John’ s Island Club, Inc. Notes to Financial Statements
Note 1. Nature of Organization and Significant Accounting Policies( Continued)
The Club made an accounting policy election available not to recognize ROU assets and lease liabilities for leases with a term of 12 months or less. For all other leases, ROU assets and lease liabilities are measured based on the present value of future lease payments over the lease term at the commencement date of the lease. The ROU assets also include any initial direct costs incurred and lease payments made at or before the commencement date and are reduced by any lease incentives received.
The Club has made an accounting policy election to account for lease and non-lease components in its contracts as a single lease component for its equipment asset classes. The non-lease components typically represent additional services transferred to the Club, such as maintenance on equipment, which is variable in nature.
The Club leases building space to a real estate agency of the community( see Note 6). This lease contains extension and termination options that are predominantly at the sole discretion of the lessee, provided certain conditions are satisfied. Topic 842 provides lessors a practical expedient, applicable by class of underlying asset, to not separate the lease and non-lease components for the associated lease component if certain criteria are met. An underlying asset is an asset that is the subject of a lease for which a right to use that asset has been conveyed to a lessee. The Club considers the property leased as a class of the underlying asset.
Ownership transactions: Ownership transactions within the Club encompass the net retained equity from equity payments, initial capital contributions, and capital assessments. These financial activities are classified as owner transactions because of various rights and obligations of the members making such payments. The net retained equity is determined by the difference between the equity contribution made by an incoming member to secure an Equity Membership and the sum returned to a departing member. The Club recognizes the retained equity derived from membership changes and initial capital contributions as other changes in net assets without donor restrictions when collected. Capital assessments are recognized as other changes in net assets without donor restrictions when billed and are substantially collected by December 31 each year.
Revenue recognition: All revenue is recorded based on fixed transaction prices and any right to return goods does not significantly impact Club revenue. The Club records accounts receivable when it has the unconditional right to issue an invoice and receive payment regardless of whether revenue has been recognized. When consideration is received and revenue has not yet been recognized, a contract liability( dues paid in advance) is also recorded. The Club does not recognize revenue in advance of the right to invoice and therefore has not recorded a contract asset. As of January 1, 2024, the opening balances of accounts receivable, net and dues paid in advance were approximately $ 4,782,000 and $ 20,794,000, respectively.
The Club recognizes membership dues, guest fees, golf bag storage, locker rentals, handicap fees and fitness class fees as revenue ratably over the period in which those billings relate, which is when the Club’ s performance obligation is satisfied. All other revenue is recorded upon delivery of the related goods or services to the member, which is when the Club’ s performance obligation is satisfied.
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