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SANTA ANA EMPOWERMENT CORPORATION Notes to the Financial Statements (Continued) June 30, 2010 and 2009 (e) Property and Equipment Property and equipment is capitalized at cost. It is the Organization's policy to capitalize expenditures for property and equipment in excess of $5,000. Property and equipment are being depreciated over their estimated useful lives of three to five years using the straight-line method. All property and equipment has been fully depreciated. (f) Restricted and Unrestricted Revenue and Support The Organization follows FASB ASC 958-605-25 (SFAS No. 116, Accounting for Contributions Received and Contributions Made). In accordance with this guidance, contributions received are recorded as unrestricted, temporarily restricted or permanently restricted support, depending on the existence and/or nature of any donor restrictions. Support that is restricted by the donor is reported as an increase in unrestricted net assets if the restriction expires in the reporting period in which the support is recognized. All other donor-restricted support is reported as an increase in temporarily or permanently restricted net assets, depending on the nature of the restriction. When a restriction expires (that is, when stipulated time restriction ends or purpose restriction is accomplished), temporarily restricted net assets are reclassified to unrestricted net assets and reported in the Statements of Activities as net assets released from restrictions. As described in Note (1)(b), the Organization accounts for its revenues using the accrual basis of accounting. The Organization's most significant source of revenues is the Empowerment Zone Grant from HUD. Grant revenue is recognized when expenditures are incurred. (g) Concentration of Risk The Organization receives all of its funding from HUD. The Organization has a written memorandum of understanding with HUD, which will remain in effect until July 2, 2010 or the effective date of HUD's revocation of this agreement. (h) Income Taxes The Organization is exempt from federal and state income taxes under Internal Revenue Code (IRC) Section 501(c)(3) and Section 23701d of the California Revenue and Taxation Code (CR & TC) and therefore has made no provision for income taxes in the accompanying financial statements. In addition, the Organization has been determined by the Internal Revenue Service not to be a "private foundation" within the meaning of the IRC Section 509(a). The Organization adopted the authoritative guidance for uncertainty in income taxes included in FASB ASC 740-10 Income Taxes (FASB Interpretation (FIN) No. 48, Accountingfor Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109), as amended by Accounting Standards Update (ASU) 2009-06, Implementation Guidance on Accounting for Uncertainty in Taxes and Disclosures Amendments for Nonpublic Entities. The adoption of ASC 740 (FIN 48) did not have an impact on the Organization's financial statements. 19C_18