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1 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued • ADJUSTERS INTERNATIONAL, INC. AND SUBSIDIARIES December 31, 2016 and 2015 I • NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--Continued Significant Accounting Policies: The Companies follow the accounting standards set by the 1 Financial Accounting Standards Board ("FASB"). The FASB establishes accounting principles generally accepted in the United States of America ("GAAP") thae re followed to ensure consistent reporting of the financial condition, results of operationsQand cash flows of the Companies. References to GAAP issued by the FASB in these noteconsolidated consolidated financial statements are to the FASB Accounting Standards Codification,('FASB ASC"). Non-Controlling Interests: The Company follows FASB2ASC Topic 810, "Consolidation". FASB ASC Topic 810 establishes accounting and re ortmg standards for the non-controlling interest in a subsidiary. It clarifies that a non-cont oollinngg;nterest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements and further clarifies that its income=or loss should be included in net income or loss. Use of Estimates: The preparation of ,consolidated financial statements in conformity with GAAP requires management to make estm aces and assumptions that affect the reported amounts of assets and liabilities and disclosof contingent assets and liabilities at the date of the consolidated financial statements and'reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. `,‘, Method of Accounting:evenues from adjusting and consulting fees are recognized when earned, provided tha alloaterial contingencies associated with the various fee agreements have been eliminated. Accrued fees receivable are recorded for those adjusting and consulting fees I earned but not billed. Revenues from operating agreements are recognized pursuant to the terms of the respective agreements. Expenses are recognized when the obligation is incurred. Cash and Cash Equivalents: For purposes of the consolidated statements of cash flows, the Company considers all money market funds to be cash equivalents. Accounts Receivable: Accounts receivable are recorded when invoices are issued and are presented in the consolidated balance sheets net of the allowance for doubtful accounts. Accounts receivable are written off when they are determined to be uncollectible. The allowance for doubtful accounts is estimated based on the Company's historical losses, the existing economic conditions in the industry and the financial stability of its customers and affiliates. Management believes that an allowance for doubtful accounts of $87,236 is necessary at December 31, 2016 and 2015. -10- 1