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I I " I I I I I I ~ I I I I I I I .e I CUBELLIS BUSINESS TRUST :\iOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 2 - Summary of Significant Accounting Policies (Continued) Use of Estimates The preparation of financial statements in confomlity with accounting principles generally accepted in the uniteu States of America requires managcment to make estimates ami assumptions that affect the reported amounts of assets and liabilities and disclosurc of contingent assets and liabilities at the datc of the financial statcments and the reported amounts of revenues and expenses Juring the reporting period. Actual results could di ffer from those estimates. Revenue Recognition A substantial maJority of the Company's revenues are deriveu from time and materials contracts under which n;vellucs an: recognized and billed on the basis of costs incurred. A small number of contracts are fixed-pnce contracts under which revenues are recognized on the percentage of completion lTlethou. The asset resulting from costs incurred in excess of billings and the liability resulting from billings in excess of costs incurred were not material at Decemher 31. 2005 and 2004 and are included in accounts receivable and accmed expenses and other current liabilities. respectively. 011 the accompanying balallce sheets. Cash and Cash Equivalents The Company considers all highly liquid debt instmments with ..in milial maturIty of three months or less to be cash equivalents. Accounts Receivable The Company carries its accounts receivable net of an allowance tor doubtful accounts. On a periodic basis. the Company evaluates its accounts receivable and adjusts the allowances for doubtful accounts as necessary based on a history of past write-offs. collections and current crcdit conditions. The Company does not accme interest on trade receivables. Equipment and Improvements Equipment and improvements arc recorded at cost. ~rajor additions and improvements arc capitalized. while repairs and maintenance are charged to expense as incurrcd. Depreciation is computed using straight-line and accelerated methods over the estimated lives of the assets. Computer Software Computer software is recorded at cost and amortIzed over its estimated useful life. Accumulated amortization at December 31. 2U05 and 2UO-l was 5381.451 and S 175.35-l. rcspectively. Goodwill Goodwill represents the excess of consideration paid over the net assets obtained in connection with acquired businesses. In accordance \vith Statement of Financial Accounting Standan..ls No. 1-l2. "Goodwill and Other Intangible Assets" (SFAS 142), the Company is required to perform an annual assessment to delel111ine \vhether goodwill has been impaired. ~o impairmcnt has been identilied since the adoption of SFAS 1-l2. Advertising Costs The Company expellses advertising costs as they arc incurred. Advertising expense tor 2(JU5 and 2004 was approximately 5252.000 and 5212.000. respectively. 7