NOTE 3. IMPLEMENTED ACCOUNTING PRONOUNCEMENTS

Revenue from Contracts with Customers

The Company’s accounting for revenues is governed by two accounting standards. The majority of the Company’s revenues are considered lease related and are accounted for in accordance with Topic 840, Leases. Revenues determined to be non-lease related are accounted for in accordance with ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which was adopted by the Company on January 1, 2018. The Company utilized the modified retrospective method of adoption and there was no impact on its condensed consolidated financial statements, nor was there a cumulative effect of initially applying the new standard. The Company accounts for revenues when approval and commitment from both parties have been obtained, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable. The Company typically recognizes non-lease related revenues at a point in time because the customer does not simultaneously consume the benefits of the Company’s promised goods and services, or performance obligations, and obtain control when delivery and installation is complete. For contracts that have multiple performance obligations, the transaction price is allocated to each performance obligation in the contract based on the Company’s best estimate of the standalone selling prices of each distinct performance obligation in the contract. The standalone selling price is typically determined based upon the expected cost plus an estimated margin of each performance obligation.

The Company generally rents and sells to customers on 30 day payment terms. The Company does not typically offer variable payment terms, or accept non-monetary consideration. Amounts billed and due from the Company’s customers are classified as Accounts receivable on the Company’s consolidated balance sheet. For certain sales of modular buildings, progress payments from the customer are received during the manufacturing of new equipment, or the preparation of used equipment. The advance payments are not considered a significant financing component because the payments are used to meet working capital needs during the contract and to protect the Company from the customer failing to adequately complete their obligations under the contract. These contract liabilities are included in Deferred income on the Company’s consolidated balance sheet and totaled $11.0 million and $6.8 million at September 30, 2018 and December 31, 2017, respectively. Sales revenues totaling $2.1 million and $5.6 million were recognized during the three and nine months ended September 30, 2018, respectively, which were included in the contract liability balance at December 31, 2017. For certain modular building sales, the customer retains a small portion of the contract price until full completion of the contract, which results in revenue earned in excess of billings. These unbilled contract assets are included in Accounts receivable on the Company’s consolidated balance sheet and totaled $0.3 million and $2.0 million at September 30, 2018 and December 31, 2017, respectively.

Lease Revenues

Rental revenues from operating leases are recognized on a straight-line basis over the term of the lease for all operating segments. Rental billings for periods extending beyond period end are recorded as deferred income and are recognized in the period earned. Rental related services revenues are primarily associated with relocatable modular building and liquid and solid containment tanks and boxes leases. For modular building leases, rental related services revenues for modifications, delivery, installation, dismantle and return delivery are lease related because the payments are considered minimum lease payments that are an integral part of the negotiated lease agreement with the customer. These revenues are recognized on a straight-line basis over the term of the lease. Certain leases are accounted for as sales-type leases. For these leases, sales revenue and the related accounts receivable are recognized upon delivery and installation of the equipment and the unearned interest is recognized over the lease term on a basis which results in a constant rate of return on the unrecovered lease investment. Other revenues include interest income on sales-type leases and rental income on facility leases.

Non-Lease Revenues

Non-lease revenues are recognized in the period when control of the performance obligation is transferred, in an amount that reflects the consideration the Company expects to be entitled to receive in exchange for those goods or services. For liquid and solid containment solutions, portable storage containers and electronic test equipment, rental related services revenues for delivery and return delivery are considered non-lease revenues.

Sales revenues are typically recognized at a point in time, which occurs upon the completion of delivery, installation and acceptance of the equipment by the customer. Accounting for non-lease revenues requires judgment in determining the point in time the customer gains control of the equipment and the appropriate accounting period to recognize revenue.

Sales taxes charged to customers are reported on a net basis and are excluded from revenues and expenses.

The following table disaggregates the Company’s revenues by lease (within the scope of Topic 840) and non-lease revenues (within the scope of Topic 606) and the underlying service provided for the three and nine months ended September 30, 2018 and 2017:

(in thousands)	Mobile Modular		TRS- RenTelco		Adler Tanks		Enviroplex		Consolidated
Three Months Ended September 30,
2018
Leasing	$	52,036	$	23,206	$	18,942	$	—	$	94,184
Non-lease:
Rental related services		5,697		642		6,781		—		13,120
Sales		17,140		3,828		294		14,102		35,364
Other		18		461		—		—		479
Total non-lease		22,855		4,931		7,075		14,102		48,963
Total revenues	$	74,891	$	28,137	$	26,017	$	14,102	$	143,147

2017
Leasing	$	45,824	$	22,033	$	16,700	$	—	$	84,557
Non-lease:
Rental related services		5,528		623		6,255		—		12,406
Sales		17,533		4,186		461		15,781		37,961
Other		2		462		—		—		464
Total non-lease		23,063		5,271		6,716		15,781		50,831
Total revenues	$	68,887	$	27,304	$	23,416	$	15,781	$	135,388

Nine Months Ended September 30,
2018
Leasing	$	146,672	$	69,183	$	51,889	$	—	$	267,744
Non-lease:
Rental related services		11,226		1,816		17,674		—		30,716
Sales		30,694		14,179		629		19,831		65,333
Other		21		1,349		52		—		1,422
Total non-lease		41,941		17,344		18,355		19,831		97,471
Total revenues	$	188,613	$	86,527	$	70,244	$	19,831	$	365,215

2017
Leasing	$	133,184	$	63,106	$	46,629	$	—	$	242,919
Non-lease:
Rental related services		10,634		1,666		17,929		—		30,229
Sales		30,001		13,080		1,572		20,692		65,345
Other		9		1,305		—		—		1,314
Total non-lease		40,644		16,051		19,501		20,692		96,888
Total revenues	$	173,828	$	79,157	$	66,130	$	20,692	$	339,807

Customer returns of rental equipment prior to the end of the rental contract term are typically billed a cancellation fee, which is recorded as rental revenue in the period billed. Sales of new relocatable modular buildings, portable storage containers, electronic test equipment and related accessories and liquid and solid containment tanks and boxes not manufactured by the Company are typically covered by warranties provided by the manufacturer of the products sold. The Company typically provides limited 90-day warranties for certain sales of used rental equipment and one-year warranties on equipment manufactured by Enviroplex. Although the Company’s policy is to provide reserves for warranties when required for specific circumstances, the Company has not found it necessary to establish such reserves to date as warranty costs have not been significant.

The Company’s incremental cost of obtaining lease contracts, which consists of salesperson commissions, are deferred and amortized over the initial lease term for modular building leases. Incremental costs for obtaining a contract for all other operating segments are expensed in the period incurred because the lease term is typically less than 12 months.

Modifications to Share-based Payments

In May 2017, the FASB issued ASU No. 2017-09, Compensation, Stock Compensation (Topic 718). The amendments in this update provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. An entity should account for the effects of a modification unless all of the following are met: 1) the fair value of the modified award is the same as the fair value of the original award immediately before the original award is modified. If the modification does not affect any of the inputs to the valuation technique that the entity uses to value the award, the entity is not required to estimate the value immediately before and after the modification; 2) the vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified and; 3) the classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original award is modified. The amendments of this update became effective for the interim and annual periods beginning after December 15, 2017. The Company adopted the provisions of this guidance on January 1, 2018, which had no impact on the Company’s consolidated financial statements.