Annual Rept 2015.publisher. full report

Frenchman’s Creek, Inc. and Subsidiary

Notes to Consolidated Financial Statements

Note 1.

Nature of Organization and Significant Accounting Policies (Continued)

Common Property: The Association holds title to or has effective ownership of common property consisting of common area land, a club- house, a beach club, two golf courses, roads, street lighting, canals and ponds, and a gate and guardhouse, along with various vehicles and maintenance equipment and various other property. The Association is responsible for preserving and maintaining these properties.

In conformity with industry practice, the Association recognizes the following common property as assets on its consolidated balance sheet:

 Common personal property, including furniture and fixtures, equipment and vehicles, and  Common real property to which it has title or other effective ownership and that it can dispose of for cash while retaining the proceeds or is used to generate significant cash flows from members or from nonmembers on the basis of usage including the clubhouse and golf courses. Future Major Repairs and Replacements: The Association provides annually in its budget for certain future major repairs and replace- ments (see Note 5). It is the Association’s policy that major repairs or replacements to the clubhouse, beach club, golf courses and certain other recreational and common property are funded by member approved assessments and other sources of funds. For this reason the annual budget of the Association does not include a provision for reserve accounts for replacement or improvement to the Association’s recreational amenities and certain other common property. The budget of the association does not provide for reserve accounts for capital expenditures and deferred maintenance that may result in special assessments. Owners may elect to provide for reserve accounts pursuant to the provisions of section 720.303(6), Florida statutes, upon approval of not less than a majority of the total voting interest of the association.

Member Dues Collected in Advance: Member dues received in advance are deferred and recognized as income as they are earned over the membership year.

Interest Earned: It is the Association’s policy to allocate interest earned on cash accounts between the Operating Fund and the Replace- ment Fund.

Income Taxes: The Association files its federal income tax return under Internal Revenue Code Section 277, which requires segregation of member-related and nonmember-related activities (principally interest income and Realty’s operations). Member-related losses cannot be applied against nonmember-related income but may be carried forward to offset future member-related income. Each activity is subject to graduated income tax rates. Member-related activity losses are referred to as deferred expense carryforwards and cannot be used to offset nonmember-related activity profits. Due to the nature of the Association’s operations, the Association believes it is remote that it would utilize either type of loss car- ryforward. As a result, it is the Association’s policy not to disclose the deferred tax asset and related valuation allowances associated with the carryforwards. The Association has evaluated its tax positions and concluded that the Association has taken no uncertain tax positions that require ad- justment to the financial statements to comply with the provisions of the Income Taxes Topic of the FASB Accounting Standards Codifica- tion. With few exceptions, the Association is no longer subject to income tax examinations by the U.S. federal or state tax authorities for years prior to 2011.

2014/2015 Annual Report Page 37