NOTES TO FINANCIAL STATEMENTS.1. Organization and Significant Accounting Policies The California California (kăl'ĭfôr`nyə), most populous state in the United States, located in the Far West; bordered by Oregon (N), Nevada and, across the Colorado River, Arizona (E), Mexico (S), and the Pacific Ocean (W). Society of Certified Public Accountants Certified Public Accountant (CPA) An accountant who has met certain standards, including experience, age, and licensing, and passed exams in a particular state. (CalCPA) is a nonprofit A corporation or an association that conducts business for the benefit of the general public without shareholders and without a profit motive. Nonprofits are also called not-for-profit corporations. Nonprofit corporations are created according to state law. incorporated membership organization whose purpose is to advance the profession of accountancy in the State of California CalCPA provides its members with general and technical resources through its chapters and committees. California Certified Public Accountants Education Foundation (Foundation) is a nonprofit public benefit corporation organized to provide continuing professional education to Certified Public Accountants (CPAs) and other interested parties. Revenues for both CalCPA and the Foundation are derived primarily from CPAs in California. CalCPA and the Foundation share some administrative functions. Such costs are incurred by CalCPA, who charges the Foundation for its estimated share. PRINCIPLES OF CONSOLIDATION The Board of Trustees board of trustees Politics The posse of thugs who oversee an institution's administration. See Board of directors. of the Foundation consists of members of CalCPA who are elected by the governing Board Noun 1. governing board - a board that manages the affairs of an institution board - a committee having supervisory powers; "the board has seven members" of Directors of CalCPA. Because of common control, the accompanying financial statements reflect the consolidation of CalCPA and the Foundation. Material transactions between the entities have been eliminated in consolidation. BASIS OF PRESENTATION The financial statements are presented in conformity with Statement of Financial Accounting Standards (SFAS SFAS Statement of Financial Accounting Standards SFAS Special Forces Assessment and Selection SFAS Student Financial Aid Services SFAS Sport Fishing Association of Singapore SFAS Safety Features Actuation System SFAS Statewide Fixed Assets System ) No. 117, Financial Statements of Not-For-Profit Not-for-profit An organization established for charitable, humanitarian, or educational purposes that is exempt from some taxes and in which no one in profits or losses. Organizations. REVENUE RECOGNITION Membership dues are recognized as revenue in the membership period. Dues collected in advance of the membership period are recorded as deferred revenue until earned. Peer review registration fees are recognized over the calendar year. Peer review processing and review fees are recognized as review engagements are completed. Revenue from professional education programs is recognized in the periods the programs are held. CASH AND EQUIVALENTS For financial statement purposes, CalCPA and the Foundation consider all investments with a maturity at purchase of three months or less to be cash equivalents. ADVERTISING COSTS Direct response advertising consists primarily of catalogs and brochures for educational seminars and other events. Direct response advertising costs are capitalized Capitalized Recorded in asset accounts and then depreciated or amortized, as is appropriate for expenditures for items with useful lives longer than one year. as other current assets Other Current Assets A balance sheet item that includes the value of non-cash assets due within one year. Notes: Examples are things like prepaid expenses and accounts receivable. and charged to expense in the period the events occur. Other advertising costs are expensed as incurred. INVESTMENTS Investments are stated at market value. PROPERTY AND EQUIPMENT Property and equipment are stated at cost and depreciated Depreciated may refer to:
straight-line method of depreciation over estimated useful lives of 3 to 10 years. DEFERRED LEASE COSTS Rent expense is recognized on a straight-line straight-line adj. 1. Lying in a straight line. 2. Relating to a device whose linkage produces or copies motion in straight lines. 3. basis over the life of the lease. Deferred lease costs represent rent expense recognized in excess of rental payments made. DONATED do·nate v. do·nat·ed, do·nat·ing, do·nates v.tr. To present as a gift to a fund or cause; contribute. v.intr. To make a contribution to a fund or cause. SERVICES Members of CalCPA donate their time to various activities of CalCPA and the Foundation, including the leadership of the organizations, committees, chapters, and member events. The value of this donated time is not reflected in the accompanying financial statements since it does not meet the criteria for recognition. INCOME TAXES CalCPA and the Foundation are exempt from income taxes under Internal Revenue Code The Internal Revenue Code is the body of law that codifies all federal tax laws, including income, estate, gift, excise, alcohol, tobacco, and employment taxes. These laws constitute title 26 of the U.S. Code (26 U.S.C.A. § 1 et seq. (IRC (Internet Relay Chat) Computer conferencing on the Internet. There are hundreds of IRC channels on numerous subjects that are hosted on IRC servers around the world. After joining a channel, your messages are broadcast to everyone listening to that channel. ) Sections 501(c)(6) and 501(c)(3), respectively, and related California code sections. However, the organizations are subject to income taxes from activities unrelated to their tax-exempt tax-ex·empt adj. 1. Not subject to taxation, as the capital or income of a philanthropic organization. 