2018 SEP Reviewed Financial Statements

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) SOUTHEASTERN PRINTING COMPANY, INC. AND SUBSIDIARY December 31, 2018 (See Independent Accountant's Review Report) - 7 - NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Property and Equipment: The Company capitalizes property and equipment acquisitions with a useful life of three years or more and an original cost of $5,000 or more. Property and equipment are stated at cost. Depreciation is computed on the straight-line method over the following estimated useful lives: Lives Building and improvements 10 - 40 Years Machinery, equipment and vehicles 3 - 10 Years Advertising Costs: The Company expenses the production costs of advertising as incurred. Advertising expense for the year ended December 31, 2018 was $55,971. Income Taxes: The Company, with the consent of its stockholder, has elected to have its income taxed as an S corporation under Section 1362 of the Internal Revenue Code. As such, the Company does not pay corporate income taxes and is not allowed net operating tax loss carrybacks or carryovers as deductions. Instead, the stockholder includes his proportionate share of the Company's taxable income or loss in his individual income tax return. Derivative Instruments: The Company uses derivatives to manage risks related to interest rate movements. Interest rate swap contracts designated and qualifying as cash flow hedges are reported at fair value. The gain or loss on the effective portion of the hedge initially is included as a component of other comprehensive loss and is subsequently reclassified into earnings when interest on the related debt is paid. The Company’s interest rate risk management strategy is to stabilize cash flow requirements by maintaining interest rate swap contracts to convert variable- rate debt to a fixed rate. Use of Estimates: The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Subsequent Events: Management evaluated all activity of the Company through March 30, 2019, the date the consolidated financial statements were available to be issued, and concluded that no subsequent events have occurred that would require recognition or disclosure in the consolidated financial statements or notes.