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<br /> ROHL NETWORKS LIMITED PARTNERSHIP
<br /> NOTES TO FINANCIAL STATEMENTS
<br /> (SEE INDEPENDENT ACCOUNTANT'S REVIEW REPORT)
<br /> OCTOBER 31,2013 AND 2012
<br /> 1. GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(CONTINUED)
<br /> Concentration of Credit Risk
<br /> Financial instruments which potentially subject the Partnership to concentrations of credit risk consist principally of
<br /> cash deposits in excess of the FDIC insured limit of$250,000.At times,such balances may temporarily exceed these
<br /> insured limits.The Partnership has not experienced any losses in these accounts.
<br /> During the year ended October 31,2011,the Partnership was awarded a fiber placement contract for the Northeast
<br /> Service Cooperative (NSC") which is based in Mt. Iron, Minnesota. The NSC received funding from the U.S.
<br /> Department of Agriculture Rural Utilities Service.The initial value of the base contract was approximately$14,700,000
<br /> but has been expanded to include several amendments for a total amended contract value of approximately
<br /> $19,782,000. As of January 2013, the contract was complete. At October 31, 2013 and 2012, this customer
<br /> accounted for approximately$1,465,000 and$2,692,000,respectively,of"Contracts receivable including retainage'
<br /> The outstanding balance from this customer at October 31,2013 consists primarily of retainage.Management entered
<br /> into a settlement agreement with the customer to end litigation regarding collection of the balance outstanding and
<br /> additional damages(NOTE 8).
<br /> During the year ended October 31,2012,the Oklahoma combined contracts accounted for approximately$1,789,000
<br /> of gross profit. The contract receivable including retainage from this contract was approximately $496,000 and
<br /> $1,382,000 at October 31,2013 and 2012,respectively.The contract was completed subsequent to October 31,2013
<br /> and the retainage has been collected.
<br /> Additionally,at October 31,2013 and 2012,the Partnership has contract receivables including retainage from Lake
<br /> County projects of approximately$1,531,000 and$488,000,respectively.The contracts are expected to be completed
<br /> by December 31, 2014 and the Partnership expects to collect the retainage upon completion.
<br /> Cash and Cash Equivalents
<br /> For purposes of the statements of cash flows, the Partnership considers money market accounts to be cash
<br /> equivalents.
<br /> Property and Equipment, Net
<br /> Property and equipment are stated at cost. Depredation and amortization are computed using the straight-line
<br /> method over the economic useful lives ranging from three to seven years.
<br /> Long-Lived Assets
<br /> Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the
<br /> carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a
<br /> comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated
<br /> by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is
<br /> recognized for the amount by which the carrying amount of the asset exceeds the fair value of the asset.
<br /> Income Taxes
<br /> The Partnership recognizes and measures tax positions taken or expected to be taken in its tax return based on their
<br /> technical merit and assesses the likelihood that the positions will be sustained upon examination based on the fads,
<br /> circumstances and information available at the end of each period. Interest and penalties on tax liabilities, if any,
<br /> would be recorded in interest expense and other non-interest expense,respectively.
<br /> The Partnership is treated as a disregarded entity for federal and state income tax purposes and, accordingly,
<br /> generally would not incur income taxes or have any unrecognized tax benefits. Instead,its earnings and tosses are
<br /> • included in the tax return of its owners and taxed depending on the owners tax situation.As a result,the financial
<br /> statements do not reflect a provision for income taxes.The Partnership is subject to U.S.federal and state income tax
<br /> examinations for its initial tax year, October 31,2011.
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