LENLennar

We note your disclosure on page 50 that sales incentives are one of many significant inputs the the Company uses in estimating its fair value of its communities. Given their significance, please expand your Homebuilding revenue recognition disclosures to discuss how the Company accounts for its sales incentives that it provides its customers.

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Your disclosures should highlight whether the Company typically offers customers sales incentives and the nature of each type of incentive that is offered. Finally, please disclose the amounts of such incentives for each of the periods presented and how the Company accounts for such incentives, including whether the Company recognizes such incentives as a reduction of revenue or in its costs and expenses.

In future filings, we will expand our Homebuilding revenue recognition disclosures to discuss how the company accounts for its sales incentives that it provides its customers and include such amounts if material. The disclosure will be as follows:

Revenue Recognition:

Homebuilding revenues and related profits from sales of homes are recognized at the time of the closing of a sale, when title to and possession of the property are transferred to the homebuyer. In order to promote sales of our homes, we may offer sales incentives to homebuyers.

Rest of the answer

The types of incentives vary on a community-by-community basis and home-by-home basis. They include primarily price discounts on individual homes and financing incentives, all of which are reflected as a reduction of home sales revenues. For the years ended November 30, 2021, 2020 and 2019, sales incentives offered to homebuyers were $9,000 per home, or 2.1% as a percentage of home sales revenues, $19,800 per home, or 4.8% as a percentage of home sales revenues, and $25,900 per home, or 6.1% as a percentage of home sales revenues, respectively.

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We note your disclosure that states you adopted ASC 606 in the three months ended February 28, 2019. Please tell us your consideration of the other disclosures set forth in ASC 606-10-50 (e.g., explanations of your performance obligations, transaction price allocated to remaining performance obligations, etc.).

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We remind you of the guidance in Rule 10-01(a)(5) of Regulation S-X, which would elicit both annual and interim periods financial statement disclosures prescribed by new accounting principles and practices in each quarterly report in the year of adoption.

The following are the responses of Lennar Corporation (“the Company”) to the comments contained in the letter from the Staff of the Securities and Exchange Commission (the “Staff”) dated May 16, 2019, regarding the above referenced Form 10-K and Form 10-Q. For your convenience, the Staff’s comment precedes each response in this letter. Form 10-Q for the period ended February 28, We note from your response to comment 1 of our letter dated May 1, 2019, that there were no significant changes to your revenue recognition accounting policies from those noted in your recent annual report on Form 10-K.

Rest of the letter

We further note from the revenue recognition policies in your Form 10-K that you recognize revenue from (1) home sales when the sales are closed and title passes to the new homeowner, the new homeowner’s initial and continuing investment is adequate to demonstrate a commitment to pay for the home, the new homeowner’s receivable is not subject to future subordination and the Company does not have a substantial continuing involvement with the new home, and (2) land sales when a significant down payment is received, the earnings process is complete, title passes and collectability of the receivable is reasonably assured. It is unclear to us how these policies comply with the provisions of ASC 606. Furthermore, we could not locate disclosure about the nature and timing of recognition of your service-related performance obligations (e.g., management fees and mortgage financing, title insurance, and closing service fees). Please disclose in future Forms 10-Q for the interim periods in the fiscal year ended November 30, 2019 your accounting policies for contracts with customers across all your segments. In future 10-Q filings for the interim periods in the fiscal year ended November 30, 2019, we will disclose our significant accounting policies for contracts with customers across all of our segments. We will disclose that we generally recognize revenues and related profits from sales of homes at the time of the closing of a sale, when title to and possession of the property are transferred to the homebuyer. The Company’s performance obligation, to deliver the agreed-upon home, is generally satisfied in less than one year from the original contract date. Cash proceeds from home closings held in escrow for the Company’s benefit, typically for approximately three days, are included in Lennar homebuilding cash and cash equivalents in the condensed consolidated balance sheets and disclosed in the notes to the condensed consolidated balance sheets. Contract liabilities include customer deposits liabilities related to sold but undelivered homes that are included in other liabilities in the condensed consolidated balance sheets. The Company periodically elects to sell parcels of land to third parties. Cash consideration from land sales is typically due on the closing date, which is generally when performance obligations are satisfied and revenue is recognized as title to and possession of the property are transferred to the buyer. Company’s financial services’ operations recognize revenues as follows: Title premiums on policies issued directly by us are recognized as revenue on the effective date of the title policies and escrow fees and loan origination revenues are recognized at the time the related real estate transactions are completed, usually upon the close of escrow. Revenues from title policies issued by independent agents are recognized as revenue when notice of issuance is received from the agent, which is generally when cash payment is received by us. The Company’s multifamily segment provides management services with respect to the development, construction and property management of rental projects in joint ventures in which we have investments. As a result, our multifamily segment earns and receives fees, which are generally based upon a stated percentage of development and construction costs and a percentage of gross rental collections. These fees are recorded over the period in which the services are performed using an input method, which properly depicts the level of effort required to complete the management services. In addition, our multifamily segment provides general contractor services for the construction of some of its rental projects and recognizes the revenue over the period in which the services are performed using an input method, which properly depicts the level of effort required to complete the construction services. These customer contracts require the Company to provide management and general contractor services which represents a performance obligation that the Company satisfies over time. Management fees and general contractor services in the multifamily segment are included in multifamily revenue. Form 10-K for the period ended November 30, 2018 Management’s Discussion and Analysis of Financial Condition and Results of Operations We note your response to comment 2 from our letter dated May 1, 2019. We believe that the quantification of the dollar impact of the CalAtlantic acquisition within MD&A allows for a thorough understanding and evaluation of your operating results for the periods presented including any impact from organic operating results. Please expand your MD&A to include the information you highlight in paragraph 3 of your response and include similar information to the extent that the CalAtlantic acquisition materially impacted any additional segment results of operations. 2018 comparative information we will expand our MD&A to include the information highlighted in paragraph 3 of our previous response, which states the homebuilding revenues and earnings before income taxes that were from CalAtlantic since the date of acquisition. We will include similar information to the extent that the CalAtlantic acquisition materially impacted any additional segment results of operations.

