Financial Statement CPA Certified EXEMPT

Home Browse Search

Hycon Investments, LLC Notes to Financial Statements June 30, 2024 7 Note 2 Summary of Significant Accounting Policies (Continued) Fair Value of Financial Instruments (Continued) Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 820 Fair Value Measurement 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 at the measurement date.” The Company uses the following three level valuation hierarchy based upon observable and non- observable inputs: Level 1 – Quoted market prices in active markets for identical assets or liabilities that are accessible at the measurement date. Level 2 – Other than quoted market prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3 – Unobservable inputs that are used to measure fair value to the extent that observable inputs are not available. This valuation method utilizes management’s estimates of market participant assumptions. The fair value of the Company’s investments was determined based on “Level 3” due to the use of significant unobservable inputs in their valuation. These investments are carried at cost, less impairments, if any, as permitted under ASC 321, Equity Securities. Management performs periodic assessments to evaluate if any impairment or observable price changes in orderly transactions for identical or similar investments of the same issuer have occurred. As of June 30, 2024, no such impairment has been identified. Income Taxes The Company, a limited liability company, is treated as a Partnership for income tax purposes and does not pay federal or state corporate income taxes on its taxable income. Instead, the members are liable for income taxes on the Company income. Uncertain Tax Position The Company accounts for uncertain tax positions in accordance with FASB ASC 740 Income Taxes. This pronouncement prescribes a recognition threshold and measurement process for financial statement recognition of uncertain tax positions taken or expected to be taken in a tax return. The interpretation also provides guidance on recognition, derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. Contracts Receivable Contracts receivable are carried at the outstanding amount due less an estimate for credit losses, if deemed necessary. Contract Assets and Liabilities Billing practices are governed by the contract terms of each project based upon costs incurred, achievement of milestones or predetermined schedules. Billings do not necessarily correlate with revenue recognized over time using the percentage-of-completion method. Contract assets consist of unbilled receivables and retainage. Unbilled receivables represent the estimated value of unbilled work for projects with performance obligations recognized over time. Retainage represents a portion of the contract amount that has been billed, but for which the contract allows the customer to retain a portion of the billed amount until final contract settlement, which is generally, from 5% to 10% of contract billings.