Company: LGIH
Filing Date: 2025-02-26
Form Type: 10-K
Source: 0001580670-25-000016
Chunk: 12

Company: LGI Homes, Inc.
Filing Date: 2025-02-26
Form: 10-K
Item: Item 8
Chunk 12
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, the geographic areas in which they are built, and potential impacts of our continued expansion. Warranty reserves are reviewed quarterly to assess the reasonableness and adequacy and adjusted, as needed, to reflect changes in trends and historical data as information becomes available.Customer DepositsCustomer deposits are received upon signing a purchase contract and are typically $1,000 to $10,000.  Deposits are generally refundable if the customer is unable to obtain financing. Forfeited buyer deposits related to home sales are recognized in other income in the period in which it is determined that the buyer will not complete the purchase of the property and the deposit is nonrefundable to the buyer.

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Home SalesIn accordance with ASC Topic 606, Revenue from Contracts with Customers, revenues from home sales are recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. Revenues from home sales are recorded at the time each home sale is closed, title and possession are transferred to the customer and we have no significant continuing involvement with the home. Home sales discounts and incentives granted to customers, which are related to the customers’ closing costs that we pay on the customers’ behalf, are recorded as a reduction of revenue in our consolidated financial statements of operations.Cost of SalesAs discussed under “Real Estate Inventory” above, cost of sales for homes closed include the construction costs of each home and allocable land acquisition and land development costs, capitalized interest, and other related common costs (both incurred and estimated to be incurred).Selling and Commission CostsSales commissions are paid and expensed based on homes closed. Other selling costs are expensed in the period incurred.Advertising CostsAdvertising costs are expensed as incurred. Advertising costs were $43.6 million, $33.1 million and $18.7 million for the years ended December 31, 2024, 2023 and 2022, respectively.Income TaxesWe are a taxable entity subject to federal and state taxes. We utilize the liability method of accounting for income taxes.  Under the liability method, deferred tax assets and liabilities are recognized using enacted tax rates for the effect of temporary differences between the book and tax bases of recorded assets and liabilities. Changes in tax rates are recognized in the year of enactment. Deferred tax assets are reduced by a valuation allowance if it is more likely than not that some portion or all of the net deferred tax assets will not be realized. Our