Notes to the combining financial statements (dollars in thousands).1. ORGANIZATION & 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. (Society) 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. The Society 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 the Society and the Foundation are derived primarily from CPAs in California. The Society and the Foundation share some administrative functions. Such costs are allocated between the entities based on their estimated share. The California CPA (Computer Press Association, Landing, NJ) An earlier membership organization founded in 1983 that promoted excellence in computer journalism. Its annual awards honored outstanding examples in print, broadcast and electronic media. The CPA disbanded in 2000. Institute (the Institute), a nonprofit organization Nonprofit Organization An association that is given tax-free status. Donations to a non-profit organization are often tax deductible as well. Notes: Examples of non-profit organizations are charities, hospitals and schools. 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. Section 501(c)(3), was formed in October 2004 to account for scholarship activities and financial literacy Financial literacy is the ability of individuals to make appropriate decisions in managing their personal finances. Raising levels of financial literacy is now a focus of government programmes in countries including[1] Australia, Japan, the United States and the UK. program. The activities of the Institute are included in the Society. PRINCIPLES OF COMBINATION 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 the Society who are elected by the governing gov·ern v. gov·erned, gov·ern·ing, gov·erns v.tr. 1. To make and administer the public policy and affairs of; exercise sovereign authority in. 2. Council of the Society. Because of common control, the accompanying financial statements reflect the combining of the Society and the Foundation. 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 over the membership period. Peer review registration fees are recognized over the calendar year. Peer review processing and review fees are recognized when review engagements are completed. Revenues from professional education programs are recognized in the periods the programs are held. Revenues collected in advance are deferred until earned. CASH AND EQUIVALENTS For financial statement purposes, the Society and the Foundation consider all investments with maturity at purchase of three months or less to be cash equivalents. ALLOWANCE FOR DOUBTFUL ACCOUNTS Allowance for Doubtful Accounts An estimation made by a company and documented on its balance sheet for receivables that might go uncollected. Notes: It is standard practice for a company to have funds set aside for money that cannot be collected. Allowance for doubtful accounts totaled $11 and $13 for the Society at April 30, 2007 and 2006, respectively, and totaled $6 at April 30, 2007 and 2006 for the Foundation. INVESTMENTS Investments are stated at fair value. Unrealized and realized gains Realized Gain A gain resulting from selling an asset at a price higher than the original purchase price. Notes: There may be tax consequences for a realized profit. and losses are included in investment income reported on the combining statements of activities. 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 basis over the lives of the leases. Deferred lease costs represent rent expense recognized in excess of rental payments made. OTHER INCOME Other income includes event sponsorships for various state committee meetings and conferences. ADVERTISING COSTS Advertising costs consist primarily of catalogs and brochures for educational seminars and other events. 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. 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 the Society donate their time to various activities of the Society 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 as a contribution. INCOME TAXES The Society is exempt from income taxes under Internal Revenue Code (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. ) Section 501(c)(6) and related California code sections. The Institute and the Foundation are both exempt from income taxes under Internal Revenue Code (IRC) Section 501(c)(3) and related California code sections. However, the organizations are subject to income taxes from activities unrelated to their tax-exempt 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 accounting principles generally accepted in the United States of America UNITED STATES OF AMERICA. The name of this country. The United States, now thirty-one in number, are Alabama, Arkansas, Connecticut, Delaware, Florida, Georgia, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Mississippi, Missouri, New Hampshire, 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 The Society shares certain administrative functions with CAMICO Mutual Insurance Company (CAMICO) and Group Insurance Trust (GIT). The Society charges GIT and is charged by CAMICO for estimated shares of related expenses. The Society also sells services to CAMICO and GIT. CAMICO provides professional