BBSR 2002 Annual Report - Bermuda Institute of Ocean Sciences

1. OrganizationNOTES TO FINANCIAL STATEMENTSDECEMBER 31, 2002 AND 2001The Bermuda Biological Station for Research, Inc. (“Station”) was founded in 1903 and was incorporated in the State of New York in 1926 as a U.S.not-for-profit organization. The Station is exempt from U.S. income taxes pursuant to Sections 501(c)(3) and 509(a) of the Internal Revenue Code.The Station’s mission is to conduct science research and education of the highest quality from the special perspective of a mid-ocean island. Itprovides well-equipped facilities and responsive staff support for visiting scientists, faculty and students from around the world. The Stationaccomplishes its educational mission by conducting undergraduate and graduate level courses, and elementary and secondary school programs.The Station is supported by gifts, grants and contracts received from the U.S. and Bermuda governments as well as various individual, corporateand foundation donors. Additionally, the Station charges fees for the use of its various scientific, marine and housing facilities. The Station operatesin Bermuda where its assets, except for its investments and certain cash balances, are held.2. Summary of Significant Accounting PoliciesBasis of AccountingThe accompanying financial statements have been prepared on the accrual basis.Use of EstimatesThe preparation of financial statements, in conformity with accounting principles generally accepted in the United States of America, requiresmanagement to make estimates and judgments that affect the reported amounts of assets and liabilities and disclosures of contingencies at thedate of the financial statements and revenues and expenses recognized during the reporting period. Actual results could differ from thoseestimates.Financial Statement PresentationThe Station is required to report information regarding its financial position and activities according to three classes of net assets: permanentlyrestricted, temporarily restricted, and unrestricted. Gifts and bequests that create endowment funds to provide a permanent source of income areclassified as permanently restricted net assets. Gifts of cash and other assets with stipulations that they be used for a particular purpose or for aspecified time period are classified as temporarily restricted assets until the purpose or stipulated time restriction is met. All other net assets areclassified as unrestricted.ContributionsContributions, including unconditional promises to give, are recognized as revenue in the period received or pledged. Contributions of assetsother than cash are recorded at their estimated fair value and are recorded as increases in unrestricted net assets unless the donor places restrictionson their use. Contributions due after one year are discounted at a risk-free rate. Amortization of the discount is recorded annually asadditional contribution revenue in accordance with the donor-imposed restrictions, if any.Cash EquivalentsFor the statements of cash flows, the Station considers all highly liquid investments, with a maturity of three months or less, to be cashequivalents.InventoryThe Station’s inventory is reported at the lower of cost or market (first in, first out) and consists of gift shop merchandise, cafeteria, laboratory andscuba supplies held for resale.Charitable Gift AnnuityThe charitable gift annuity is subject to the restrictions of the gift instrument requiring the Station to pay a stipulated amount to designated beneficiaries.Such payments terminate at the time specified by the donor. Contribution revenues are recognized at the date of receipt after recordingliabilities for the present value of the estimated future payments to be made to the donors and/or other beneficiaries. The liability is adjusted forthe change in the value of the asset, accretion of the discount and other changes in the estimate of future benefits.Foreign CurrencyThe Station’s functional currency is U.S. dollars. There are no foreign currency transaction gains or losses from transaction in the Bermuda dollarbecause it is equivalent to the U.S. dollar.3. Concentrations of Credit RiskThe Station’s financial instruments that are exposed to concentrations of credit risk consist primarily of cash, investments and contributionsreceivable. The Station places its cash with high credit quality financial institutions. The Station believes no significant concentrations of creditrisk exist with respect to its cash and cash equivalents. Due to the diversification and quality of investments held, the Station believes that it hasminimized risk concentration regarding its investments. At December 31, 2002, the Station had outstanding contributions receivable from eightdonors totaling $1,920,000. At December 31, 2001, the Station had outstanding contributions receivable from six donors totaling $1,095,000.28