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ASC 606

Understanding the Actuarial and Accounting Impacts

of the New Revenue Recognition Standard

November 15, 2016

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Webinar Disclaimer

The information contained herein is general in nature and is notintended, and should not be construed, as legal, accounting, or taxadvice or opinion provided by Continuing Care Actuaries and Hertzbach& Co to the user. The user also is cautioned that this material may not beapplicable to, or suitable for, the user’s specific circumstances or needs,and may require consideration of non-tax and other tax factors if anyaction is to be contemplated. The user should contact his or her taxprofessional prior to taking any specific action based upon thisinformation. Continuing Care Actuaries and Hertzbach & Co assumes noobligation to inform the user of any changes in tax laws or other factorsthat could affect the information contained herein.

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@HertzbachCPAs

P r o v i d i n g a c c o u n t i n g a n d c o n s u l t i n g s e r v i c e s t o t h e h e a l t h c a r e c o m m u n i t y

f o r o v e r 3 5 y e a r s .h e r t z b a c h . c o m / h e a l t h c a r e

Services We Provide:Audit/Review/Compilations

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Who We Serve:Skilled Nursing Facilities

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Our firm is staffed by a highly skilled team of professionals and our

extensive involvement in today’s healthcare field enables us to meet the

needs of healthcare specialists.

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Speaker Introduction

Mark Steinberg, CPA, CVA

Mark is a Partner with Hertzbach & Company where he is theDirector of the Health Care Industry Group, Director of AssuranceServices, and a member of the Management Committee. He has 25years of experience serving the senior living industry providingservices in the areas of audit, tax, reimbursement consulting,budgets and projections, and business valuations,. His clientsinclude continuing care retirement communities, skilled nursingfacilities, nonprofits, residential treatment centers, and serviceproviders for the developmentally disabled. Mark is a certifiedpublic accountant as well as a certified valuation analyst. He is amember of the American Institute of Certified Public Accounts,Maryland Association of Certified Public Accountants, NationalAssociation of Certified Valuation Analysts, and the Association ofCertified Fraud Examiners. He has spoken on a variety topicsrelated to senior living for Leading Age, Health Facilities Associationof Maryland, and Maryland Association of Certified PublicAccounts. He has authored articles for publications on a variety oftopics impacting senior living providers.

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What is ASU 2014-09Revenue Recognition from Contracts with Customers?

� In May of 2014, the FASB and IASB issued theirconverged standard on revenue recognition

� The new standard creates significant change tohow revenue from contracts with customers isrecognized

� All industries will be affected by the new standard

� The AICPA has created a task force for the healthcare industry to identify implementation issues andprovide guidance on practical implementation

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ASU 2014-09 – The Basics

� What is the standard trying to accomplish?

Recognize revenue to depict the transfer of

promised goods or services to customers in

an amount that reflects the consideration

to which the entity expects to be entitled

in exchange for those goods or services

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ASU 2014-09 – The Basics

Five Step Revenue Model

1. Identify the contract with a customer

2. Identify the performance obligations in the contract

3. Determine the transaction price

4. Allocate the transaction price to the performance obligations

5. Recognize revenue when (or as) each performance obligation is satisfied

Effective Date� Public companies and those with conduit debt - Periods beginning

after December 15, 2017

� Nonpublic entities - Periods beginning after December 15, 2018

� Debt that is issued through a municipality is considered public debtfor purposes of the effective date requirements

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So How Does this Effect CCRC’s

“Given the complex, long-term nature of continuing care contracts, CCRC’s are expected to be among the health care organizations whose revenue recognition

is most significantly affected by the new guidance”

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Identify the Contract

� Customer

• A party that has contracted to obtain goods or services that are an output of an entity’s ordinary activities

� Contract

• Agreement between two or more parties that creates enforceable rights and obligations

Elements that must be present

1. Approved contract

2. Identify each party’s rights

3. Identify payment terms

4. Commercial substance

5. Probability all consideration will be collected

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CCRC Contracts

� Contracts span several years

� Include payment of a combination of monthly fees plus a one-time upfront entrance fee