One letter for all the questions, without numbered answers. Read the reply ↗

Please expand your disclosures to quantify the dollar impact of the CalAtlantic acquisition on your results of operations to allow a better understanding of how the performance of your legacy business and the acquired CalAtlantic business impacted your results of operations for the periods presented.

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Refer to Instruction 4 to Item 303(a) of Regulation S- X and Section 501.12(b)(2) of the Financial Reporting Codification.

See the reply above.

We note from your response to comment 1 of our letter dated May 1, 2019, that there were no significant changes to your revenue recognition accounting policies from those noted in your recent annual report on Form 10-K.

Rest of the question

We further note from the revenue recognition policies in your Form 10-K that you recognize revenue from (1) home sales when the sales are closed and title passes to the new homeowner, the new homeowner’s initial and continuing investment is adequate to demonstrate a commitment to pay for the home, the new homeowner’s receivable is not subject to future subordination and the Company does not have a substantial continuing involvement with the new home, and (2) land sales when a significant down payment is received, the earnings process is complete, title passes and collectability of the receivable is reasonably assured. It is unclear to us how these policies comply with the provisions of ASC 606. Furthermore, we could not locate disclosure about the nature and timing of recognition of your service-related performance obligations (e.g., management fees and mortgage financing, title insurance, and closing service fees). Please disclose in future Forms 10-Q for the interim periods in the fiscal year ended November 30, 2019 your accounting policies for contracts with customers across all your segments.

No reply letter found.

We note your response to comment 2 from our letter dated May 1, 2019. We believe that the quantification of the dollar impact of the CalAtlantic acquisition within MD&A allows for a thorough understanding and evaluation of your operating results for the periods presented including any impact from organic operating results.

Rest of the question

Please expand your MD&A to include the information you highlight in paragraph 3 of your response and include similar information to the extent that the CalAtlantic acquisition materially impacted any additional segment results of operations.

No reply letter found.

We note your discussion and analysis of the change in income tax (benefit) expense for fiscal year ended November 30, 2015 when compared to November 30, 2014. Please expand your disclosures to quantify all the material factors disclosed and provide a more meaningful analysis discussing the reasons behind each and whether the material factors impacting the effective tax rate are expected to have a continuing impact.

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As an example, we note that your disclosures indicate that the effective tax in 2015 rate included tax benefits for the domestic production activities deduction and energy tax credits which reduced the effective tax rate by 1.92%, however there is no robust discussion explaining the nature of those tax credits and whether they may be expected to have a continuing impact on the effective tax rate in the future. Please refer to Item 303(a)(3) of Regulation S-K and Sections 501.12.b.3 and 501.12.b.4. of the Financial Reporting Codification for guidance.

The reduction in the Company’s tax rate from 34.80% for the year ended November 30, 2014 to 32.72% for the year ended November 30, 2015 was primarily from tax credits related to our increased investment in solar energy systems in 2015 compared with 2014, and the retroactive enactment of the new energy efficient home credit.

