AgdaPkt 2020-07-13 Special Joint SA PFA

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6.C. - Page 63 of 124 Redwood City Improvement Association Notes to Financial Statements November 30, 2019 and 2018 Functional Allocation of Expenses The costs of program and supporting services activities have been summarized on a functional basis in the statements of activities. The statements of functional expenses present the natural classification detail of expenses by function. Accordingly, certain costs have been allocated among the programs and supporting services benefited. The financial statements report certain categories of expenses that are attributed to more than one program or supporting function. Therefore, expenses require allocation on a reasonable basis that is consistently applied. The expenses that are allocated include occupancy, depreciation, and amortization, which are allocated on a square footage basis, as well as salaries and wages, benefits, payroll taxes, professional services, office expenses, information technology, interest, insurance, and other, which are allocated on the basis of estimates of time and effort. Accounting Standard Update (ASU) Effective in the Current Year Financial Accounting Standards Board (FASB) has issued ASU 2016-14, Presentation of Financial Statements for Not -For -Profit Entities. The provisions of the ASU replace the existing three classes of net assets with two new classes (net assets without donor restrictions and net assets with donor restrictions). The Association has adopted this update in the current year. Subsequent Events The Association has evaluated subsequent events through February 21, 2020, the date the financial statements were available to be issued. Management has determined that there were no subsequent events or transactions that would have a material impact on the current year financial statements. Note 2 - Liquidity and Availability Financial assets available for general expenses, that is, without donor or other restrictions limiting their use, within one year of the statement of financial position date, comprise of $758,154 cash and cash equivalents. Note 3 - Market Value of Financial Assets and Liabilities The Association determines the fair market values of certain financial instruments based on the fair value hierarchy established in FASB ASC 820-10-50, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value. The following provides a summary of the hierarchical levels used to measure fair value: Level 1 - Quoted prices in active markets for identical assets or liabilities. Level 2 - Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities. Level 3 - Unobservable inputs that are supported by little or no market activity. The Association did not have any assets or liabilities recorded at fair value as of November 30, 2019. N 269