liability insurance for Society members and is endorsed by the Society. Since CAMICO is not under common control with the Society and the Foundation, the financial statements do not reflect consolidation of CAMICO. Balances of $41 and $37 due from CAMICO as of April 30, 2007 and 2006, respectively, are included in the Society's 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 by CAMICO, net of expenses allocated from CAMICO, totaled $181 for 2007 and $176 for 2006. GIT is a multiple-employer welfare arrangement formed to provide health and welfare insurance plans to Society members at favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. group rates. The Society's Council 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 the Society's control of GIT's activities, the financial statements do not reflect consolidation of GIT. Balances of $45 and $48 due from GIT are included in the Society's other accounts receivable as of April 30, 2007 and 2006, respectively. Services purchased and expenses allocated for GIT totaled $277 for 2007 and $228 for 2006. 3. THE INSTITUTE The activities of CalCPA Institute are reflected in the financial statements of the Society. This entity was formed to account for scholarship activities and financial literacy programs. Its 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 2007 and 2006 are as follows:
2007 2006
Current assets $290 $488
Noncurrent assets 1,262 873
Total Assets 1,552 1,361
Current Liabilities 44 189
Net Assets 1,508 1,172
Total Net Assets and Liabilities 1,552 1,361
Revenue:
Scholarship donations 378 409
Financial literacy donations 116 178
Investment and other income 211 112
Total Revenue 705 699
Expenses:
Administration expenses 64 153
Scholarship distributions 305 247
Change in net assets 336 299
Net assets, beginning of year 1,172 873
Net assets, end of year $1,508 $1,172
4. PEER REVIEW PROGRAM The financial statements of the Society include the operations of the Peer Review Program, which administers the American Institute of Certified See certification. Public Accountants' 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. Peer review expenses are included in other activities in the statements of activities and the statements of functional expenses. Revenues, expenses, and net assets for the program are summarized as follows:
2007 2006
Revenues:
Registration fees $719 $702
Processing and review fees 223 167
Total peer review fees 942 869
Interest income 49 31
Other income 15 13
Total revenue 1,006 913
Expenses:
Reviewer costs and operating expenses 949 929
Change in net assets 57 (16)
Net assets, beginning of year 490 506
Net assets, end of year $547 $490
5. INVESTMENTS Investments consist of the following:
Society Foundation Combined
2007
Debt securities $4,505 1,337 5,842
Equity securities 7,906 6,190 14,096
Total $12,411 $7,527 $19,938
2006
Debt securities 4,148 1,268 5,416
Equity securities 6,680 6,245 12,925
Total $10,828 $7,513 $18,341
Investment income consists of the following:
Society Foundation Combined
2007
Interest and dividends $773 $729 $1,502
Net realized and unrealized gains 668 255 923
Investment income 1,441 984 2,425
Less investment expenses (34) (27) (61)
Investment income, net $1,407 $957 $2,364
2006
Interest and dividends $547 $459 $1,006
Net realized and unrealized gains 1,335 844 2,179
Investment income 1,882 1,303 3,185
Less investment expenses (27) (34) (61)
Investment income, net $1,855 $1,269 $3,124
6. PROPERTY AND EQUIPMENT Property and equipment consist of the following:
Society Foundation Combined
2007
Equipment $990 $712 $1,702
Software 886 529 1,415
Furniture 257 61 318
Leasehold improvements 679 4 683
Total 2,812 1,306 4,118
Less accumulated depreciation and (2,101) (1,116) (3,217)
amortization
Property and equipment, net $711 $190 $901
2006
Equipment $892 $636 $1,528
Software 822 526 1,348
Furniture 225 61 286
Leasehold improvements 672 - 672
Total 2,611 1,223 3,834
Less accumulated depreciation and (1,859) (1,031) (2,890)
amortization
Property and equipment, net $752 $192 $944
7. DEFERRED REVENUES Deferred revenues consist of the following: Society: 2007 2006 Dues $5,165 $4,883 Peer review registration fees 517 550 Advertising 213 206 Registration fees - - Institute - 83 Society total 5,895 5,722 Foundation: Registration fees, including Value Pricing (VP) program 2,272 1,835 Combined $8,167 $7,557 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. COMMITMENTS The Society 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 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 noncancelable sublease agreements with the Society and CAMICO, respectively, also expiring in July 2010. Sublease payments are based on square footage occupied. The Society also leases office space in Sacramento and Glendale under noncancelable operating leases expiring in February and November of 2008, respectively while San Diego's operating lease expires in June of 2011. 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: Society Foundation Combined 2008 $685 $388 $1,073 2009 543 404 947 2010 508 420 928 2011 134 324 458 Total $1,870 $1,536 $3,406 Rent expense, recorded net of the portion of the Society's lease paid by GIT, is as follows:
