts in the form of revenue or profit participation and marketing fees received from homebuilders, which historically have been recognized as revenue in the period in which the contingencies associated with the amount and timing of the consideration were resolved, but under the new guidance estimates of the amount of variable consideration that the Company expects to be entitled to receive in revenue are recognized at the time of land sale; (iii) the timing of revenue recognition from land sales or agriculture crop sales resulting from additional clarity in determining that the performance obligation to the customer is complete when control of the land or crop has been transferred to the customer; (iv) the impact of adoption of ASU No. 2014-09 by the Company’s unconsolidated entities; and (v) the requirement to provide more robust disclosure on the nature of the Company’s transactions, the economic substance of the arrangements and the judgments involved.
The cumulative effect of the changes made to the Company’s consolidated January 1, 2018 balance sheet from the adoption of the new revenue guidance were as follows (in thousands):
 
Balance at December 31, 2017
 
Adjustments due to ASU No. 2014-09
 
Balance at January 1, 2018
ASSETS
 
 
 
 
 
Inventories
$
1,425,892

 
$
(9,457
)
 
$
1,416,435

Investment in unconsolidated entities
530,007

 
3,067

 
533,074

Intangible asset, net—related party
127,593

 
(19,220
)
 
108,373

Related party assets
3,158

 
38,332

 
41,490

Other assets
7,585

 
716

 
8,301

LIABILITIES
 
 
 
 
 
Accounts payable and other liabilities
167,620

 
(1,722
)
 
165,898

Related party liabilities
186,670

 
(9,485
)
 
177,185

CAPITAL
 
 
 
 
 
Retained earnings
57,841

 
10,684

 
68,525

Noncontrolling interests
1,320,208

 
13,961

 
1,334,169



In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force) (“ASU No. 2016-15”) which amends the guidance in ASC Topic 230, Statement of Cash Flows, on the classification of certain cash receipts and payments in the statement of cash flows. The primary purpose of ASU No. 2016-15 is to reduce the diversity in practice that has resulted from the lack of consistent principles on this topic. The Company adopted ASU No. 2016-15 effective January 1, 2018 retrospectively with no material impact on the Company’s condensed consolidated financial statements.
In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of the Emerging Issues Task Force) (“ASU No. 2016-18”) which requires entities to show the changes in the total of cash, cash equivalents, restricted cash and restricted cash equivalents in the statement of cash flow. The Company adopted this guidance on January 1, 2018 retrospectively and as a result included restricted cash with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts presented on the condensed consolidated statement of cash flows.
The effect of the changes made to the Company’s condensed consolidated statement of cash flow line items from the adoption of ASU No. 2016-18 were as follows (in thousands):
 
Three Months Ended March 31, 2017
 
As Previously Reported
 
Adjustments due to ASU No. 2016-18
 
As Adjusted
CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
 
 
Decrease in restricted cash and certificates of deposits
$
(213
)
 
$
213

 
$

NET INCREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH
20,163

 
213

 
20,376

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH—Beginning of period
62,304

 
2,343

 
64,647

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH—End of period
82,467

 
2,556

 
85,023


In March 2017, the FASB issued ASU No. 2017-07, Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost (“ASU No. 2017-07”) which amends the guidance for the income statement presentation of the components of net periodic benefit cost for an entity’s sponsored defined benefit pension and other postretirement plans. ASU No. 2017-07 requires entities to report non-service-cost components of net periodic benefit cost outside of income from operations. The Company adopted ASU No. 2017-07 effective January 1, 2018, retrospectively, which resulted in reclassifying net periodic pension benefit of $23,000 from selling, general, and administrative expenses to other miscellaneous income on the condensed consolidated statement of operations for the three months ended March 31, 2017.
In May 2017, the FASB issued ASU No. 2017-09, Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting (“ASU No. 2017-09”). ASU No. 2017-09 provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in ASC Topic 718, Compensation - Stock Compensation. The Company adopted the amendments of ASU No. 2017-09 effective January 1, 2018 prospectively with no material impact on the Company’s condensed consolidated financial statements.