2. Producing interest that is exempt from income tax: tax-exempt bonds. n. purposes. The Foundation is considered a publicly supported organization. FUNCTIONAL EXPENSES The costs of providing the program services and supporting services have been summarized on a functional basis in the statements of activities and of functional expenses. Accordingly, certain costs have been allocated among the program services and supporting services based on estimates of employees' time incurred and on usage of resources. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. 2. Related Parties CalCPA shares certain administrative functions with CAMICO Mutual Insurance Company (CAMICO) and Group Insurance Trust (GIT). CalCPA charges CAMICO and GIT for their estimated shares of related expenses. In addition, CAMICO and GIT purchase services from CalCPA CAMICO provides professional liability insurance for CalCPA members and is endorsed by CalCPA. Since CAMICO is not under common control with CalCPA and the Foundation, the financial statements do not reflect consolidation of CAMICO. Balances of $73,000 and $126,000 due from CAMICO as of April 30, 2001 and 2000, respectively, are included in CalCPAs other accounts receivable accounts receivable n. the amounts of money due or owed to a business or professional by customers or clients. Generally, accounts receivable refers to the total amount due and is considered in calculating the value of a business or the business' problems in paying . Services purchased and expenses allocated for CAMICO totaled $191,000 for 2001 and $353,000 for 2000. GIT is a multiple employer welfare arrangement formed to provide health and welfare insurance plans to CalCPA members at favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. group rates. The CalCPA Board of Directors exerts control over the nomination process for the Board of Trustees of GIT. However, since regulatory agencies regulatory agency Independent government commission charged by the legislature with setting and enforcing standards for specific industries in the private sector. The concept was invented by the U.S. limit CalCPAs control of GIT's activities, the financial statements do not reflect consolidation of GIT. A balance of $105,000 due from GIT as of April 30,2001, is included in CalCPA's other accounts receivable. A balance of $136,000 due to GIT as of April 30,2000, is included in CalCPAs accrued expenses Accrued Expense An accounting expense recognized in the books before it is paid for. It is a liability, usually current. These expenses are typically periodic and documented upon a company's balance sheet due to the high probability of collection. . Services purchased and expenses allocated for GIT totaled $233,000 for 2001 and $256,000 for 2000. 3. Peer Review Program The financial statements of CalCPA include the operations of the Peer Review Program, which administers the American Institute of Certified Public Accountants With over 330,525 CPA members (in August 2006), the American Institute of Certified Public Accountants (AICPA) is the largest professional organization of Certified Public Accountants (CPAs) in the United States of America. peer review program in California, Arizona Arizona (âr'əzō`nə), state in the southwestern United States. It is bordered by Utah (N), New Mexico (E), Mexico (S), and, across the Colorado R., Nevada and California (W). , and Alaska Alaska (əlă`skə), largest in area of the United States but third smallest (exceeding only Vermont and Wyoming) in population, occupying the northwest extremity of the North American continent, separated from the coterminous United States . Peer review expenses are included in "Other Activities" in the statements of activities and of functional expenses. Revenues, expenses, and net assets Net assets The difference between total assets on the one hand and current liabilities and noncapitalized long-term liabilities on the other hand. net assets See owners' equity. for the division are summarized as follows:
2001 2000
Revenues:
Registration fees $ 760,000 $ 771,000
2001 2000
Processing and review fees 202,000 216,000
Total peer review fees 962,000 987,000
Interest income 63,000 28,000
Other income 21,000 42,000
Total revenue 1,046,000 1,057,000
Expenses:
Reviewer costs and operating expenses 929,000 836,000
Increase in net assets 117,000 221,000
Net assets, beginning of year 345,000 124,000
Net assets, end of year $ 462,000 $ 345,000
4. Advertising Costs The Foundation's direct response advertising consists primarily of catalogs and brochures for events. Other current assets include capitalized advertising costs of $196,000 and $177,000 as of April 30, 2001 and 2000, respectively. Advertising costs charged to expense are as follows:
2001 2000
CalCPA $ 72,000 $ 67,000
Foundation 627,000 630,000
Consolidated $ 699,000 $ 697,000