As a result of the Consolidated Appropriations Act of 2016, enacted in December 2015, the 30% tax credit for eligible solar energy property was extended.

Rest of the answer

The Act adds a phase-out for the solar energy credit under which the "energy percentage" on which the credit is based will gradually be reduced from 30% to 10% in 2022. The Company is eligible for this tax credit through its Sunstreet residential solar business. For the year ended November 30, 2015, the impact of this credit on the Company’s effective tax rate was (0.91%).

In addition, in December 2014, the 2014 Tax Increase Prevention Act ("TIPA") was enacted. TIPA retroactively restored and extended the new energy efficient home credit for homes delivered in 2014. The Company is eligible for this tax credit to the extent its homes meet the energy efficiency standards required under the tax code. Since the legislation was enacted in our fiscal year ended November 30, 2015, the impact of this legislation on the Company’s effective tax rate for fiscal 2015 was (1.01%).

The Company will continue to be eligible for this credit through fiscal 2016 since the new energy efficient home credit was extended in December 2015 by the enactment of the Protecting Americans from Tax Hikes Act to homes delivered through 2016, including retroactively for homes delivered in 2015.

In addition to the solar energy tax credits and the energy efficient home credit mentioned above, the Company also expects its effective tax rate to continue to benefit from the domestic production activities deduction ("DPAD"), provided the Company continues to generate positive taxable income. The DPAD is currently not subject to sunset or phase-out. For the fiscal year ended November 30, 2015, the impact of the DPAD on the Company’s effective tax rate was (3.01%).

In future Form 10-K filings, we will provide a more detailed analysis of material changes in the Company's tax rate from period to period and whether we expect the cause of particular changes to have a continuing impact on the Company's effective tax rate in the future. In our Form 10-Q filings, we will update our disclosures for any significant changes in our effective tax rate. We expect that the expanded disclosures in our Form 10-Q for the three months ended February 29, 2016 will be as follows:

"In the first quarter of 2016 and 2015, we had a tax provision of $56.2 million and $59.7 million, respectively. Our overall effective income tax rates were 28.08% and 34.19% in the first quarter of 2016 and 2015, respectively. The reduction is primarily the result of the reversal of an accrual due to a settlement with the IRS, which reduced our effective tax rate by (5.42%). We do not anticipate similar settlements during the remainder of fiscal 2016. The effective tax rate for the first quarter of 2016 and 2015 included tax benefits for the domestic production activities deduction and energy tax credits, offset primarily by state income tax expense. During the first quarter of 2016, tax legislation was passed extending the new energy efficient home credit through 2016, as well as extending the 30% investment tax credit for solar energy property through 2022. Both of these tax credits benefited and we expect will continue to benefit our effective tax rate."

Rialto-Investments in Unconsolidated Entities, page 58

Comment No. 2

We note your disclosure that Rialto adopted a Carried Interest Plan which provides participants in the plan an equity interest in a Rialto subsidiary that entitles them to specified percentages of distributions. We further note your disclosure that Rialto recorded $3 million related to the amortization of compensation expense of the plan over the vesting period. In order to better understand the Company’s policy in accounting for this plan and given that your Rialto operations are considered a critical accounting estimate, please tell us and expand your disclosures to include a more robust discussion around how the Company is accounting for the compensation expense for the carried interest that the Rialto employees may be entitled to under the plan. In providing your response, please tell us and expand your disclosures to include the following:

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Whether the amount of compensation expense recorded relates to the entire carried interest in the funds or just amounts not subject to clawback, such as the advance distributions to cover taxes;

The timing of the recognition of compensation expense and how and when the Company determines it has a liability for that compensation expense;

To the extent the compensation expense relates to the total carried interest, your expanded disclosures should state that the timing of recognition of compensation expense precedes the recognition of any management revenue related to carried interest given the Company’s policy to only recognize revenue related to carried interest when collectability is reasonably assured and in effect not subject to clawback; and

The amount of compensation expense that could be reversed in the future to the extent it is subject to clawback.

Response

During 2015, Rialto adopted a Carried Interest Plan (the "Plan"), which provides participants in the Plan the opportunity to participate in distributions made by a fund or other investment vehicle (a "Fund") managed by a subsidiary of Rialto.

