Recent Accounting Pronouncements

Recent Accounting Pronouncements - Adopted

On January 1, 2018, we adopted ASU 2014-09 “Revenue from Contracts with Customers (Topic 606).” Refer to Note 2, “Revenue” for information regarding our adoption of this guidance.

On January 1, 2018 we adopted ASU 2017-09 “Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting.” This update provided clarity and reduced both diversity in practice and cost and complexity when applying the guidance in Topic 718, Compensation - Stock Compensation, regarding a change to the terms or conditions of a share-based payment award. There was no initial impact that resulted from adoption of this guidance; it will be applied should a modification occur.

On January 1, 2018, we adopted ASU 2017-01 “Business Combinations (Topic 805): Clarifying the Definition of a Business.” This update clarified the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation.

Under previous guidance, substantially all of our property acquisitions were accounted for as business combinations with identifiable assets and liabilities measured at fair value, and acquisition related costs expensed as incurred.

With the adoption of ASU 2017-01, we expect that substantially all of our future property acquisitions will be accounted for as asset acquisitions. We allocate the purchase price of these properties on a relative fair value basis and capitalize direct acquisition related costs as part of the purchase price. Acquisitions costs that do not meet the criteria to be capitalized will be expensed as incurred and presented as General and administrative costs in our Consolidated Statements of Operations.

On January 1, 2018, we adopted ASU 2016-18 “Statement of Cash Flows (Topic 230): Restricted Cash.” This update required inclusion of restricted cash and restricted cash equivalents with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows.

Our restricted cash consists of amounts primarily held in deposit for tax, insurance and repair escrows held by lenders in accordance with certain debt agreements. Restricted cash is included as a component of Other assets, net on the Consolidated Balance Sheets. Changes in restricted cash are reported in our Consolidated Statements of Cash Flows as operating, investing or financing activities based on the nature of the underlying activity.

The following table reconciles our beginning-of-period and end-of-period balances of cash, cash equivalents and restricted cash for the periods shown (in thousands):



	September 30, 2018		December 31, 2017		September 30, 2017		December 31, 2016
Cash and cash equivalents	$	113,556	$	10,127	$	137,448	$	8,164
Restricted cash	15,538		13,382		19,943		17,149
Cash, cash equivalents and restricted cash	$	129,094	$	23,509	$	157,391	$	25,313

Recent Accounting Pronouncements - Not Yet Adopted

In June 2016, the FASB issued ASU 2016-13 “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” This update replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The amendments in this update are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. We are in the initial phases of evaluating how this guidance will impact our accounting policies regarding assessment of, and allowance for, loan losses.

In February 2016, the FASB issued ASU 2016-02 “Leases (Topic 842).” The core principle of this update is that a lessee should recognize the right of use (“ROU”) assets and liabilities in the Consolidated Balance Sheet that arise from lease agreements. The ROU asset represents our right to use an underlying asset for the term of the lease and the lease liability represents our obligation to make lease payments arising for the agreements. The accounting by a lessor is largely unchanged from that applied under previous GAAP. This update also requires significant additional disclosures about the amount, timing and uncertainty of cash flows from leases. The amendments in this update are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. We will adopt the amendment in the first quarter 2019 using the prospective approach. Our income from real property and rental home revenue streams is derived from rental agreements where we are the lessor. The new accounting standard narrowed the definition of initial direct costs which can be capitalized. The new standard defines initial direct costs as the incremental costs of signing a lease. Employee salaries, legal fees rendered prior to the execution of a lease, negotiation costs, advertising and other origination effort costs no longer meet the definition of initial direct costs. These costs will now be included in general and administrative costs in our Consolidated Statement of Operations. We are currently assessing the impact of our measurement of initial direct costs under the new standard definition. We are the lessee in other arrangements, primarily for our executive offices, ground leases at certain communities and certain equipment. For leases with a term greater than one year, a right of use asset and corresponding ROU liability are to be included on the Consolidated Balance Sheet. The ROU asset and liability is measured as the estimated present value of minimum lease payments at the commencement of the lease agreement and discounted by our incremental borrowing rate of a collateralized term loan. For existing leases the ROU asset and ROU liability will be measured at the remaining present value of the lease payments. The lease liability is amortized over the straight line method over the term of the lease agreement. Extension options on ROU assets are included if the option is reasonably certain to be exercised. Operating leases with a term of less than one year are recognized as a lease expense over the term of the lease, no asset or liability is recognized on the Consolidated Balance Sheet. Variable lease payments are excluded from the ROU asset and liability on the Consolidated Balance Sheet and are recognized in the period in which the obligation payment occurred and recognized as variable lease obligation payments on the Consolidated Statement of Operations. We are currently evaluating our inventory of such leases to determine which will require recognition of right of use assets, corresponding lease liabilities, and the related disclosure requirements thereto. We will elect certain practical expedients allowable by the ASU, including the expedient to forego separation of lease and non-lease component of lessee contracts, resulting in a gross-up effect on the balance sheet assets and liabilities. Additionally for all leases, we will elect the package of practical expedients, which permits the Company not to reassess expired or existing contracts containing a lease, the lease classification for expired or existing contracts, and measurement of initial direct costs for any existing leases.

In August 2018, the FASB issued ASU 2018-15 “Intangibles- Goodwill and Other- Internal-Use Software (Topic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract.” This update aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal use software. The amendments in this update are effective for fiscal years beginning after December 15, 2020. Early adoption of the amendments in this update is permitted, including adoption in any interim period, for all entities. We are currently evaluating the potential impact of adoption of this standard on our consolidated financial statements.