2012 CAFR - Encina Wastewater Authority

ENCINA WASTEWATER AUTHORITYNOTES TO FINANCIAL STATEMENTSJUNE 30, 2012 AND 2011Note 1 - Organization and Significant Accounting Policies: (Continued)Significant Accounting Policies (Continued)EstimatesThe preparation of financial statements in conformity with accounting principles generally accepted in theUnited States of America requires management to make estimates and assumptions that affect the reportedamounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financialstatements and the reported amounts of revenues and expenses during the reporting period. Actual resultscould differ from those estimates.Revenue RecognitionThe Authority recognizes revenues from wastewater treatment services and other fees when they areearned. Operating activities generally result from providing services and producing and delivering goods. Assuch, the Authority considers fees received from sewer services and other fees to be operating revenues.InvestmentsInvestments are stated at their fair value which represents the quoted or stated market value. Investmentsthat are not traded on a market, such as investments in external pools, are valued based on the stated fairvalue as represented by the external pool.Allowance for Doubtful AccountsManagement believes that all receivables were fully collectible; therefore no allowance for doubtful accountswas recorded as of June 30, 2012 and 2011.InventoryInventory consists primarily of materials used in the construction and maintenance of capital assets and isvalued at weighted average cost using the first-in, first-out (FIFO) method.Capital AssetsCapital assets purchased or acquired with a cost exceeding $2,000 and an estimated useful life of more thanone year are reported at historical cost. Contributed assets are recorded at fair market value as of the datereceived. A dditions, improvements and other capital outlays that significantly extend the useful life of anasset are capitalized. Other costs incurred for repairs and maintenance are expensed as incurred.Depreciation is calculated on the straight-line method over the following estimated useful lives:See accompanying independent auditors’ report.24