Page 39 - BAA CAFR 2017

BIRMINGHAM AIRPORT AUTHORITY
NOTES TO THE FINANCIAL STATEMENTS

NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

current information regarding the credit worthiness of the tenants and others
doing business with the Authority. When continued collection activity
results in receipt of amounts previously written off, revenue is recognized
for the amount collected.

R. Interest Capitalization
Interest cost related to construction financing is capitalized, net of interest
earned, on the borrowed proceeds, from the time of borrowing until
construction is substantially complete and the assets are placed in service.
Cumulative interest capitalized was $0 and $1,327,145 for the years ended
June 30, 2017 and 2016, respectively.

S. Bond Issue Costs, Original Issue Discount and Deferred Loss on Bond
Refunding
Bond issue costs, original issue discount and deferred loss on refunding on
long-term indebtedness are deferred and amortized using the effective
interest method over the life of the debt to which it relates.

T. Compensated Absences
The Authority's employees earn vacation leave at graduated rates based on
their length of service (one day per month of service initially) and up to
forty days of unused leave may be carried over to the following year. Sick
leave is earned at the rate of eight hours for each month of service and can
accumulate up to sixty days. The Authority funds sick leave as taken.

An accrual is recorded for accumulated unpaid vacation pay. As of June
30, 2017 and 2016, accrued vacation pay totaled $529,385 and $510,161,
respectively.

U. Arbitrage Rebate
The U.S. Treasury has issued regulations on calculating the rebate due the
Federal government on arbitrage profits, calculating arbitrage penalties, and
determining compliance with the arbitrage rebate provisions of the Tax
Reform Act of 1986. Arbitrage profits arise when the Authority temporarily
invests the proceeds of tax exempt debt in securities with higher yields. For
the years ended June 30, 2017 and 2016, the Authority has no arbitrage
rebate liability.

V. Retention Payable
The Authority enters into construction contracts that may include retention
provisions such that a certain percentage of the contract amount is held for
payment until completion of the contract and acceptance by the Authority.
The Authority’s policy is to record retention payable as contract work is
completed and accepted. Retention payable is included in construction
contracts payable on the accompanying statements of net position.
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