Print Page  |  Close Window

SEC Filings

10-Q
CINEMARK HOLDINGS, INC. filed this Form 10-Q on 05/09/2018
Entire Document
 

CINEMARK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

 

entity transfers of assets other than inventory.  ASU 2016-16 is effective for fiscal years beginning after December 15, 2017, including interim periods within that year.  A modified retrospective transition method should be used in the application of the amendments within ASU 2016-16 with a cumulative-effect adjustment to retained earnings as of the beginning of the period of adoption.  ASU 2016-16 did not have a material impact on the Company’s condensed consolidated financial statements.  

In May 2017, the FASB issued ASU 2017-09, Compensation – Stock Compensation (Topic 718):  Scope Modification Accounting, (“ASU 2017-09”). The amendments in ASU 2017-09 provide guidance on which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting as described in ASC Topic 718.  The amendments should be applied on a prospective basis. ASU 2017-09 is effective for fiscal years beginning after December 15, 2017, including interim periods within that year. Early adoption is permitted.  The Company adopted ASU 2017-09 effective January 1, 2018.  ASU 2017-09 did not have a material impact on the Company’s condensed consolidated financial statements.

3.

Revenue Recognition

Revenue Recognition Policy

Admissions and concession revenues are recognized when sales are made at the box office and concession stand, respectively.  Other revenues include screen advertising and other ancillary revenues such as vendor marketing promotions, meeting rentals and electronic video games located in the Company’s theatres.  The Company records proceeds from the sale of gift cards and other advanced sale-type certificates in current liabilities and recognizes admissions or concession revenue when a holder redeems the card or certificate. Additionally, the Company recognizes unredeemed gift cards and other advanced sale-type certificates as a proportion of actual redemptions as other revenues, which is an estimate primarily based on the Company’s historical experience with such cards and certificates.

Screen advertising revenues are generally recognized over the period that the related advertising is delivered on-screen or in-theatre. Advances collected on long-term screen advertising, concession and other contracts are recorded as deferred revenues. In accordance with the terms of the agreements, the advances collected on such contracts are recognized during the period in which the Company satisfies the related performance obligations, which may differ from the period in which the advances are collected. These advances are recognized on either a straight-line basis over the term of the contracts or as the Company has met its performance obligations in accordance with the terms of the contracts.

See additional revenue recognition policy considerations, updated for the adoption of ASC Topic 606, below.  

Adoption of ASC Topic 606

The Company adopted ASC 606, Revenue from Contracts with Customers, effective January 1, 2018 under the modified retrospective method (cumulative-effect) and therefore, revenue amounts as presented on the condensed consolidated statements of income have not been adjusted for prior periods presented.

Changes to the way in which the Company recognizes revenue resulted in the following impacts to the condensed consolidated statements of income:

 

a)  

Recording of incremental other revenue and interest expense related to the significant financing component of the Company’s Exhibitor Services Agreement (“ESA”) with NCM, LLC (“NCM”).  See further discussion below, including the estimated interest rates assumed in determining the amount of interest expense.  

 

b)

Deferral of a portion of admissions and concession revenues for transactions that include the issuance of loyalty points to customers. To determine the amount of revenues to defer upon issuance of points to customers under its points-based loyalty programs, the Company estimated the values of the rewards expected to be redeemed by its customers for those points.  The estimates are based on the rewards that have historically been offered under the loyalty programs, which the Company believes is representative of the rewards to be offered in the future.

 

c)

Increase in other revenues and an increase in utilities and other expenses due to presentation of transactional fees on a gross versus net basis.

 

d)

Increase in other revenues due to the change in amortization methodology for deferred revenue – NCM that is now amortized on a straight-line basis and effective for the entire term of the ESA. As a result of the change in amortization method, the Company recorded a cumulative effect of accounting change adjustment of $40,526, net of taxes, in retained earnings on January 1, 2018 (see also Note 6).  

 

9