Description of the Business and Summary of Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2016

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”), as contained in the Financial Accounting Standards Board’s Accounting Standards Codification (“ASC”) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X, as promulgated by the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by GAAP for a complete set of financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.

Operating results for the three months ended March 31, 2016 are not necessarily indicative of the results that may be expected for the year ending December 31, 2016 due to, among other things, the seasonal nature of our business. We have historically experienced, and in the future expect to continue to experience, variability in our operating results on a quarterly basis in each of our three operating segments. Because many of our Florida homebuyers prefer to close on their new home purchases before the winter, the fourth quarter of each calendar year often produces a disproportionately large portion of our annual homebuilding revenues, income and cash flows. Activity in our realty brokerage operations is greater during the spring and summer months primarily because (i) buyers with families generally move when their children are out of school and (ii) Florida’s seasonal residents tend to make resale home purchases prior to leaving for the summer. These factors typically result in a larger portion of real estate services revenues, income and cash flows during the second and third quarters of each calendar year. In addition, many of our club members spend the winter months in Florida, thereby producing a disproportionately large portion of our annual amenities revenues and cash flows during that time period. Accordingly, revenues and operating results for our three operating segments may fluctuate significantly on a quarterly basis and we must maintain sufficient liquidity to meet short-term operating requirements. Although we believe that the abovementioned seasonal patterns will likely continue, they may be affected by economic conditions in the homebuilding and real estate industry and other interrelated factors. As a result, our operating results may not follow the historical trends.

The consolidated balance sheet as of December 31, 2015 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by GAAP for a complete set of financial statements. For further information, refer to our audited consolidated financial statements and accompanying notes in our Annual Report on Form 10-K for the year ended December 31, 2015 (the “2015 Form 10-K”) that was filed with the Securities and Exchange Commission on February 22, 2016.

The accompanying unaudited consolidated financial statements include the accounts of WCI Communities, Inc., its wholly-owned subsidiaries and certain joint ventures, which are not variable interest entities (“VIEs”), as defined under ASC 810, Consolidation (“ASC 810”), but over which the Company has the ability to exercise control. In accordance with ASC 323, Investments—Equity Method and Joint Ventures, the equity method of accounting is applied to those investments in joint ventures that are not VIEs where the Company has less than a controlling interest but either significant influence or substantive participating rights, as defined in ASC 810. All material intercompany balances and transactions have been eliminated in consolidation. Also, see below under “Recently Issued Accounting Pronouncements” for certain consolidation accounting guidance that the Company adopted on January 1, 2016.

The Company’s operations involve real estate development and sales and, as such, it is not possible to precisely measure the duration of its operating cycle. The accompanying consolidated balance sheets of the Company have been prepared on an unclassified basis in accordance with real estate industry practice.

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the Company’s consolidated financial statements and accompanying notes. Actual results could significantly differ from those estimates.

Recently Issued Accounting Pronouncements

Recently Issued Accounting Pronouncements

On May 28, 2014, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”). Among other things, ASU 2014-09 outlines a framework for a single comprehensive model that entities can use when accounting for revenue and supersedes most current revenue recognition guidance, including that which pertains to specific industries such as homebuilding (e.g., sales of real estate, etc.). The core principle of ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods or services in an amount that reflects the consideration to which the entity expects to be entitled in exchange for such goods and services. ASU 2014-09 also requires expanded quantitative and qualitative disclosures that will enable the users of an entity’s financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. As originally issued, public entities were required to adopt ASU 2014-09 during annual reporting periods beginning after December 15, 2016 and interim reporting periods during the year of adoption; however, on August 12, 2015, the FASB issued Accounting Standards Update 2015-14, Revenue from Contracts with Customers: Deferral of the Effective Date (“ASU 2015-14”), which delayed the new revenue standard’s effective date by one year. An entity may adopt ASU 2014-09 using either a full retrospective approach for each prior reporting period presented or a modified retrospective approach. Under the latter approach an entity will (i) recognize the cumulative effect of initially applying ASU 2014-09 as an adjustment to the opening balance of its retained earnings or accumulated deficit during the annual reporting period that includes the date of initial application of ASU 2014-09 and (ii) provide certain supplemental disclosures during reporting periods that include the date of initial application of ASU 2014-09. Early adoption of ASU 2014-09 was not initially permitted by public entities; however, ASU 2015-14 provides for early adoption by such entities but not before the original effective date of the new revenue standard. We are currently evaluating the impact of ASU 2014-09 on our consolidated financial statements and the method of adoption that the Company will apply.

