2018 Kimley-Horn Report with Disclaimer

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KIMLEY‐HORN AND ASSOCIATES, INC. NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2018 AND 2017 (SEE INDEPENDENT ACCOUNTANT’S REVIEW REPORT) 10 Note 1—Summary of significant accounting policies (continued) Fair Value Measurements - The Company follows ASC Topic 820, Fair Value Measurements and Disclosures, which defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. ASC 820 also establishes a framework for measuring fair value and expands disclosures about fair value measurements. ASC Topic 820 establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value: Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3: one or more significant inputs or significant value drivers that are unobservable or based on market assumptions. All of the Company’s investments were able to be valued using Level 1 inputs for fair value measurements. The following methods and assumptions were used to estimate the fair value of each class of financial instruments: Cash and Cash Equivalents, Accounts Receivable, and Accounts Payable - The carrying amount approximates fair value because of the short maturity of these instruments. Notes Receivable and Notes Payable - Since these notes have variable interest rates, the carrying value approximates the fair value. New Accounting Pronouncements - The Company is currently in the process of evaluating the impact of adoption of the following ASUs on the financial statements. In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers. Under the new standard, a company will recognize revenue when it delivers promised services to clients in the amount the company is due in exchange for those services. This standard also includes expanded disclosure requirements about the nature, amount, timing, and uncertainty of revenue and cash flows arising from existing contracts with clients. This standard will be effective for the Company for the calendar year ending December 31, 2019. In February 2016, the FASB issued ASU No. 2016-02, Leases. The standard requires all leases with lease terms over 12 months to be capitalized as a right-of-use asset and lease liability on the balance sheet at the date of lease commencement and to be classified as either finance or operating. This standard will be effective for the Company for the calendar year ending December 31, 2020.