AMERICAN WELDING SOCIETY, INC., AND AWS FOUNDATION NOTES TO COMBINED FINANCIAL STATEMENTS DECEMBER 31, 2015 1. NATURE OF ORGANIZATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Allocation of Expenses The cost of performing the Organizations’ various activities have been summarized on a functional basis in the accompanying Combined Statement of Activities. Accordingly, certain costs have been allocated among the activities benefited. Income Taxes American Welding Society, Inc. and AWS Foundation are not-for-profit corporations and are exempt from federal income taxes under Section 501(c)(3) of the Internal Revenue Code. Accordingly, no provision for federal or state income tax is required for revenues derived from its tax-exempt function. For income tax purposes, publication advertising revenue and rental income are considered "unrelated business income” and are subject to income tax. The Organizations are taxed on unrelated business income less the related expenses. International Excellence, LLC and Weldmex, LLC are disregarded entities for tax purposes. The Organizations recognize and measure tax positions based on their technical merit and assess the likelihood that the positions will be sustained upon examination based on the facts, circumstances and information available at the end of each period. Interest and penalties on tax liabilities, if any, would be recorded in interest expense and other non-interest expense, respectively. The U.S. Federal and State of Florida jurisdictions are the major tax jurisdictions where the Organizations file informational tax returns. The Organizations are generally no longer subject to U.S. Federal or State examinations by tax authorities for years before 2012. Recent Accounting Pronouncement Lease Accounting In February 2016, the Financial Accounting Standards Board (“FASB”) issued an accounting standard update which amends existing lease guidance. The update requires lessees to recognize a right-of-use asset and related lease liability for many operating leases now currently off-balance sheet under current U.S. GAAP. The Organizations are currently evaluating the effect the update will have on their financial statements but expect upon adoption that the update will have a material effect on the Organization’s financial condition due to the recognition of a right-of-use asset and related lease liability. The Organization’s do not anticipate the update having a material effect on the Organization’s results of operations or cash flows, though such an effect is possible. The update is effective using a modified retrospective approach for fiscal years beginning after December 15, 2019, and for interim periods within fiscal years beginning after December 15, 2020, with early application permitted. Reclassifications Certain amounts in the 2014 combined financial statements have been reclassified to conform to the 2015 presentation. Subsequent Events The Organizations have evaluated subsequent events through April 1, 2016, which is the date the combined financial statements were available to be issued. 2. NOTE RECEIVABLE During the year ended December 31, 2012, AWS entered into a secured first mortgage note receivable with 550 Lejeune, LLC, the buyer of AWS’s former headquarters. In January 2015, the outstanding note receivable balance of $3,680,000 was fully collected. 50 WELDING JOURNAL / JUNE 2016
Welding Journal | June 2016
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