Page 32 - 2019 Apple Supply Chain Co-op, Inc. Annual Report

CENTRALIZED SUPPLY CHAIN SERVICES, LLC
NOTES TO THE FINANCIAL STATEMENTS
December 31, 2019 and 2018

NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)

Property and Equipment: Property and equipment are stated at cost. Depreciation is provided by the
straight-line method over the estimated useful lives of assets. Leasehold improvements are depreciated
over the shorter of the lease term or the estimated useful life of the improvements. Estimated useful lives
used in calculating depreciation are as follows:

Computer and office equipment 3 – 5 years
Equipment and furniture 7 years
Leasehold improvements 7 years

Repairs and maintenance are expensed as incurred. Major renewals and betterments are capitalized.

Income Taxes: The Company is a limited liability company formed under state statutes and taxed for federal
and state purposes as a partnership. Therefore, each member reports their proportionate share of the
Company’s taxable income or loss on their respective income tax return.

Under guidance issued by the Financial Accounting Standard Board with respect to accounting for
uncertainty in income taxes, a tax position is recognized as a benefit only if it is “more likely than not" that
the tax position would be sustained in a tax examination, with a tax examination being presumed to occur.
The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized
on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded.

The Company is subject to U.S. federal income tax as well as income tax of the states of California, Arizona,
and Missouri. The Company is subject to examination by taxing authorities for the tax years ending on or
after 2016 for federal and the states of California and Missouri. The Company does not expect the total
amount of unrecognized tax benefits to significantly change in the next 12 months.

The Company recognizes interest and/or penalties related to income tax matters in income tax expense.
The Company did not have any amounts accrued for interest and/or penalties at December 31, 2019 and
2018, respectively.

Members’ Equity: After considering the Company’s need for capital and reserves, the Board of Directors
shall elect to distribute to the Company’s members dividends based upon each member’s pro rata share of
net earnings, which are allocated to the Concept Co-op’s based upon each Concept Co-op’s proportionate
share of activity conducted by Centralized Supply Chain Services, LLC. As of December 31, 2019, the
dividends were undeclared, and accordingly, were not recorded in the balance sheets or statements of
members’ equity. The Company anticipates paying out 100% of its 2019 net earnings to its members as
dividends during 2020.

The Company receives freight rebates quarterly or annually, which are distributed to the Concept Co-ops
on a quarterly or annual basis. These distributions are allocated to the Concept Co-ops based on their pro
rata share of the rebates earned by CSCS.

Reclassifications: Certain prior year amounts have been reclassified to conform with the current year
presentation. These reclassifications had no effect on net earnings or members’ equity.

Subsequent Events: Management has performed an analysis of the activities and transactions subsequent
to December 31, 2019 to determine the need for any adjustments to and disclosures within the financial
statements for the period ended December 31, 2019. Management has performed their analysis through
__________, 2020, the date the financial statements were available to be issued.

(Continued)

7.