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SFIN'I Services,Inc.and Subsidiaries,SFM Security Services,Inc., and Gaming Facilities Services,LLC Notes to the Consolidated Combined Financial Statements• For the year ended December 31,2016 • B. Summary of Significant Accounting Policies(Continued) Revenue and Cost Recognition Revenue from contract services is recognized on the percentage-of-completion method, measured by the percentage of labor hours incurred to date to estimated total labor hours for each contract. This method is used as management considers expended labor hours to be the best available measure of progress on these contracts.The asset,"costs and estimated earnings in excess of billings on uncompleted contracts", represents revenues recognized in excess of amounts billed. The liability, `Billings in excess of costs and estimated earnings on uncompleted contracts",represents billings in excess of revenues recognized. Advertising Expense Advertising costs are expensed as incurred.For the year ended December 31,2016 these costs totaled S26,479. Depreciation The Company capitalizes all major assets and depreciates them on the straight-line method over the estimated useful life of the asset. Contract Receivable The Company grants credit under standard terms without collateral to its customers, substantially all of whom are local.Generally,the Company accounts for uncollectible accounts using the direct write-off method,during the year,and at year-end the accounts receivable aging is evaluated and a specific allowance to reserve for doubtful accounts is recorded. As of December 31,2016,the allowance for doubtful accounts totaled$100,067. Income Taxes The Company,with consent of its shareholders,has elected under the Intemal'Revenue Code to be an S corporation.In lieu of corporation income taxes,the shareholders of an S corporation are taxed on their proportionate share of the Company's taxable income.Therefore,no provision or liability for federal income taxes has been included in these financial statements. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts and disclosures. Accordingly,actual results could differ from those estimates. C. Line of Credit The Company has a$1,500,000 asset based revolving line of credit for cash advances. With a variable interest rate of 3.25%plus the index,4.75%at December 31,2016. As of December 31, 2016, the outstanding balance was$112,759.This line of credit expires on October 20, 2017. The obligations are guaranteed by the shareholders and the assets of the Parent Company. 8 IIISFM ... SEaVKES,IMC.