Page 29 - CALEA 2015 Annual Report

For the Year Ended December 31, 2015
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
The Commission on Accreditation for Law Enforcement Agencies, Inc. (CALEA) is a private, nonprofit corporation founded in 1979 to improve the delivery of public safety services, primarily through programs for law enforcement agency accreditation; public safety communications accreditation; public safety training academy accreditation; and campus security accreditation, organized and maintained in the public interest serving the United States, Canada, and Mexico. CALEA’s specific purposes include:
· Establish and maintain standards for the operation of public safety organizations;
· Administer an accreditation process that encourages applicant agencies to comply with applicable standards;
· Conduct on-site assessments of agencies’ compliance with applicable standards and to recognize compliance with those standards by the issuance of a certificate of accreditation;
· Conduct education, training and research programs and to publish the results thereof; and
· Develop and maintain relationships with national, regional, state and local associations, and agencies in the criminal justice and related fields.
BASIS OF ACCOUNTING
The financial statements of CALEA have been prepared on the accrual basis of accounting. Accordingly, revenue is recognized when earned and expenses are recognized when the obligation is incurred.
CASH AND CASH EQUIVALENTS
CALEA considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. Money market deposit accounts included in the investment portfolio are not considered cash equivalents.
ACCOUNTS RECEIVABLE
Accounts receivable are stated at the amount management expects to collect from outstanding balances. CALEA pursues collection of past due installments for agencies that have signed continuation-style contracts and from new agencies that have obligated, in writing, to the accreditation fees and processes. CALEA uses the allowance method to reserve for uncollectible accounts.
INVENTORY
Inventory consists of emblem items and is stated at the lower of cost or market value on the first-in, first-out basis.
INVESTMENTS
Investments, which are reported at fair value, consist of equity and fixed-income mutual funds and money market funds. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Gains and losses on investments, including changes in fair value, are reported as investment income (loss) in the accompanying statement of activities.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 820, Fair Value Measurements and Disclosures, defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles (GAAP) and requires disclosures about fair value measurements for assets and liabilities measured at fair value on a recurring basis. The ASC emphasizes that fair value is a market-based measurement, not an entity-specific measurement, and therefore, a fair value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, the ASC established a fair value hierarchy based upon the transparency of the inputs to the valuation of an asset or liability. These inputs may be observable, whereby the market participant assumptions are developed based on market data obtained from independent sources, and unobservable, whereby assumptions about market participant assumptions are developed by the reporting entity based on the best information available in the circumstances.
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