5. Investments
CalCPA Foundation
Investments consist of the following:
2001
U.S. government obligations $ 695,000 $ 1,361,000
GNMA mortgage pool 97,000 187,000
Other debt securities 281,000 455,000
Equity securities 1,797,000 2,820,000
Total $ 2,870,000 $ 4,823,000
2000
U.S. government obligations $ 715,000 $ 1,510,000
GNMA mortgage pool 125,000 242,000
Other debt securities 191,000 265,000
Equity securities 1,972,000 3,205,000
Total $ 3,003,000 $ 5,222,000
Investment income (loss) consists of the
following:
2001
Interest and dividends $ 395,000 $ 338,000
Net realized and unrealized losses (229,000) (280,000)
Investment income 166,000 58,000
Less investment expenses (45,000) (74,000)
Investment income (loss), net $ 121,000 $ (16,000)
2000
Interest and dividends $ 263,000 $ 262,000
Net realized and unrealized gains 28,000 125,000
Investment income 291,000 387,000
Less investment expenses (41,000) (71,000)
Investment income, net $ 250,000 $ 316,000
Consolidated
Investments consist of the following:
2001
U.S. government obligations $ 2,056,000
GNMA mortgage pool 284,000
Other debt securities 736,000
Equity securities 4,617,000
Total $ 7,693,000
2000
U.S. government obligations $ 2,225,000
GNMA mortgage pool 367,000
Other debt securities 456,000
Equity securities 5,177,000
Total $ 8,225,000
Investment income (loss) consists of the
following:
2001
Interest and dividends $ 733,000
Net realized and unrealized losses (509,000)
Investment income 224,000
Less investment expenses (119,000)
Investment income (loss), net $ 105,000
2000
Interest and dividends $ 525,000
Net realized and unrealized gains 153,000
Investment income 678,000
Less investment expenses (112,000)
Investment income, net $ 566,000
6. Property and Equipment
Property and equipment consist of the following:
Ca1CPA Foundation
2001
Equipment 938,000 $ 1,079,000
Software 937,000 783,000
Furniture 290,000 189,000
Leasehold improvements 626,000 94,000
Total 2,791,000 2,145,000
Less accumulated depreciation and (1,711,000) (1,312,000)
amortization
Property and equipment, net $ 1,080,000 $ 833,000
2000
Equipment $ 867,000 $ 886,000
Software 950,000 448,000
Furniture 185,000 90,000
Leasehold improvements 57,000
Total 2,059,000 1,424,000
Less accumulated depreciation and (1,283,000) (1,151,000)
amortization
Property and equipment, net $ 776,000 $ 273,000
Consolidated
2001
Equipment $ 2,017,000
Software 1,720,000
Furniture 479,000
Leasehold improvements 720,000
Total 4,936,000
Less accumulated depreciation and (3,023,000)
amortization
Property and equipment, net $ 1,913,000
2000
Equipment $ 1,753,000
Software 1,398,000
Furniture 275,000
Leasehold improvements 57,000
Total 3,483,000
Less accumulated depreciation and (2,434,000)
amortization
Property and equipment, net $ 1,049,000
7. Deferred Revenue
Deferred revenue consists of the following:
CalCPA: 2001 2000
Dues $ 3,098,000 $ 2,942,000
Peer review registration fees 597,000 604,000
Annual meeting fees 29,000 29,000
Web site advertising 9,000
CalCPA total 3,724,000 3,584,000
Foundafion:
Registration fees, including Value 1,451,000 1,420,000
Pricing (VP) program
Consolidated $ 5,175,000 $ 5,004,000
8. Operating Lease Operating Lease A lease contract that allows the use of an asset, but does not convey rights similar to ownership of the asset. Notes: An operating lease is not capitalized it is accounted for as a rental expense. Obligations CalCPA and CAMICO lease office space for their corporate headquarters under non-cancelable operating leases expiring ex·pire v. ex·pired, ex·pir·ing, ex·pires v.intr. 1. To come to an end; terminate: My membership in the club has expired. 2. in July July: see month. 2010. GIT and the Foundation sublease sublease n. the lease of all or a portion of premises by a tenant who has leased the premises from the owner. A sublease may be prohibited by the original lease, or require written permission from the owner. a portion of the office space for their corporate headquarters under non-cancelable sublease agreements with CalCPA and CAMICO, respectively, also expiring in July 2010. Sublease payments are based on square footage occupied. CalCPA also leases office space in several major California cities, mostly under year-to-year operating leases. The Glendale Glendale. 1 City (1990 pop. 148,134), Maricopa co., S central Ariz., adjacent to Phoenix; inc. 1910. It is located in a rich agricultural region irrigated by the Salt River project. Glendale has become one of the fastest-growing U.S. office lease is a non-cancelable operating lease expiring in November November: see month. 2003. Future minimum lease payments Rental payments over the lease term including the amount of any bargain purchase option, premium and any guaranteed residual value and excluding any rental relating to costs to be met by the lessor and any contingent rentals. under these agreements, net of minimum sublease receipts from GIT, are as follows: Year ending April 30: CalCPA Foundation Consolidated 2002 $ 596,000 $ 297,000 $ 893,000 2003 611,000 309,000 920,000 2004 590,000 321,000 911,000 2005 556,000 334,000 890,000 2006 572,000 348,000 920,000 Thereafter 2,228,000 1,604,000 3,832,000 Total $5,153,000 $ 3,213,000 $ 8,366,000 Under the former operating lease for the corporate headquarters, CalCPA and the Foundation earned income Sources of money derived from the labor, professional service, or entrepreneurship of