2019 BBNC Annual Report - Page 50

The Corporation consolidates majority owned subsidiaries that are not considered variable interest entities for which the Corporation exercises operational control. The Corporation will also consolidate any variable interest entities of which it is the primary beneficiary. The Corporation consolidates AN-AN, C, LLC as the primary beneficiary of a variable interest entity. Included in the Corporation’s consolidated balance sheet as of March 31, 2019, is $18,347,000 of assets and $12,089,000 of liabilities of AN-AN, C, LLC, consisting primarily of a building and the associated long-term loan payable for the building. The Corporation contributed $6,463,000 of equity and guarantees the long-term loan payable of AN-AN, C, LLC. All significant intercompany accounts and transactions have been eliminated in consolidation. (C) CASH AND CASH EQUIVALENTS Cash and cash equivalents include cash and investments with initial maturities, at the time of purchase, of three months or less. Money market mutual funds that are part of the investment portfolio are not considered to be cash equivalents and are included in marketable securities. (D) MARKETABLE SECURITIES Marketable securities are used to supplement cash provided by operations in order to fund corporate overhead and shareholder dividends. The marketable securities are recorded at fair value and are classified as trading. The Corporation includes net unrealized gains and losses as a part of investment earnings. Realized gains or losses resulting from the sale of securities are also included in investment earnings. Cost of securities is determined using the first-in, first-out method. Interest income is recorded on the accrual basis. Dividends are recorded on the ex-dividend date. (E) INVESTMENTS IN UNCONSOLIDATED AFFILIATES Investments in unconsolidated affiliates are accounted for using the cost or the equity method, depending on whether the Corporation has the ability to exercise significant influence over operating and financial policies of an investee. Under the cost method, investments are carried at acquisition cost and distributions are recognized as income when received. Under the equity method, the Corporation’s share of affiliate earnings is included in income when earned, and distributions are credited to the investment when received. For flow-through entities (i.e., partnerships, limited liability companies, subchapter S corporations, etc.), the ability to exercise significant influence is presumed to exist if the percentage of ownership is equal to or greater than 3% to 5%. For other entities, significant influence is presumed to exist if the percentage of ownership is equal to or greater than 20%. The Corporation’s share of earnings or losses is determined either by its respective ownership percentage or, when appropriate, by using the hypothetical liquidation at book value method (HLBV). When using the HLBV, the Corporation evaluates at each balance sheet date, the amount it would receive or be obligated to pay if the investee were liquidated. The difference between this amount at the beginning of the period compared to end of the period plus cash received from the investments during the period and less amounts contributed to the investment during the period, represents the Corporation’s earnings or losses for the period from such investment. Cost method investments are reviewed for impairment in the occurrence of a triggering event indicating impairment. Equity method investments are analyzed for impairment on an ongoing basis. An impairment charge is recorded whenever the fair value of the investment is considered to be less than the carrying amount and the impairment is considered other than temporary. (F) TRADE ACCOUNTS RECEIVABLE Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is management’s best estimate of the amount of probable credit losses in existing accounts receivable. The Corporation determines the allowance based on its historical write-off experience and current economic conditions. Past-due balances over 60 days in a specified amount are reviewed individually for collectability. All other balances are reviewed in aggregate. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Corporation does not have any off-balance- sheet credit exposure related to its customers. The allowance for uncollectible accounts was $740,718 and $828,000 at March 31, 2019 and 2018, respectively. 48 BBNC FY2019 ANNUAL REPORT