2.	Recently Issued Accounting Standards

Adoption of New Accounting Standards

Accounting Standards Update (“ASU”)

2018

02,

Income Statement – Reporting Comprehensive Income (Topic

220

)

(“ASU

2018

02”

). ASU

2018

allows for a reclassification from accumulated other comprehensive income to retained earnings for certain tax effects resulting from the Tax Cuts and Jobs Act that was signed into law in

December

2017

(the “Act”). ASU

2018

is effective for our interim and annual reporting periods beginning

January 1, 2018,

and is to be applied either (a) at the beginning of the period of adoption or (b) retrospectively to each period in which the income tax effects of the Act related to items remaining in accumulated other comprehensive income are recognized. On

January 1, 2018,

we adopted ASU

2018

by recognizing an adjustment to the opening balance of retained earnings for certain tax effects related to net unrealized gains on equity investments. The comparative information has

not

been restated and continues to be reported under the accounting standards in effect for the period. Please see the table below for a summary of all transition adjustments from adoption of new accounting guidance.

ASU

2016

18,

Statement of Cash Flows (Topic

230

): Restricted Cash

consensus of the FASB Emerging Issues Task Force

(“ASU

2016

18”

). ASU

2016

amends ASC

830,

Statement of Cash Flows

and requires restricted cash to be included with cash and cash equivalents when reconciling the beginning and ending amounts on the statements of cash flows. In certain states, we are restricted from using deposits received from our customers who enter into home sale contracts for general purposes unless we take measures to release state imposed restrictions on such deposits received from homebuyers, which

may

include posting blanket surety bonds. As a result, cash deposits with such restrictions are classified as restricted cash. On

January 1, 2018,

we adopted ASU

2016

using the retrospective transition method. The comparative information in our statements of cash flows has been restated and the impact from adoption of this guidance was

not

material to our statements of cash flows.

ASU

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

2016

15”

). ASU

2016

amends ASC

830,

Statement of Cash Flows

and clarifies guidance on the classification of certain cash receipts and payments in the statements of cash flows. On

January 1, 2018,

we adopted ASU

2016

using the retrospective transition method. There were

items in our comparative statements of cash flows that required restatement as a result of the adoption of ASU

2016

and the impact from adoption of this guidance was

not

material to our statements of cash flows.

ASU

2016

01,

Financial Instruments-Overall: Recognition and Measurement of Financial Assets and Financial Liabilities

(“ASU

2016

01”

). On

January 1, 2018,

we adopted ASU

2016

using a modified retrospective transition method. Prior to this amendment, our equity investments with readily determinable fair values were classified as available for sale with changes in fair value being reported through other comprehensive income. Under the amended standard, any changes in fair value of equity investments with readily determinable fair values are now recognized in net income. We adopted the changes from ASU

2016

by recognizing an adjustment to beginning retained earnings for our net unrealized gains/losses on equity investments with readily determinable fair values. The comparative information has

not

December 31, 2018

was a decrease of approximately

$1.6

million.

ASU

2014

09,

Revenue from Contracts with Customers

(“ASU

2014

09”

). In

May 2014,

ASU

2014

was issued which created ASC Topic

606,

Revenue from Contracts with Customers

(“ASC

606”

) and is a comprehensive new revenue recognition model. In addition, ASU

2014

amended ASC

340,

Other Assets and Deferred Costs

by adding ASC

340

40,

Other Assets and Deferred Costs – Contracts with Customers

(“ASC

340

40”

). On

January 1, 2018,

we adopted ASC

606

and ASC

340

using the modified retrospective transition method applied to contracts that were

not

completed as of

January 1, 2018.

We recognized the cumulative effect of initially applying ASC

606

and ASC

340

as an adjustment to the opening balance of retained earnings. The comparative information has

not

606

and ASC

340

40,

there was

not

a material impact to our consolidated balance sheets or consolidated statements of operations and comprehensive income.

As substantially all of our contracts are completed within a year, we do

not

disclose the value of unsatisfied performance obligations.

The cumulative effect of the changes made to our consolidated

January 1, 2018

balance sheet for the adoption of ASU

2018

02,

ASU

2016

and ASU

2014

were as follows:

	Balance at December 31, 2017		Adjustments due to ASU 2018-02			Adjustments due to ASU 2016-01			Adjustments due to ASU 2014-09			Balance at January 1, 2018
Balance Sheet	(Dollars in thousands)
Assets:
Homebuilding:
Housing completed or under construction	$	936,685	$	-		$	-		$	7,406		$	944,091
Property and equipment, net		26,439		-			-			25,270			51,709
Prepaid and other assets		75,666		-			-			(34,227	)		41,439
Deferred tax asset, net		41,480		-			-			(573	)		40,907

Financial Services:
Other assets		9,617		-			-			3,898			13,515

Stockholders' Equity:
Retained earnings		258,164		(860	)		4,852			1,774			263,930
Accumulated other comprehensive income		3,992		860			(4,852	)		-			-

Accounting Standards Issued But

Not

Yet Adopted

February 2016,

the Financial Accounting Standards Board (“FASB”) issued ASU

2016

02,

Leases

(“ASU

2016

02”

), which is codified in ASC

842,

Leases

(“ASC

842”

) and supersedes current lease guidance in ASC

840.

ASC

842

requires a lessee to recognize a right-of-use asset and a corresponding lease liability for substantially all leases. The lease liability will be equal to the present value of the remaining lease payments while the right-of-use asset will be similarly calculated and then adjusted for initial direct costs. In addition, ASC

842

expands the disclosure requirements to increase the transparency and comparability of the amount, timing and uncertainty of cash flows arising from leases. The Company will be adopting the new standard effective

January 1, 2019

using the modified retrospective transition method by recognizing a cumulative effect adjustment to the opening balance of retained earnings. We will

not

apply the standard to the comparative periods presented in the year of adoption. We will elect available practical expedients permitted under the guidance, which among other items, allow the Company to carry forward its historical lease classification and

not

reassess leases for the definition of lease under the new standard. Upon the adoption of ASC

842,

we do

not

expect to record a right-of-use asset and related lease liability for leases with an initial term of

months or less and we plan to account for lease and non-lease components as a single lease component. We are still assessing the potential impact that ASC

842

will have on our financial statements and disclosures, but we expect to recognize net homebuilding liabilities of

$33.6

million, primarily related to a lease liability of

$34.3

million, and net homebuilding assets of

$33.5

million, primarily related to a right-of-use asset of

$33.2

million. The cumulative effect adjustment to the opening balance of retained earnings is expected to be a decrease of

$0.1

million. The actual impact

may

differ from our estimate. We do

not

expect there will be a material impact to our consolidated statements of operations and comprehensive income or consolidated cash flows as a result of adoption of this new guidance.

June 2016,

the FASB issued ASU

2016

13,

Financial Instruments—Credit Losses (Topic

326

Measurement of Credit Losses on Financial Instruments

(“ASU

2016

13”

), which requires measurement and recognition of expected credit losses for financial assets held. The amendments in ASU

2016

eliminate the probable threshold for initial recognition of a credit loss in current GAAP and reflect an entity’s current estimate of all expected credit losses. ASU

2016

is effective for our interim and annual reporting periods beginning

January 1, 2020,

and is to be applied using a modified retrospective transition method. Earlier adoption is permitted. We do

not

plan to early adopt ASU

2016

and with our current holdings of financial instruments that are subject to credit losses, we do

not

believe adoption of this guidance will be material to our financial statements.