� Entrance fees typically paid in advance

� Offer multiple types of contracts

� Large number of services covered under the contract

� Declining refunds

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Performance Obligations

� A performance obligation is a promise in a contract to transfer a distinct good or service (or a series of distinct goods or services)

• You must account for goods or services separately if they are distinct, which includes both of the following conditions:

o The customer can benefit from the good or service on its own or together with other resources readily available to the customer

o Distinct within the context of the contract, because the good or service is separately identifiable from other goods or services

• If a promised service is not distinct it should be combined with other promised goods or services in a contract as a single performance obligation

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Performance Obligations

Issues for CCRCs

� CCRC contracts are a complex bundle of rights and obligations that combine aspects of leasing, hospitality, and health care

� A single contract might be viewed as having thousands of individual performance obligations over multiple years

� Many of these performance obligations are interrelated

� How should these obligations be grouped

� Consider grouping the performance obligations as independent care, assisted living, and skilled nursing care

� The task force is discussing the matter and should be providing additional guidance

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Determine the Transaction Price

� This is the amount of consideration to which an entity expects to be entitled to from a customer

Issues for CCRCs

� Aggregation of fees – Likely will need to aggregate the entrance fee and monthly fees together when estimating the transaction price

� Contracts where refundability of entrance fees diminish over time

� Fees refundable only from proceeds of re-occupancy

• No longer allowed to be deferred and amortized into income over the contract’s term.

• Such amounts must now be reported as a liability

� Time value of money – Is the entrance fee considered a loan

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Allocation of Price / Revenue Recognition

� Must allocate the transaction price to performance obligations within the contract based on standalone selling prices

� Recognize revenue as performance obligations are satisfied by transferring control to the customer

Issues for CCRCs

� Can the allocation be applied to a portfolio of contracts? Yes

� Can the revenue be recognized over a period of years? Yes

� How to treat differences between the estimated transaction price and the actual

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Transition to the New Standard

Full Retrospective Method

� Cumulative effect adjustment is applied to the opening balance of net assets as of the earliest year presented in the financial statements

� Applies to all existing contracts

Modified Retrospective Method

� Cumulative effect adjustment is applied to the year of adoption and the prior year (if shown) is not restated

� Applies to all existing contracts

� Requires additional disclosures

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What Should You Be Doing

� Develop a implementation plan and assign a leader

� Train the staff

� Continue to monitor new guidance from the AICPA Health Care Revenue Recognition Task Force

� Evaluate current contracts

� Identify potential IT system/software application changes needed

� Run schedule of the revenue recognition calculation under the new standard parallel to the old standard

� Educate your Board of Directors

� Choose an implementation method

� Implement

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About Continuing Care Actuaries

�A leading provider of actuarial consulting services to the CCRC industry.

�Our actuaries have provided work to over 450 CCRC’s.

�Our actuaries are credentialed by the Society of Actuaries, the Conference of Consulting Actuaries, and the American Academy of Actuaries.

�Possess one of the largest databases of CCRC residents

�Currently work with approximately 75% of the operational At Home programs.

�Our self-insured clients include governmental entities, employee and retiree organizations, and private employers.

�Expertise in self-funding health plans and stop-loss coverage.

�Offer consultative advice on the stop loss structure, contracts, terms/conditions and pricing. Lasers, aggregating specific arrangements, terminal liability options, return of surplus and more are all facets of stop loss that require your consideration and a professional review.

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Speaker Introduction

Brad Paulis, ASA, FCA, MAAA

Brad is a partner with Continuing Care Actuaries and has overtwenty-five years of experience in providing actuarial consultingservices for the health care industry, with an emphasis in Life PlanCommunities, Life Care at Home and Long Term Care. Bradcurrently provides actuarial services to numerous Life PlanCommunities and Life Care at Home programs throughout the year,focusing on the long-term sustainability and mitigating against theinherent pricing risks of entrance fee contracts. Brad is an Associateof the Society of Actuaries, a Fellow of the Conference ofConsulting Actuaries, and a Member of the American Academy ofActuaries. Brad is a frequent guest speaker at the AnnualLeadingAge Conference.

