Summary of Significant Accounting Policies Level 1 (Notes)

3 Months Ended

Mar. 31, 2022

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. 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.

Certain reclassifications have been made to prior period amounts to conform to the current period financial statement presentation with no effect on our consolidated net income or cash flows.

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, 2021, 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:


	March 31, 2022		December 31, 2021
	(In thousands)
Cash and cash equivalents	$	300,556	$	268,626
Restricted cash (1)
Included in Other current assets	3,291		7,847
Included in Deferred charges and other assets, net	2,085		2,082
Total restricted cash	5,376		9,929
Total cash, cash equivalents, and restricted cash	$	305,932	$	278,555

(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:


	March 31, 2022
	Atneed Funeral		Atneed Cemetery		Miscellaneous		Current Portion of Notes		Total
	(In thousands)
Receivables	$	42,171	$	27,108	$	39,329	$	275	$	108,883
Reserve for credit losses	(3,467)		(1,876)		(345)		(161)		(5,849)
Receivables, net	$	38,704	$	25,232	$	38,984	$	114	$	103,034


	December 31, 2021
	Atneed Funeral		Atneed Cemetery		Miscellaneous		Current Portion of Notes		Total
	(In thousands)
Receivables	$	49,011	$	27,461	$	35,650	$	267	$	112,389
Reserve for credit losses	(3,597)		(2,231)		(344)		(166)		(6,338)
Receivables, net	$	45,414	$	25,230	$	35,306	$	101	$	106,051

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


	March 31, 2022		December 31, 2021
	(In thousands)
Notes receivable	$	8,846	$	8,684
Reserve for credit losses	(2,798)		(3,424)
Notes receivable, net	$	6,048	$	5,260

Long-term miscellaneous receivables	$	7,880	$	8,146
Reserve for credit losses	(1,119)		(1,153)
Long-term miscellaneous receivables, net	$	6,761	$	6,993

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 three months ended March 31, 2022:


	December 31, 2021		(Provision) benefit for Expected Credit Losses		Acquisitions (Divestitures), net		Write Offs		Recoveries		Effect of Foreign Currency and Other		March 31, 2022
	(In thousands)
Trade receivables:
Funeral	$	(3,597)	$	(1,708)	$	(99)	$	2,196	$	(365)	$	106	$	(3,467)
Cemetery	(2,231)		170		(48)		297		(63)		(1)		(1,876)
Total reserve for credit losses on trade receivables	$	(5,828)	$	(1,538)	$	(147)	$	2,493	$	(428)	$	105	$	(5,343)

Miscellaneous receivables:
Current	$	(344)	$	(1)	$	—	$	—	$	—	$	—	$	(345)
Long-term	(1,153)		34		—		—		—		—		(1,119)
Total reserve for credit losses on miscellaneous receivables	$	(1,497)	$	33	$	—	$	—	$	—	$	—	$	(1,464)

Notes receivable	$	(3,590)	$	6	$	—	$	625	$	—	$	—	$	(2,959)

At March 31, 2022, the amortized cost basis of our miscellaneous and notes receivables by year of origination was as follows:


	2022		2021		2020		2019		2018		Prior		Revolving Line of Credit		Total
	(In thousands)
Miscellaneous receivables:
Current	$	37,445	$	905	$	442	$	378	$	152	$	7	$	—	$	39,329
Long-term	1,173		3,175		1,440		1,618		443		31		—		7,880
Total miscellaneous receivables	$	38,618	$	4,080	$	1,882	$	1,996	$	595	$	38	$	—	$	47,209

Notes receivable	$	—	$	—	$	—	$	93	$	—	$	4,927	$	4,101	$	9,121

At March 31, 2022, 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	$	—	$	9	$	5	$	205	$	219	$	39,110	$	39,329
Long-term	—		—		—		—		—		7,880		7,880
Total miscellaneous receivables	$	—	$	9	$	5	$	205	$	219	$	46,990	$	47,209

Notes receivable	$	2	$	2	$	5	$	1,119	$	1,128	$	7,993	$	9,121

Recently Issued Accounting Standards

Business Combinations

In October 2021, the Financial Accounting Standards Board ("FASB") amended guidance to require that an acquirer recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606.

Generally, this new guidance will result in the Company recognizing contract assets and contract liabilities consistent with those reported by the acquiree immediately before the acquisition date. The standard will be effective for all acquisitions after December 31, 2022, although early adoption is permitted. We are still evaluating the impact of adoption on our consolidated results of operations, consolidated financial position, and cash flows.

Financial Instruments

In March 2022, the FASB amended guidance to require public companies to disclose the vintage year of receivable write-offs during the reporting period. This new disclosure is required for us beginning with our Form 10-Q for the three months ended March 31, 2023 and we will add the additional disclosures if write-offs during the period are material. This standard has no impact on our consolidated results of operations, consolidated financial position, and cash flows.