an individual taxpayer as opposed to funds generated by investments, dividends, and interest. , included in other income on the statements of activities, on space subleased to unrelated tenants. CalCPA has not subleased any of its space under the new lease to unrelated tenants, but has the option to do so. Rent expense under the lease was recorded net of the portion of the lease paid by CAMICO. Rent expense and sublease income under the leases are as follows: Rent expense: 2001 2000 CalCPA $ 600,000 $ 857,000 Foundation 348,000 347,000 Consolidated $ 948,000 $ 1,204,000 Sublease income: CalCPA $ 49,000 $ 184,000 Foundation 27,000 102,000 Consolidated $ 76,000 286,000 9. Retirement Plans CalCPA sponsors a defined benefit pension plan for substantially all full-time employees of CalCPA and the Foundation. Each employee's benefits are based on years of service and the employee's compensation during the last five years of employment. CalCPA's funding policy is to contribute annually an amount not less than the ERISA See Employee Retirement Income Security Act. ERISA See Employee Retirement Income Security Act (ERISA). minimum funding requirement The Minimum Funding Requirement (MFR) was a part of United Kingdom legislation in the Pensions Act 1995, and was introduced on 6 April 1997. The Pensions Act 2004 abolishes the MFR replaces it with new "scheme funding objective"; this came into force on 30 December, 2005 for all and not more than the amount that would be deductible That which may be taken away or subtracted. In taxation, an item that may be subtracted from gross income or adjusted gross income in determining taxable income (e.g., interest expenses, charitable contributions, certain taxes). for federal income taxes. Due to investment performance, no employer contributions were required for 2001 or 2000. Contributions are intended to provide not only for benefits earned to date but also for benefits expected to be earned in the future. The following information is based on computations by the plan actuary actuary One who calculates insurance risks and premiums. Actuaries compute the probability of the occurrence of such events as birth, marriage, illness, accidents, and death. :
2001 2000
Net periodic pension expense:
CalCPA $ 220,000 $ 207,000
Foundation 103,000 108,000
Total $ 323,000 $ 315,000
Employer contributions $ - $ -
Benefits paid $ 85,000 $ 110,000
The following weighted average
assumptions were used in the actuarial
computations:
Discount rate 7.09% 7.00%
Expected long-term rate of return on 9.00% 10.00%
plan assets
Rate of compenstation increase 6.00% 6.00%
The plan's funded status is as follows:
Fair value of plan assets as of April 30 $ 3,032,000 $ 3,523,000
Projected benefit obligation as of April (5,442,000) (4,929,000)
30
Funded status $ (2,410,000) $(1,406,000)
Accrued pension liability included in $ (2,184,000) $(1,855,000)
the statements of financial position
CalCPA and the Foundation each sponsor defined contribution plans Defined contribution plan A pension plan whose sponsor is responsible only for making specified contributions into the plan on behalf of qualifying participants. Related: Defined benefit plan under IRC Section 401(k). All employees at least 21 years of age who have completed one year of service are eligible to participate. Participants may contribute up to 15 percent of eligible gross compensation. Employer contributions are at the discretion of the organizations' respective governing boards. There were no employer contributions in 2001 or 2000. CalCPA maintains a deferred compensation plan under IRC Section 457. The plan is closed to further contributions or new participants, and only a few participants remain. Deferred compensation assets consist of investments reserved for future payment of deferred compensation liabilities. 10. Net assets As of April 30, 2001 and 2000, the net assets of the Foundation include approximately $300,000 that is temporarily restricted for scholarships by CalCPA chapters. Except for this balance, the net assets of CalCPA and the Foundation are unrestricted. The changes in temporarily restricted net assets for 2001 and 2000 are not significant. 11. Contingency contingency n. an event that might not occur. CalCPA is involved in a potential legal action for which a determination of either the likelihood or the amount of potential losses, if any, cannot yet be made. 12. Subsequent Event The Foundation entered into an agreement as of May 8, 2001, to purchase certain assets of SC Publishing, Inc., which provided a home-study continuing education continuing education: see adult education. continuing education or adult education Any form of learning provided for adults. In the U.S. the University of Wisconsin was the first academic institution to offer such programs (1904). program for certified public accountants under the "Western Schools" registered trade name. The purchase price was $150,000. 13. Concentration of Credit Risk CalCPA and the Foundation maintain a majority of their cash in money market accounts that are not federally insured and in bank deposit accounts which, at times, may exceed federally insured limits. The organizations have not experienced any losses in such accounts. Management believes the organizations are not exposed to any significant credit risk related to cash. |
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