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CHARLES HOUSE ASSOCIATION <br />Notes to Financial Statements <br />General Expenditures (Continued) <br />Functional Allocation of Expenses <br />Income Taxes <br />Uncertain Tax Positions <br />Right-To-Use Leased Asset and Lease Liabilities <br />Property and Equipment <br />The costs of providing program and other activities have been summarized on a functional basis in the <br />statements of activities and functional expenses.Accordingly,certain costs have been allocated among <br />the program and supporting services benefited.Such allocations are determined by management on an <br />equitable basis. <br />NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) <br />The Organization is exempt from income tax under Section 501(c)(3)of the Internal Revenue Code, <br />and classified as a public charity under 170(b)(1)(A)(vi).It is also exempt from North Carolina <br />income and franchise taxes under the North Carolina Non-Profit Corporation Act.It is responsible for <br />unrelated business income,if any.No provision has been made for income taxes in the financial <br />statements. <br />It is the Organization's policy to capitalize property and equipment with an original cost or donated <br />value of $2,500 or more and an estimated useful life of more than one year.Purchased property and <br />equipment are recorded at cost.Donated property and equipment are recorded as revenue at their <br />estimated fair value as of the date of the contribution.Such donations are reported as unrestricted <br />contributions unless the donor has restricted the donated asset to a specific purpose.Depreciation is <br />computed over the straight-line method over the estimated useful lives of the assets,which range from <br />three to thirty years. <br />The allocation of staffing expenses is based on time and effort studies of the Organization's employees. <br />The remaining categories on the statement of functional expenses are allocated based on approximate <br />direct usage. <br />Leases that provide the Organization the right-to-use an asset for a period of more than one year are <br />considered a capital asset.Right-to-use leased assets are recorded at the initial measurement of the <br />lease liability which equals the present value of all payments expected to be made during the lease <br />term. The right-to-use leased assets are amortized on a straight-line basis over the term of the lease(s). <br />Lease liabilities represent the Board's financial obligation to make lease payments during the term of <br />the lease and is measured at the present value of future lease payments. <br />Accordingly,the related resources for the latter have been excluded in the quantitative information <br />detailing the financial assets available to meet general expenditures within one year. <br />The Organization believes it has appropriate support for any tax positions taken,and as such,does not <br />have any uncertain tax positions that are material to the financial statements.It should be noted the <br />prior three tax returns remain subject to examination by major tax jurisdictions. <br /> <br />Page 9 <br />Docusign Envelope ID: FE6E03E9-3378-4BE8-B2E5-0623619296B7