Notes to financial statements.

(dollars in thousands)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

   The California Society of Certified Public Accountants (CalCPA) is a nonprofit incorporated membership organization whose purpose is to advance the profession of accountancy in the State of California. CalCPA provides its members with general and technical resources through its chapters and committees. California Certified Public Accountants Education Foundation (Foundation) is a nonprofit public benefit corporation organized to provide continuing professional education to Certified Public Accountants (CPAs) and other interested parties. Revenues for both CalCPA and the Foundation are derived primarily from CPAs in California. CalCPA and the Foundation share some administrative functions. Such costs are incurred by CalCPA, which charges the Foundation for its estimated share.

   PRINCIPLES OF CONSOLIDATION

   The Board of Trustees of the Foundation consists of members of CalCPA who are elected by the governing Council of CalCPA. Because of common control, the accompanying financial statements reflect the consolidation of CalCPA and the Foundation. Material transactions between the entities have been eliminated in consolidation.

   BASIS OF PRESENTATION

   The financial statements are presented in conformity with Statement of Financial Accounting Standards (SFAS) No. 117, Financial Statements of Not-For-Profit Organizations.

   REVENUE RECOGNITION

   Membership dues are recognized as revenue in the membership period. Peer review registration fees are recognized over the calendar year. Peer review processing and review fees are recognized as review engagements are completed. Revenues from professional education programs are recognized in the periods the programs are held. Revenues collected in advance are deferred until earned.

   CASH AND EQUIVALENTS

   For financial statement purposes, CalCPA and the Foundation consider all investments with a maturity at purchase of three months or less to be cash equivalents.

   INVESTMENTS

   Investments are stated at market value.

   PROPERTY AND EQUIPMENT

   Property and equipment are stated at cost and depreciated using the straight-line method over estimated useful lives of 3 to 10 years.

   INTANGIBLE ASSETS

   Intangible assets represent the cost of trademarks and goodwill associated with the Foundation's acquisition of the Western Schools professional education materials. The Foundation is phasing out the Western Schools trade name over a three-year period ending April 30, 2005; accordingly, the Foundation is charging the intangible assets to expense over that period.

   DEFERRED LEASE COSTS

   Rent expense is recognized on a straight-line basis over the lives of the leases. Deferred lease costs represent rent expense recognized in excess of rental payments made.

   ADVERTISING COSTS

   Direct response advertising consists primarily of catalogs and brochures for educational seminars and other events. Direct response advertising costs are capitalized as other current assets and charged to expense in the period the events occur. Other advertising costs are expensed as incurred.

   DONATED SERVICES

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