Notes to financial statements

California CPA, Sept, 2004

(dollars in thousands)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

The California Society of Certified Public Accountants (CalCPA) is a nonprofit 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, which charges the Foundation for its estimated share.

PRINCIPLES OF CONSOLIDATION

The Board of Trustees of the Foundation consists of members of CalCPA who are elected by the governing Council 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) No. 117, Financial Statements of Not-For-Profit Organizations.

REVENUE RECOGNITION

Membership dues are recognized as revenue in the membership period. Peer review registration fees are recognized over the calendar year. Peer review processing and review fees are recognized as 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, CalCPA and the Foundation consider all investments with a maturity at purchase of three months or less to be cash equivalents.

INVESTMENTS

Investments are stated at market value.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost and depreciated using the straight-line method over estimated useful lives of 3 to 10 years.

INTANGIBLE ASSETS

Intangible assets represent the cost of trademarks and goodwill associated with the Foundation's acquisition of the Western Schools professional education materials. The Foundation is phasing out the Western Schools trade name over a three-year period ending April 30, 2005; accordingly, the Foundation is charging the intangible assets to expense over that period.

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.

ADVERTISING COSTS

Direct response advertising consists primarily of catalogs and brochures for educational seminars and other events. Direct response advertising costs are capitalized as other current assets and charged to expense in the period the events occur. Other advertising costs are expensed as incurred.

DONATED 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 (IRC) 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 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 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 GIT and is charged by CAMICO for estimated shares of related expenses. CalCPA also sells services to CAMICO and GIT.

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 $16 and $7 due from CAMICO as of April 30, 2004 and 2003, respectively, are included in CalCPA's other accounts receivable. Services purchased by CAMICO, net of expenses allocated from CAMICO, totaled $178 for 2004 and $156 for 2003.