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THE GREELEY AND LOVELAND IRRIGATION COMPANY <br />Greeley, Colorado <br />Notes to Financial Statements <br />October 31, 2000 <br />Note 1 - Summary of Significant Accounting Policies <br />This summary of significant accounting policies of The Greeley and <br />Loveland Irrigation Company is presented to assist in understanding the <br />Company's financial statements. The financial statements and notes are <br />representations of the Company's management who are responsible for <br />their integrity and objectivity. These accounting policies conform to <br />generally accepted accounting principles and have been consistently <br />applied in the preparation of the financial statements. <br />Nature of Business <br />The Greeley and Loveland Irrigation Company is a membership <br />organization formed to operate as a mutual irrigation company which <br />provides its members with irrigation and domestic water. The Company <br />operates a reservoir and ditch system in the vicinity of Loveland to <br />Greeley, Colorado. <br />Cash and Cash Equivalents <br />The Company considers all highly liquid investments with a maturity of <br />three months or less when purchased to be cash equivalents. <br />The Company places its temporary cash investments with high credit <br />quality financial institutions. At times, such cash balances and <br />temporary investments may be in excess of the FDIC insurance limits. <br />Property and Equipment <br />All property and equipment are depreciated over the estimated useful <br />lives of the assets (5 -50 years), using the straight -line method. <br />Maintenance and repairs are charged to expense as incurred. When <br />depreciable assets are disposed of, the cost and related accumulated <br />depreciation are removed from the accounts and the resulting gain or <br />loss is reflected in earnings. <br />Deferred Income Taxes Payable <br />Temporary differences in the basis of assets and liabilities for <br />financial statement and income tax reporting arise from using different <br />methods and periods to calculate depreciation and different methods to <br />recognize gain on the sale of land and other fixed assets. Provision <br />has been made for current income taxes due on taxable income and for <br />the deferred income taxes on the temporary differences. <br />Income Taxes <br />The Company is exempt from Federal and Colorado income taxes under IRC <br />Section 501(c) (12), if 85% or more of gross revenue is received from <br />shareholders. During the current fiscal year, the 85% test was not <br />met, therefore, the Company was required to file Federal and State <br />Corporate income tax returns. <br />7 <br />