2017 Issued Kimley-Horn Financials - Final with Disclaimer

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KIMLEY‐HORN AND ASSOCIATES, INC. NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2017 AND 2016 (SEE INDEPENDENT ACCOUNTANT’S REVIEW REPORT) 8 Note 1—Summary of significant accounting policies Nature of Business - Kimley-Horn and Associates, Inc. (the “Company”) is an indirect wholly-owned subsidiary of APHC, Inc. The Company provides engineering, planning, and environmental consulting services to public and private clients. Revenue Recognition - Fixed fee contracts are accounted for using the percentage-of-completion method. Contract revenues are recognized in the proportion that contract costs incurred bear to total estimated costs. Contract costs include direct labor, materials, equipment, subcontracts, and indirect costs allocable to contract performance. Cost-plus contract revenues are recognized as contract costs are incurred. Selling, general, and administrative costs are charged to expense as incurred. For contracts extending beyond one year, adjustments to cost estimates during the course of the contract are recorded in the accounting period in which they are estimated. Contract losses are recognized in full when such losses are estimated. Changes in project performance, project conditions, estimated profitability, and final contract settlements may result in revisions to costs and are recognized in the period in which revisions are determined. The asset “Costs and estimated earnings in excess of billings on uncompleted contracts” represents revenues recognized in excess of amounts billed. The liability “Billings in excess of costs and estimated earnings on uncompleted contracts” represents billings in excess of revenues recognized. Cash and Cash Equivalents - The Company considers all highly liquid, short-term investments with an original maturity of three months or less to be cash equivalents. Marketable Securities - Debt securities are considered to be held to maturity and are reported at amortized cost. Allowance for Uncollectible Accounts and Notes - An allowance for uncollectible accounts and notes is provided for using the allowance method, which is based on historical experience and management’s evaluation of outstanding accounts and notes receivable at the end of each year. The allowance for uncollectible accounts and notes was $3,240,000 and $2,645,000 as of December 31, 2017 and 2016, respectively. Properties and Equipment, Net - All properties and equipment are stated at cost. Expenditures for maintenance and repairs are expensed as incurred. When items are disposed of or replaced, the cost and accumulated depreciation amounts are removed from the accounts, and any gain or loss is included in other income. Depreciation - The cost of properties and equipment is depreciated using primarily the straight-line method over the following useful lives: Type of Property Life in Years Vehicles 5 years Office furniture and equipment 4 to 7 years Leasehold improvements Shorter of lease term or estimated useful life Buildings 39 years Depreciation expense totaled $7,916,481 in 2017 and $7,275,145 in 2016.