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034 <br />JOHNSTON- LEE - HARNETT COMMUNITY ACTION, INCORPORATED <br />Notes to Financial Statements <br />June 30, 2013 <br />2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) <br />Property and Equipment <br />It is the Organization's policy to capitalize property and equipment with an original value of over <br />$1,000 and an estimated useful life of more than one year. Purchased property and equipment <br />are recorded at cost. <br />Depreciation is provided using the straight -line method over the estimated useful life of the <br />related asset. The following useful lives are used in determining depreciation: <br />Estimated <br />Useful Life <br />Buildings 20 -27 Years <br />Vehicles 5 -7 Years <br />Furniture and equipment 5 -10 Years <br />Expenditures for repairs and maintenance are charged to expense as incurred. The cost of <br />major renewals and betterments are capitalized and depreciated over their estimated useful <br />lives. Upon disposition of property and equipment, the related asset and accumulated <br />depreciation accounts are removed and any gain or loss is reflected in the statement of <br />activities for the period. Depreciation expense for the year ended June 30, 2013 was $286,370. <br />Donated property and equipment are recorded as revenue at their estimated fair value as of the <br />date of the contribution. If donors stipulate how long the assets must be used, the contributions <br />are recorded as restricted support. In the absence of such stipulations, contributions of property <br />and equipment are recorded as unrestricted support. <br />Certain property and equipment with a carrying value of $372,959 was acquired with funds <br />received under grant contract with governmental agencies. This property is used in connection <br />with the entity's various programs. If such programs were to terminate, arrangements would <br />need to be made with the grantor to dispose of the equipment. Equipment cannot be sold or <br />traded without permission from the grantor. <br />Revenue Recognition <br />Government contracts and awards represent reimbursement of costs incurred in direct support <br />of charitable programs. Such revenue is recognized when the direct costs are incurred. In <br />addition, government contracts and awards normally provide for the recovery of indirect costs <br />supporting the program effort. Indirect research recovery is recorded at rates established in <br />advance by the Organization through negotiations with the United States Government. <br />Contract services refer to revenues earned from competitive bids awarded by local <br />governments to provide building renovations and improvements. The related costs are shown <br />as an element of program services. <br />7 <br />