2007 2006
Society $693 $671
Foundation 376 372
Combined $1,069 $1,043
9. RETIREMENT PLANS Defined Benefit Pension Plan The Society sponsored a defined benefit pension plan for substantially all full-time employees of the Society and the Foundation. Effective May 31, 2003, the defined benefit pension plan has been frozen, and is therefore closed to further benefit accrual accrual, n continually recurring short-term liabilities. Examples are accrued wages, taxes, and interest. or new participants. The Society'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 . 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. :
2007 2006
Net periodic pension expense (income):
Society $(88) $(45)
Foundation (41) (22)
Total $(129) $(67)
Employer contributions $191 $403
Benefits paid $200 $197
The plan's funded status & balanced recognized are as follows:
2007 2006
Fair value of plan assets as of April 30 $7,913 $7,156
Projected & accumulated benefit obligation as of April 7,591 7,197
30
Funded status $322 $(41)
Accrued pension asset (liability) included in the $385 $(41)
statements of financial position
The following weighted average assumptions were used in the actuarial ac·tu·ar·y n. pl. ac·tu·ar·ies A statistician who computes insurance risks and premiums. [Latin computations:
2007 2006
Benefit obligation at April 30:
Discount rate 6.00% 6.25%
Rate of compensation increase N/A N/A
Net periodic pension expenses for years ended April 30:
Discount rate 6.25% 5.50%
Expected long-term rate of return on plan assets 8.00% 8.00%
Rate of compensation increase N/A N/A
The expected long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. rate of return on plan assets was developed by adding the weighted average historical risk premiums on the asset classes held in the plan to the long-term expectation of inflation. The plan's primary investment objective is a balance among capital appreciation, preservation of capital Preservation of Capital An investment strategy whose primary goal is to prevent the loss of an investment's total value. Notes: For investors using the capital preservation strategy to achieve their goal, they must ensure their portfolio is producing a return that is at , and current income, with a goal of attaining an 8% annual rate of return net of fees. To meet this objective, the plan is expected to maintain between 50% and 70% of its assets in marketable Marketable are securities that can be easily converted into cash. Such securities will generally have highly liquid markets allowing the security to be sold at a reasonable price very quickly. equity securities and the remainder mostly in marketable debt securities. The actual and projected assets allocations for the plan are as follows:
Target Actual Actual
Asset category 2008 2007 2006
Marketable equity securities 60% 62% 62%
Marketable debt securities 38% 36% 37%
Cash equivalents 2% 2% 1%
Total 100% 100% 100%
Expected employer contributions range from none to $100 for the year ending April 30, 2007 and are due in 2008. The expected benefit payments for the next 10 years are as follows: 2008 $294 2009 343 2010 370 2011 398 2012 416 2013-2017 2,416 In September 2006, the FASB FASB See: Financial Accounting Standards Board FASB See Financial Accounting Standards Board (FASB). issued Statement 158, Employers' Accounting for Defined Benefit Pension and Other Post-retirement Plans. Statement 158 will require the Society to show the funded status of its pension and retiree health care plans as a prepaid pre·pay tr.v. pre·paid, pre·pay·ing, pre·pays To pay or pay for beforehand. pre·pay  ment n. asset or accrued ac·crue v. ac·crued, ac·cru·ing, ac·crues v.intr. 1. To come to one as a gain, addition, or increment: interest accruing in my savings account. 2. liability and to show as part of net assets the net deferred and unrecognized gains and losses related to the plans. Previously, the net deferred and unrecognized gains and losses were netted in the prepaid asset or accrued liability recorded for the retirement plans. The Society will adopt provisions of Statement 158, as required, for the year ending April 30, 2008. Defined Contribution Plan 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 The Society and the Foundation sponsor a defined contribution 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. Effective May 1, 2003, the Society and the Foundation enhanced the plan and began making matching contributions Matching Contribution A type of contribution an employer chooses to make to his or her employee's employer-sponsored retirement plan. The contribution is based on elective deferral contributions made by the employee. up to 4% of salary. In addition, all employees, regardless of participation, earn an employer contribution equal to 3% of salary. Employer contributions for 2007 totaled $297 for the Society and $113 for the Foundation; and for 2006 totaled $266 for the Society and $137 for the Foundation. All employer contributions vest at a rate of 20% per year. Deferred Compensation Plan The Society maintains a deferred compensation plan under IRC Section 457. Deferred compensation assets consist of investments reserved for future payment of deferred compensation liabilities. There are no employer contribution expenses associated with this plan because all current contributions are made only by employees. 10. ADVERTISING COSTS The Foundation's advertising costs consist primarily of catalogs and brochures for events. Other current assets include capitalized advertising costs of $112 and $150 as of April 30, 2007 and 2006, respectively. Advertising costs charged to expense for the years ended April 30, are as follows:
2007 2006
Society $486 $354
Foundation 610 495
Combined $1,096 $849
11. NET ASSETS The changes in the Society's net assets for the years ended April 30, 2007 and 2006 are as follows:
Temporarily
Unrestricted Restricted Total
Net assets as of April 30, 2006: $10,318 $1,038 $11,356
Changes in net assets 1,928 206 2,134
Net assets as of April 30, 2007 12,246 1,244 13,490
Temporarily
Unrestricted Restricted Total
Net assets as of April 30, 2005: $7,898 $771 $8,669
Changes in net assets 2,420 267 2,687
Net assets as of April 30, 2006 10,318 1,038 11,356
As of April 30, 2007 and 2006 the net assets of the Society includes $1,244 and $1,038, respectively, that are temporarily restricted for scholarships and financial literacy. The net $206 increase during the year ended April 30, 2007 is the result of donations and investment appreciation, net of fees, totaling $625 less administration cost and scholarship distributions of $419. The net $267 increase during the year ended April 30, 2006 is the result of donations and investment appreciation, net of fees, totaling $668, less administration cost and scholarship distributions of $401. In addition, the Society has designated $3,500 and $2,000 of its net assets to a building fund as of April 30, 2007 and 2006, respectively. Changes in the unrestricted temporarily restricted and permanently restricted net assets for the years ended April 30, 2007 and 2006 are summarized below for the Foundation.
Temporarily Permanently
Unrestricted Restricted Restricted Total
Net assets as of $6,173 $47 $81 $6,301
April 30, 2006:
Changes in net 52 (30) 4 26
assets
Net assets as of 6,225 17 85 6,327
April 30, 2007
Temporarily Permanently
Unrestricted Restricted Restricted Total
Net assets as of $4,596 $54 $78 $4,728
April 30, 2005:
Changes in net 1,577 (7) 3 1,573
assets
Net assets as of 6,173 47 81 6,301
April 30, 2006
As of April 30, 2007 and 2006, the Foundation's permanently restricted net assets were $85 and $81, respectively, which represented a restricted endowment A transfer, generally as a gift, of money or property to an institution for a particular purpose. The bestowal of money as a permanent fund, the income of which is to be used for the benefit of a charity, college, or other institution. for the John F. Forbes Medal Fund. The earnings from this endowment are used to purchase the Forbes medal, which may be granted each year to the candidates in California receiving the highest grade score on the uniform CPA examination. During the years ended April 30, 2007 and 2006 the endowment earned $4 and $3, respectively. 12. CONCENTRATION OF CREDIT RISK The Society and the Foundation maintain a majority of their cash in money market accounts that are not federally insured and in bank deposit accounts that, at times, may exceed federally insured limits. As of April 30, 2007 the Society's cash and cash equivalents was comprised of deposits with a book balance of $5,626 and had a balance per financial institutions of $5,626, of which $5,403 was not insured by the Federal Deposit Insurance Corporation Federal Deposit Insurance Corporation (FDIC), an independent U.S. federal executive agency designed to promote public confidence in banks and to provide insurance coverage for bank deposits up to $100,000. (FDIC FDIC See: Federal Deposit Insurance Corporation FDIC See Federal Deposit Insurance Corporation (FDIC). ) or the Security Investor Protection Corporation (SIPC (Simply Interactive PC) An earlier umbrella term from Microsoft and Intel for a PC that works like a home appliance. For example, it has a sealed case, uses external connectors for expansion and boots in just a couple of seconds. ). As of April 30, 2007 the Foundation's cash and cash equivalents was comprised of deposits with a book balance of $2,081 and had a balance per financial institutions of $2,067, of which $1,967 was not insured by the FDIC or SIPC. 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 and cash equivalents. 13. LINE OF CREDIT The Society has a revolving loan agreement providing for borrowing of up to $3,000 at April 30, 2007. Under the agreement, interest is payable monthly at the prime rate minus .60% or the London InterBank Offered Rates London Interbank Offered Rate A short-term interest rate often quoted as a 1,3,6-month rate for U.S.dollars. ("LIBOR LIBOR See: London Interbank Offered Rate LIBOR See London interbank offered rate (LIBOR). ") plus 1.65%, whichever is lower. The revolving loan agreement was executed on January 22, 2007 and there have been no borrowings against the agreement to date. |
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