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ASC 606 Review Process

�ASC 606• 156 - Total number of identified Implementation issues

• Industry Task Force / CCRC Sub-Groupo 3 implementation issues related to CCRCs

• AICPA Revenue Recognition Working Group• Financial Reporting Executive Committee• FASB’s Transition Resource Group• Posted for exposure to get public comments• Re-submitted to two committees• Final guide published

• 0 CCRC exposures posted for public comments�Presentation based on currently available information

• Details on methodology will change• Numbers present scope of change

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Monthly Service Fee @ Entry $3,000

Stand Alone Market RatesIL per month $3,988 AL per day 142 SNF per day 285

Entrance Fee $300,000 Refundability 0%

Fiscal Year End December 31Date of Birth 1/1/1940 Date of Entry 1/1/2015

IL Life Expectancy 10.5 yrsAL Life Expectancy 1.0 yrsSNF Life Expectancy 1.2 yrsTotal 12.7 yrs

Demographic and Financial AssumptionsSample Calculation – Single Female – Age 75Type A Lifecare ContractBased on Life Expectancy Upon Entry – 12/31/15 Development

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Expected Cash Flows

Entrance Fee Monthly FeesDeferred Revenue IL AL SNF Total

2015 $300,000 $35,877 $335,877 ---> reflects actual experience2016 37,080 37,080 2017 38,192 38,192 2018 39,338 39,338 2019 40,518 40,518 2020 41,734 41,734 2021 42,986 42,986 2022 44,275 44,275 reflects life expectancy at age 762023 45,604 45,604 2024 46,972 46,972 2025 44,299 4,082 48,381 2026 46,184 3,648 49,832 2027 51,327 51,327 2028 7,988 7,988

$300,000 $456,875 $50,267 $62,964 $870,106

Total Expected Transaction Price $870,106

Life Expectancy IL AL SNF Total75 10.5 yrs 1.0 yrs 1.2 yrs 12.7 yrs76 9.9 yrs 1.0 yrs 1.2 yrs 12.1 yrs

Sample Calculation – Single Female – Age 75Type A Lifecare ContractBased on Life Expectancy Upon Entry – 12/31/15 Development

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Stand Alone Market Rates

IL AL SNF Total2015 $51,661 $51,661 ---> reflects actual experience2016 53,394 53,394 2017 54,995 54,995 2018 56,645 56,645 2019 58,345 58,345 2020 60,095 60,095 2021 61,898 61,898 2022 63,755 63,755 reflects life expectancy at age 762023 65,667 65,667 2024 67,637 67,637 2025 63,788 6,085 69,873 2026 68,835 10,874 79,709 2027 153,000 153,000 2028 23,812 23,812

$657,880 $74,919 $187,687 $920,486

Distribution 71.5% 8.1% 20.4%


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Allocation Based on Stand Alone Market Rates

Total Expected Transaction Price $870,106

IL AL SNF

Distribution 71.5% 8.1% 20.4%

Allocation $621,873 $70,819 $177,414


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Redevelopment of Cash Flows Based on Allocation

Actual Revenue RecognizedIL AL SNF MSF's Paid

Unamortized Revenue

2015 $48,833 $35,877 $12,957 $287,043 2016 50,471 37,080 2017 51,985 38,192 2018 53,545 39,338 2019 55,151 40,518 2020 56,806 41,734 2021 58,510 42,986 2022 60,265 44,275 2023 62,073 45,604 2024 63,935 46,972 2025 60,297 5,752 48,381 2026 65,067 10,279 49,832 2027 144,626 51,327 2028 22,509 7,988

$621,873 $70,819 $177,414 $570,106

71.5% 8.1% 20.4%


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Life Expectancies

Entry Age

Life Expectancy

Projected Terminal Age

75 12.7 87.7

80 10.0 90.0

85 7.8 92.8

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Old Revenue Recognition

EF MSFTotal

Revenue2015 $25,581 $35,877 $61,458 2016 24,743 37,080 61,823 2017 23,613 38,192 61,805 2018 22,527 39,338 61,865 2019 21,361 40,518 61,879 2020 20,213 41,734 61,947 2021 18,903 42,986 61,889 2022 17,607 44,275 61,882 2023 16,270 45,604 61,874 2024 14,945 46,972 61,917 2025 22,638 48,381 71,019 2026 35,407 49,832 85,239 2027 36,193 36,713 72,906