Under the Plan, Rialto may assign its right to receive carried interest payments from a Fund to a limited liability company (a "Carried Interest Entity"), wholly owned and consolidated by Rialto, and distribute units, which are considered equity, of the Carried Interest Entity to some employees who are involved in the management of the Fund. The units entitle their holders to specified percentages of distributions made from the Fund to the Carried Interest Entity. Rialto may distribute to some of its employees units entitling them up to 40% of the distributions received by a Carried Interest Entity.

The awards were determined to be share-based payments and were accounted for in accordance with ASC 718, Compensation - Stock Compensation ("ASC 718"). Management determined that the awards did not meet any of the five types of awards described in ASC 718 as awards that should be classified as a liability:

1. An award with conditions or other features that are indexed to something other than a market, performance, or service condition.

Read in the reply ↗

We note your disclosure that Rialto adopted a Carried Interest Plan which provides participants in the plan an equity interest in a Rialto subsidiary that entitles them to specified percentages of distributions. We further note your disclosure that Rialto recorded $3 million related to the amortization of compensation expense of the plan over the vesting period.

Rest of the question

In order to better understand the Company’s policy in accounting for this plan and given that your Rialto operations are considered a critical accounting estimate, please tell us and expand your disclosures to include a more robust discussion around how the Company is accounting for the compensation expense for the carried interest that the Rialto employees may be entitled to under the plan. In providing your response, please tell us and expand your disclosures to include the following:  Whether the amount of compensation expense recorded relates to the entire carried interest in the funds or just amounts not subject to clawback, such as the advance distributions to cover taxes;  The timing of the recognition of compensation expense and how and when the Company determines it has a liability for that compensation expense;  To the extent the compensation expense relates to the total carried interest, your expanded disclosures should state that the timing of recognition of compensation expense precedes the recognition of any management revenue related to carried interest given the Company’s policy to only recognize revenue related to carried interest when collectability is reasonably assured and in effect not subject to clawback; and  The amount of compensation expense that could be reversed in the future to the extent it is subject to clawback.

An award that meets certain criteria of ASC 480, Distinguishing Liabilities from Equity (“ASC 480”). ASC 480 provides guidance for determining whether certain freestanding financial instruments are classified as liabilities and generally excludes stock-based compensation from its scope. Read in the reply ↗

We note your response to our comment 2 from our letter dated March 1, 2016. In order to better understand the Company’s conclusion that the awards issued under the Carried Interest Plan are considered equity awards under ASC 718, please expand on your response to describe the substantive terms of the awards issued under the Carried Interest Plan and why an evaluation of those terms would not result in liability

Rest of the question

classification per the guidance under ASC 718-10-25-6 through ASC 718 -10-25-19. In providing your response, please tell us how you considered that the awards “entitle employees up to 40% of the distributions received by the Carried Interest Entity” in your evaluation. In that regard, it would appear that the holders are entitled to the cash from the Carried Interest Distributions received from the funds and assigned by Rialto. Furthermore, given that it appears that the Carried Interest Plan will continue to be a method of providing additional compensation to employees assisting in managing the funds in your Realto segment, the accounting for the Plan may become material to that segment and important for investors. As such, please confirm that you will expand your disclosures in your Critical Accounting Estimates section to disclose how the Company is accounting for the Carried Interest Plan including that expense recognition would precede the timing of the revenue recognized related to the underlying Carried Interest distributions; to the extent material or becomes material in that segment.

An award with conditions or other features that are indexed to something other than a market, performance, or service condition. The units are not indexed to a factor that is not a market, performance or service condition. Read in the reply ↗

We note the response in your letter dated April 13, 2016, that you intend on expanding disclosures in your critical accounting estimates section if the Carried Interest Plan becomes material. Please confirm that you will expand your disclosures if award issuances or modifications represent a known trend that is reasonably likely to occur and that a material effect on your financial statements is reasonably likely.

Rest of the question

We note the level of complexity and subjectivity involved in the accounting and classification of these units. Specifically, we note there are various factors that may indicate that the awards have characteristics of a bonus or profit sharing arrangement, including: a lack of voting rights, a lack of any initial investment and transfer restrictions related to the awards. However, you attributed significant weight to the units being subject to vesting, and once vested the employee retains the residual interest in the units which is tied to the underlying net assets of the respective Carried Interest Entity. Please note that we may have further comment about your accounting should these awards become material in the future.

Lennar confirms that in future filings it will expand its disclosure related to the Carried Interest Plan in its critical accounting estimates section if award issuances or modifications represent a known trend that is reasonably likely to occur and that a material effect on the Company's financial statements is reasonably likely. Read in the reply ↗