AgdaPkt 2020-07-13 Special Joint SA PFA

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6.C. - Page 36 of 124 REDWOOD CITY IMPROVEMENT ASSOCIATION (A California Nonprofit Corporation) NOTES TO FINANCIAL STATEMENTS NOVEMBER 30, 2018 AND 2017 Property and Equipment The Association capitalizes property and equipment purchased or donated with a fair value over $5,000. Lesser amounts are expensed when purchased. Donations of property and equipment are recorded as contributions at their estimated fair value, if known. Such donations are reported as unrestricted contributions unless the donor has restricted the donated asset to a specific purpose. There is no donation of property or equipment in the current year. Routine maintenance and repairs are charged to expense as incurred. Depreciation is computed on the double decline method based on the assets' estimated useful lives ranging from three to ten years. Current year depreciation expense was $77,099. Donated Services, Goods, and Facilities From time to time, there might have a number of volunteers who have donated their time and experience to the Association's program services during the year. However, these donated services are not reflected in the financial statements since there is no readily determined method of valuing the services. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Actual results could differ from those estimates. Income Taxes The Association is a nonprofit public benefit corporation that is exempt from income taxes under Section 501(c)(3) of the Internal Revenue Code (IRC) and classified by the Internal Revenue Service (IRS) as other than a private organization. Contributions received qualify as tax deductible gifts as provided in Section 170(c)(2). The Association is also exempt from California State franchise and income taxes under Section 23701(d) of the California Revenue and Taxation Code. Accordingly, no provision for income taxes has been reflected in these financial statements. The Association does not have unrelated business income in the 2018 fiscal year. The Association's Federal Form 990, Return of Association Exempt From Income Tax, and State Form 109, California Exempt Association Business Income Tax Return, are subject to examination by the IRS for three years, and by the State Franchise Tax Board for four years, after they were filed. The Association is not aware of any such examinations at this time. The Association has adopted FASB ASC Topic 740 that clarifies the accounting for uncertainty in tax positions taken or expected to be taken on a tax return and provides that the tax effects from an uncertain tax position can be recognized in the financial statements only if, based on its merits, the position is more likely than not to be sustained on audit by the taxing authorities. Management believes that all tax positions taken to date are highly certain, and, accordingly, no accounting adjustment has been made to the financial statements. Allocation of Functional Expenses The costs of providing the various programs and other activities have been summarized on a functional basis in the statement of functional expenses. Accordingly, certain costs have been allocated among the programs and fundraising activities benefited. 7 242