Summary of Significant Accounting Policies Level 1 (Notes)

9 Months Ended

Sep. 30, 2021

Significant Accounting Policies [Text Block]

Summary of Significant Accounting Policies

Principles of Consolidation and Basis of Presentation

Our consolidated financial statements include the accounts of Service Corporation International and all subsidiaries in which we hold a controlling financial interest. Intercompany balances and transactions have been eliminated in consolidation.

Our unaudited condensed consolidated financial statements also include the accounts of the merchandise and service trusts and cemetery perpetual care trusts in which we have a variable interest and are the primary beneficiary. We have retained the specialized industry accounting principles when consolidating the trusts. Our trusts are variable interest entities, for which we have determined that we are the primary beneficiary as we absorb a majority of the losses and returns associated with these trusts. Although we consolidate the trusts, it does not change the legal relationships among the trusts, us, or our customers. The customers are the legal beneficiaries of these trusts; therefore, their interests in these trusts represent a liability to us.

Our interim condensed consolidated financial statements are unaudited but include all adjustments, consisting of normal recurring accruals and any other adjustments, which management considers necessary for a fair statement of our results for these periods. Our unaudited condensed consolidated financial statements have been prepared in a manner consistent with the accounting policies described in our Annual Report on Form 10-K for the year ended December 31, 2020, unless otherwise disclosed herein, and should be read in conjunction therewith. The accompanying year-end Condensed Consolidated Balance Sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America. Operating results for interim periods are not necessarily indicative of the results that may be expected for the full year period.

Use of Estimates in the Preparation of Financial Statements

The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that may affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. As a result, actual results could differ from these estimates.

Cash, Cash Equivalents, and Restricted Cash

We consider all highly liquid investments with an original maturity of three months or less to be cash equivalents. The carrying amounts of our cash and cash equivalents approximate fair value due to the short-term nature of these instruments.

The components of cash, cash equivalents, and restricted cash were as follows:


	September 30, 2021		December 31, 2020
	(In thousands)
Cash and cash equivalents	$	406,947	$	230,857
Restricted cash (1)
Included in Other current assets	11,521		5,573
Included in Deferred charges and other assets, net	971		2,180
Total restricted cash	12,492		7,753
Total cash, cash equivalents, and restricted cash	$	419,439	$	238,610

(1) Restricted cash in both periods primarily consists of proceeds from divestitures deposited into escrow accounts under IRS code section 1031 and collateralized obligations under certain insurance policies.

Receivables, net

The components of Receivables, net in our unaudited Condensed Consolidated Balance Sheet were as follows:


	September 30, 2021
	Atneed Funeral		Atneed Cemetery		Miscellaneous		Current Portion of Notes		Total
	(In thousands)
Receivables	$	48,537	$	34,325	$	22,557	$	380	$	105,799
Reserve for credit losses	(3,522)		(2,223)		126		(184)		(5,803)
Receivables, net	$	45,015	$	32,102	$	22,683	$	196	$	99,996


	December 31, 2020
	Atneed Funeral		Atneed Cemetery		Miscellaneous		Current Portion of Notes		Total
	(In thousands)
Receivables	$	56,745	$	22,559	$	18,545	$	1,121	$	98,970
Reserve for credit losses	(3,752)		(1,933)		144		(490)		(6,031)
Receivables, net	$	52,993	$	20,626	$	18,689	$	631	$	92,939

Additionally, included in Deferred charges and other assets, net were long-term miscellaneous receivables, net and notes receivable, net as follows:


	September 30, 2021		December 31, 2020
	(In thousands)
Notes receivable	$	9,541	$	12,389
Reserve for credit losses	(3,990)		(5,957)
Notes receivable, net	$	5,551	$	6,432

Long-term miscellaneous receivables	$	7,304	$	6,515
Reserve for credit losses	(1,054)		(945)
Long-term miscellaneous receivables, net	$	6,250	$	5,570

The following table summarizes the activity in our reserve for credit losses by portfolio segment, excluding preneed receivables which are presented in Note 3, for the nine months ended September 30, 2021:


	January 1, 2021		Provision for Expected Credit Losses		Acquisitions (Divestitures), net		Write Offs		Recoveries		Effect of Foreign Currency		September 30, 2021
	(In thousands)
Trade receivables:
Funeral	$	(3,752)	$	(3,554)	$	(17)	$	4,871	$	(1,345)	$	275	$	(3,522)
Cemetery	(1,933)		(970)		—		802		(122)		—		(2,223)
Total reserve for credit losses on trade receivables	$	(5,685)	$	(4,524)	$	(17)	$	5,673	$	(1,467)	$	275	$	(5,745)

Miscellaneous receivables:
Current	$	144	$	(18)	$	—	$	—	$	—	$	—	$	126
Long-term	(945)		(109)		—		—		—		—		(1,054)
Total reserve for credit losses on miscellaneous receivables	$	(801)	$	(127)	$	—	$	—	$	—	$	—	$	(928)

Notes receivable	$	(6,447)	$	306	$	—	$	1,967	$	—	$	—	$	(4,174)

At September 30, 2021, the amortized cost basis of our miscellaneous and notes receivables by year of origination was as follows:


	2021		2020		2019		2018		2017		Prior		Revolving Line of Credit		Total
	(In thousands)
Miscellaneous receivables:
Current	$	21,320	$	524	$	459	$	222	$	29	$	3	$	—	$	22,557
Long-term	2,718		1,771		1,945		734		122		14		—		7,304
Total miscellaneous receivables	$	24,038	$	2,295	$	2,404	$	956	$	151	$	17	$	—	$	29,861

Notes receivable	$	—	$	—	$	—	$	135	$	—	$	5,051	$	4,735	$	9,921

At September 30, 2021, the payment status of our miscellaneous and notes receivables was as follows:


	Past Due
	<30 Days		30-90 Days		90-180 Days		>180 Days		Total		Current		Total
	(In thousands)
Miscellaneous receivables:
Current	$	—	$	—	$	5	$	201	$	206	$	22,351	$	22,557
Long-term	—		—		—		—		—		7,304		7,304
Total miscellaneous receivables	$	—	$	—	$	5	$	201	$	206	$	29,655	$	29,861

Notes receivable	$	1	$	3	$	119	$	1,116	$	1,239	$	8,682	$	9,921

Recently Issued Accounting Standards

Reference Rate Reform

In March 2020, the FASB issued "Reference Rate Reform" to provide optional guidance for a limited time to ease the potential burden in accounting for reference rate reform. The new guidance provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts and hedging relationships that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform. These amendments are effective immediately and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022. We currently have no hedging relationships and are evaluating our contracts and the optional expedients provided by the new standard.