$300,000 $547,502 $847,503

Sample Calculation – Single Female – Age 75Type A Lifecare ContractBased on Life Expectancy Upon Entry

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New Revenue Recognition

EF MSFTotal

Revenue2015 $12,957 $35,877 $48,833 2016 12,912 37,080 49,992 2017 12,782 38,192 50,975 2018 12,550 39,338 51,888 2019 12,286 40,518 52,804 2020 11,903 41,734 53,637 2021 11,510 42,986 54,496 2022 11,020 44,275 55,295 2023 10,525 45,604 56,129 2024 9,932 46,972 56,904 2025 12,340 48,381 60,721 2026 24,002 49,832 73,834 2027 145,281 36,713 181,993

$300,000 $547,502 $847,502


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Comparison of Amortization Revenue Recognized

Old New Difference % Change2015 $25,581 $12,957 ($12,624) -49.4%2016 24,743 12,912 (11,831) -47.8%2017 23,613 12,782 (10,831) -45.9%2018 22,527 12,550 (9,977) -44.3%2019 21,361 12,286 (9,075) -42.5%2020 20,213 11,903 (8,310) -41.1%2021 18,903 11,510 (7,393) -39.1%2022 17,607 11,020 (6,587) -37.4%2023 16,270 10,525 (5,745) -35.3%2024 14,945 9,932 (5,013) -33.5%2025 22,638 12,340 (10,298) -45.5%2026 35,407 24,002 (11,405) -32.2%2027 36,193 145,281 109,088 301.4%

$300,000 $300,000 $0


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Comparison of Total Revenue Recognized

Old New Difference % Change2015 $61,458 $48,833 ($12,624) -20.5%2016 61,823 49,992 (11,831) -19.1%2017 61,805 50,975 (10,831) -17.5%2018 61,865 51,888 (9,977) -16.1%2019 61,879 52,804 (9,075) -14.7%2020 61,947 53,637 (8,310) -13.4%2021 61,889 54,496 (7,393) -11.9%2022 61,882 55,295 (6,587) -10.6%2023 61,874 56,129 (5,745) -9.3%2024 61,917 56,904 (5,013) -8.1%2025 71,019 60,721 (10,298) -14.5%2026 85,239 73,834 (11,405) -13.4%2027 72,906 181,993 109,088 149.6%

$847,503 $847,503 $0


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Old New Difference % Change2015 $25,581 $12,957 ($12,624) -49.4%2016 24,743 12,912 (11,831) -47.8%2017 23,613 12,782 (10,831) -45.9%2018 22,527 12,550 (9,977) -44.3%2019 34,504 17,564 (16,940) -49.1%2020 63,813 32,144 (31,669) -49.6%2021 105,220 199,092 93,872 89.2%

$300,000 $300,000 $0

Sample Calculation – Single Female – Age 75Type A Lifecare ContractBased on 4.5/1.0/1.2

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Old New Difference % Change2015 $25,581 $12,957 ($12,624) -49.4%2016 24,743 12,912 (11,831) -47.8%2017 23,613 12,782 (10,831) -45.9%2018 22,527 12,550 (9,977) -44.3%2019 21,361 12,286 (9,075) -42.5%2020 20,213 11,903 (8,310) -41.1%2021 18,903 11,510 (7,393) -39.1%2022 17,607 11,020 (6,587) -37.4%2023 16,270 10,525 (5,745) -35.3%2024 14,945 9,932 (5,013) -33.5%2025 13,523 9,346 (4,177) -30.9%2026 12,164 8,724 (3,440) -28.3%2027 10,836 8,076 (2,760) -25.5%2028 9,589 7,481 (2,108) -22.0%2029 8,350 6,830 (1,520) -18.2%2030 7,222 6,169 (1,053) -14.6%2031 9,505 6,914 (2,591) -27.3%2032 12,322 16,304 3,982 32.3%2033 10,726 111,779 101,053 942.1%