On August 27, 2014, the FASB issued Accounting Standards Update 2014-15, Disclosure of Uncertainties About an Entity’s Ability to Continue as a Going Concern (“ASU 2014-15”). Among other things, ASU 2014-15 requires management of a public entity to perform interim and annual assessments of such public entity’s ability to continue as a going concern within one year of the date that its financial statements are issued. If conditions or events raise substantial doubt about an entity’s ability to continue as a going concern, then such entity must provide certain supplemental disclosures in its financial statements. ASU 2014-15 is effective for annual periods ending after December 15, 2016 and annual and interim periods thereafter. Early adoption of ASU 2014-15 is permitted. The adoption of ASU 2014-15 is not expected to have a material effect on our consolidated financial statements or any related disclosures.

On February 18, 2015, the FASB issued Accounting Standards Update 2015-02, Amendments to the Consolidation Analysis (“ASU 2015-02”), which made targeted amendments to GAAP’s existing consolidation guidance under both the variable interest and voting models. Among other things, ASU 2015-02 (i) introduces a separate analysis specific to limited partnerships and similar legal entities for assessing if the equity holders at risk lack decision-making rights and (ii) eliminates certain guidance under the consolidation voting model that pertains to limited partnerships and similar legal entities, including the rebuttable presumption that a general partner unilaterally controls such an entity and should therefore consolidate it. Public entities are required to adopt ASU 2015-02 during annual reporting periods that began after December 15, 2015 and interim reporting periods within those years. An entity  can  adopt  ASU 2015-02 using either a full retrospective approach for each prior reporting period presented or a modified retrospective approach. Early adoption of ASU 2015-02 is permitted. Effective January 1, 2016, we adopted ASU 2015-02 using the modified retrospective approach. The adoption of such new accounting standard did not have a material effect on our consolidated financial statements; however, it did result in the deconsolidation of an immaterial joint venture that was previously consolidated as part of our amenities segment.

On February 25, 2016, the FASB issued Accounting Standards Update 2016-02, Leases (“ASU 2016-02”), which, among other things, requires lessees to record lease liabilities and corresponding right-of-use assets on their balance sheets for substantially all lease arrangements (other than certain leases that meet the prescribed definition of a short-term lease). ASU 2016-02 provides for a dual expense recognition model that is dependent on the underlying lease’s classification as either operating or finance. Operating leases will result in straight-line expense and finance leases will yield a front-loaded expense pattern (similar to the current practices for operating and capital leases, respectively). Certain new quantitative and qualitative disclosures are also required in a lessee’s financial statements. Public entities are required to adopt ASU 2016-02 during annual reporting periods beginning after December 15, 2018 and interim reporting periods during the year of adoption. Early adoption of ASU 2016-02 is permitted. This new accounting standard must be adopted using a modified retrospective transition method, which includes application of the guidance at the beginning of the earliest comparative period presented in the related financial statements. We have not yet determined the impact of ASU 2016-02 on our consolidated financial statements or any related disclosures.

On March 30, 2016, the FASB issued Accounting Standards Update 2016-09, Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”), which simplifies several aspects of the accounting for stock-based transactions with employees. Among other things, ASU 2016-09: (i) requires that any excess tax benefits and deficiencies pertaining to stock-based compensation be included in the provision for income taxes in an entity’s income statement during the quarterly period when an award vests or is otherwise settled; (ii) eliminates the requirement to reclassify equity compensation excess income tax benefits from operating activities to financing activities within an entity’s statement of cash flows; and (iii) permits an entity to continue to estimate forfeitures of stock awards when accounting for stock-based compensation or account for such forfeitures when they occur. The adoption of ASU 2016-09 will also impact an entity’s computation of its earnings per share and diluted weighted average shares outstanding under the treasury stock method. Public entities are required to adopt ASU 2016-09 during annual reporting periods beginning after December 15, 2016 and interim reporting periods within those years. Each individual component of ASU 2016-09 has its own specific method of adoption but the sections of the pronouncement that will most affect the Company generally must be adopted on a prospective basis, other than (ii) above, which may be adopted prospectively or retrospectively. Early adoption of ASU 2016-09 is permitted. We plan to adopt ASU 2016-09 effective January 1, 2017 but we have not yet decided which transition method to use for (ii) above. The adoption of ASU 2016-09 is not expected to have a material effect on our consolidated financial statements or any related disclosures; however, our future income tax expense and effective income tax rate are expected to be more volatile because the effects from (i) above will result in discrete quarterly income tax charges or benefits in the affected quarter whereas such amounts are currently reflected as adjustments to additional paid-in capital under existing GAAP.