Company: LGIH
Filing Date: 2025-02-26
Form Type: 10-K
Source: 0001580670-25-000016
Chunk: 486

Company: LGI Homes, Inc.
Filing Date: 2025-02-26
Form: 10-K
Item: Item 1A
Chunk 486
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, primarily driven by $887.3 million of borrowings under our credit agreement then in effect and $50.4 million of proceeds related to financing arrangements with a third-party land banker. These were partially offset by $746.0 million of repayments on our credit agreement then in effect, net of payments of $95.0 million related to a financing arrangement with a third-party land banker.  

Inflation

Our business can be adversely impacted by inflation, primarily from higher land, financing, labor, material and construction costs. In addition, inflation can lead to higher mortgage rates, which can significantly affect the affordability of mortgage financing to homebuyers.  See “Industry and Economic Risks—Inflation could adversely affect our business and financial results” in Item 1A. Risk Factors in Part I of this Annual Report on Form 10-K.

Critical Accounting Policies and Estimates 

In preparing our consolidated financial statements in accordance with GAAP and pursuant to the rules and regulations of the SEC, we make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses. We base our estimates, judgments and assumptions on historical experience and various other factors that we believe to be reasonable under the circumstances. Actual results could differ materially from these estimates under different assumptions or conditions. We evaluate our estimates, judgments and assumptions on a regular basis. We also discuss our critical accounting policies and estimates with the Audit Committee of the Board.  Discussed below are accounting policies that we believe are critical because of the significance of the activity to which they relate or because they require the use of significant judgment in their application.

47

Home Sales Revenue Recognition

We recognize home sales revenue upon the transfer of promised goods to our customers in an amount that reflects the consideration to which we expect to be entitled by applying the following five-step process:

•Identify the contract(s) with a customer

•Identify the performance obligations

•Determine the transaction price

•Allocate the transaction price

•Recognize revenue when the performance obligations are met

Our contracts with customers include a single performance obligation to transfer a completed home to the customer. We generally determine selling price per home on the expected cost plus margin. Our contracts contain no significant financing terms as customers who finance do so through a third party. Performance obligations are satisfied at a moment in time when the home is complete and control of the asset is transferred to the customer at closing. Home sales proceeds are generally received from the title company within a few business days after closing. Little to no estimation is