$300,000 $300,000 $0

Sample Calculation – Single Female – Age 75Type A Lifecare ContractBased on 16.5/1.0/1.2

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Sample Contract Assumptions

EF MSF

Type AHigh EF/Low MSF

$300,000 $3,000

Type ALow EF/High MSF

225,000 3,800

Type CHigh EF/Low MSF

265,000 2,400

Type CLow EF/High MSF

220,000 3,000

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Entrance Fee Amortization Comparison

Old New Difference % Change1991 $65,537 $35,482 ($30,055) -45.9%1992 $858,913 $651,759 ($207,154) -24.1%1993 $1,556,050 $789,179 ($766,871) -49.3%1994 $1,918,815 $1,122,435 ($796,380) -41.5%1995 $2,881,334 $2,452,919 ($428,415) -14.9%1996 $2,290,818 $1,775,819 ($514,999) -22.5%1997 $3,012,197 $2,916,498 ($95,699) -3.2%1998 $3,304,910 $2,570,353 ($734,557) -22.2%1999 $3,004,888 $2,414,701 ($590,187) -19.6%2000 $3,706,990 $3,568,201 ($138,789) -3.7%2001 $4,397,795 $3,858,720 ($539,075) -12.3%2002 $4,688,785 $3,912,137 ($776,648) -16.6%2003 $5,393,948 $5,045,484 ($348,464) -6.5%2004 $4,980,938 $4,144,362 ($836,576) -16.8% Min Difference (years 11-25): -19.7%2005 $6,883,746 $6,630,696 ($253,050) -3.7% Max Difference (years 11-25): 9.6%2006 $6,200,509 $4,977,569 ($1,222,940) -19.7%2007 $6,601,189 $6,959,111 $357,922 5.4%2008 $6,544,094 $6,708,732 $164,638 2.5%2009 $6,218,177 $6,103,189 ($114,988) -1.8%2010 $6,220,706 $5,365,034 ($855,672) -13.8%2011 $7,030,489 $7,178,645 $148,156 2.1%2012 $6,206,432 $6,285,770 $79,338 1.3%2013 $6,063,460 $5,608,116 ($455,344) -7.5%2014 $6,212,257 $6,810,409 $598,152 9.6%2015 $6,730,743 $6,353,689 ($377,054) -5.6%

Type A – High EF/Low MSF

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Old New Difference % Change1991 $65,537 $35,482 ($30,055) -45.9%1992 $858,913 $651,759 ($207,154) -24.1%1993 $1,556,050 $789,179 ($766,871) -49.3%1994 $1,918,815 $1,122,435 ($796,380) -41.5%1995 $2,881,334 $2,452,919 ($428,415) -14.9%1996 $2,290,818 $1,775,819 ($514,999) -22.5%1997 $3,012,197 $2,916,498 ($95,699) -3.2%1998 $3,304,910 $2,570,353 ($734,557) -22.2%1999 $3,004,888 $2,414,701 ($590,187) -19.6%2000 $3,706,990 $3,568,201 ($138,789) -3.7%2001 $4,397,795 $3,858,720 ($539,075) -12.3%2002 $4,688,785 $3,912,137 ($776,648) -16.6%2003 $5,393,948 $5,045,484 ($348,464) -6.5%2004 $4,980,938 $4,144,362 ($836,576) -16.8% Min Difference (years 11-25): -19.7%2005 $6,883,746 $6,630,696 ($253,050) -3.7% Max Difference (years 11-25): 9.6%2006 $6,200,509 $4,977,569 ($1,222,940) -19.7%2007 $6,601,189 $6,959,111 $357,922 5.4%2008 $6,544,094 $6,708,732 $164,638 2.5%2009 $6,218,177 $6,103,189 ($114,988) -1.8%2010 $6,220,706 $5,365,034 ($855,672) -13.8%2011 $7,030,489 $7,178,645 $148,156 2.1%2012 $6,206,432 $6,285,770 $79,338 1.3%2013 $6,063,460 $5,608,116 ($455,344) -7.5%2014 $6,212,257 $6,810,409 $598,152 9.6%2015 $6,730,743 $6,353,689 ($377,054) -5.6%

Type A – High EF/Low MSF

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Old New Difference % Change1991 $49,026 $21,703 ($27,323) -55.7%1992 $643,111 $427,741 ($215,370) -33.5%1993 $1,164,496 $488,404 ($676,092) -58.1%1994 $1,436,240 $717,762 ($718,478) -50.0%1995 $2,154,800 $1,745,794 ($409,006) -19.0%1996 $1,715,460 $1,230,769 ($484,691) -28.3%1997 $2,255,939 $2,143,086 ($112,853) -5.0%1998 $2,473,130 $1,787,024 ($686,106) -27.7%1999 $2,250,767 $1,681,887 ($568,880) -25.3%2000 $2,775,297 $2,564,097 ($211,200) -7.6%2001 $3,289,484 $2,756,277 ($533,207) -16.2%2002 $3,505,948 $2,800,584 ($705,364) -20.1%2003 $4,035,871 $3,669,403 ($366,468) -9.1%2004 $3,725,965 $2,954,073 ($771,892) -20.7% Min Difference (years 11-25): -23.1%2005 $5,150,375 $4,932,701 ($217,674) -4.2% Max Difference (years 11-25): 9.3%2006 $4,639,682 $3,565,822 ($1,073,860) -23.1%2007 $4,940,581 $5,237,746 $297,165 6.0%2008 $4,896,922 $4,967,250 $70,328 1.4%2009 $4,649,583 $4,472,247 ($177,336) -3.8%2010 $4,650,924 $3,873,406 ($777,518) -16.7%2011 $5,258,261 $5,371,819 $113,558 2.2%2012 $4,643,244 $4,719,362 $76,118 1.6%2013 $4,536,875 $4,177,005 ($359,870) -7.9%2014 $4,649,263 $5,083,759 $434,496 9.3%2015 $5,036,465 $4,662,431 ($374,034) -7.4%

Type A – Low EF/High MSF

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Old New Difference % Change1991 $57,241 $64,020 $6,779 11.8%1992 $752,404 $944,683 $192,279 25.6%1993 $1,359,591 $1,353,601 ($5,990) -0.4%1994 $1,678,216 $1,786,600 $108,384 6.5%1995 $2,509,526 $2,646,446 $136,920 5.5%1996 $2,007,967 $2,191,025 $183,058 9.1%1997 $2,643,306 $2,819,292 $175,986 6.7%1998 $2,888,308 $3,041,613 $153,305 5.3%1999 $2,638,713 $2,865,175 $226,462 8.6%2000 $3,247,776 $3,649,291 $401,515 12.4%2001 $3,835,966 $4,088,318 $252,352 6.6%2002 $4,082,214 $3,952,482 ($129,732) -3.2%2003 $4,710,344 $4,806,073 $95,729 2.0%2004 $4,344,863 $4,306,944 ($37,919) -0.9% Min Difference (years 11-25): -5.8%2005 $6,011,324 $5,754,505 ($256,819) -4.3% Max Difference (years 11-25): 11.0%2006 $5,418,696 $5,102,534 ($316,162) -5.8%2007 $5,774,337 $6,192,150 $417,813 7.2%2008 $5,718,290 $6,345,305 $627,015 11.0%2009 $5,413,586 $5,856,301 $442,715 8.2%2010 $5,412,845 $5,245,497 ($167,348) -3.1%2011 $6,129,309 $6,353,488 $224,179 3.7%2012 $5,417,223 $5,640,908 $223,685 4.1%2013 $5,296,257 $5,029,344 ($266,913) -5.0%2014 $5,432,583 $5,995,487 $562,904 10.4%2015 $5,880,247 $5,974,128 $93,881 1.6%

Type C – High EF/Low MSF

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Old New Difference % Change1991 $47,345 $52,391 $5,046 10.7%1992 $622,817 $769,179 $146,362 23.5%1993 $1,124,366 $1,101,580 ($22,786) -2.0%1994 $1,388,271 $1,458,964 $70,693 5.1%1995 $2,073,054 $2,162,364 $89,310 4.3%1996 $1,662,281 $1,796,800 $134,519 8.1%1997 $2,189,140 $2,317,318 $128,178 5.9%1998 $2,389,027 $2,487,076 $98,049 4.1%1999 $2,186,082 $2,346,119 $160,037 7.3%2000 $2,688,618 $2,998,932 $310,314 11.5%2001 $3,170,685 $3,371,751 $201,066 6.3%2002 $3,372,268 $3,275,378 ($96,890) -2.9%2003 $3,895,325 $3,975,190 $79,865 2.1%2004 $3,591,685 $3,569,935 ($21,750) -0.6% Min Difference (years 11-25): -5.8%2005 $4,971,305 $4,748,650 ($222,655) -4.5% Max Difference (years 11-25): 11.2%2006 $4,482,279 $4,222,049 ($260,230) -5.8%2007 $4,777,811 $5,170,414 $392,603 8.2%2008 $4,729,810 $5,259,632 $529,822 11.2%2009 $4,472,118 $4,841,067 $368,949 8.2%2010 $4,470,742 $4,335,544 ($135,198) -3.0%2011 $5,065,685 $5,241,600 $175,915 3.5%2012 $4,479,038 $4,649,414 $170,376 3.8%2013 $4,380,313 $4,162,288 ($218,024) -5.0%2014 $4,494,952 $4,897,565 $402,613 9.0%2015 $4,863,786 $4,887,353 $23,567 0.5%

Type C – Low EF/High MSF

38

11/14/2016

20

Old Standards - Entrance Fee Amortization Comparison

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

8,000,000

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

EF Amortization - Old

Type A

High EF/Low MSF

Type A

Low EF/High MSF

Type C

High EF/Low MSF

Type C

Low EF/High MSF

39

Old Standards - Total Revenue Comparison

0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

16,000,000

18,000,000

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

Total Revenue - Old

Type A

High EF/Low MSF

Type A

Low EF/High MSF

Type C

High EF/Low MSF

Type C

Low EF/High MSF

40

11/14/2016

21

New Standards - Entrance Fee Amortization Comparison

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

8,000,000

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

EF Amortization - New

Type A

High EF/Low MSF

Type A

Low EF/High MSF

Type C

High EF/Low MSF

Type C

Low EF/High MSF

41

New Standards - Total Revenue Comparison

0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

16,000,000

18,000,000

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

Total Revenue - New

Type A

High EF/Low MSF

Type A

Low EF/High MSF

Type C

High EF/Low MSF

Type C

Low EF/High MSF

42

11/14/2016

22

Type A Contracts - Unamortized Revenue Comparison

0

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

35,000,000

40,000,000

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

Unamortized Revenue - Type A

Old Methodology

High EF/Low MSF

New Methodology

High EF/Low MSF

Old Methodology

Low EF/High MSF

New Methodology

Low EF/High MSF

43

Type C Contracts - Unamortized Revenue Comparison

0

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

35,000,000

40,000,000

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

Unamortized Revenue - Type C

Old Methodology

High EF/Low MSF

New Methodology

High EF/Low MSF

Old Methodology

Low EF/High MSF

New Methodology

Low EF/High MSF

44

11/14/2016

23

Takeaways

�Year-to-year fluctuation of revenue will increase

�Impact on Type A and Type C will be different

�Type A - Unamortized revenue will increase

• Net Profit/Loss will decrease• Future Service Obligation liability will decrease

�Discuss with and prepare your Board of Directors

45

Contact us

Mark Steinberg, Partner

[email protected]

410-363-3200

Brad Paulis, Partner

[email protected]

410-833-4220

46

understanding the &cototheuser ...media01.commpartners.com/cca/11_15_16/161115 slides.pdf ·...

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