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Arkansas Groundwater Users Association Notes to Financial Statements December 31.,2012 Note A—Nature of Activities and Summary of Significant Accounting Policies Nature of Activities Arkansas Groundwater Users Association(AUGA)is a non-profit organization established by a group of well users.A Board elected by the shareholders operates the association. Its goals are to provide augmentation water,through lease or purchase,to replace out of priority depletions,tributary to the Arkansas,to usable state line flows and senior water rights on the Arkansas and on Fountain Creek. Wells and well permits(including springs)that were decreed and permitted for irrigation,commercial, industrial,municipal,etc.,must be augmented to replace the water they consume according to the Amended Rules and Regulations Governing the Diversion and Use of Tributary Ground Water in the Arkansas River Basin,Colorado(July 1, 1996,the"Amended Rules"). Basis of Presentation The Organization is required to report information regarding its financial position and activities according to three classes of net assets:unrestricted net assets,temporarily restricted net assets,and permanently restricted net assets. Contributed Services During the twelve month period ended December 31,2012,the value of contributed services meeting the requirements for recognition in the financial statements was not material and has not been recorded. Estimates The preparation of financial statements,in conformity with generally accepted accounting principles, requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly,actual results could differ from those estimates. Property and Equipment Currently,the organization maintains a policy that all office equipment with a cost of$500 or more will be capitalized and the purchase of any machinery or equipment will be on a case by case basis. Property and equipment are recorded at cost and depreciated using the straight-line method. Income Taxes The Organization is a not-for-profit organization exempt from income taxes under Section 501(C)(5)of the Internal Revenue Service Code and classified by the Internal Revenue Service as other than a private foundation. Investments Investments in Certificates of Deposits are recorded at cost, investments in marketable securities with readily determinable fair values and all investments in debt securities are reported at their fair values in the Statement of Financial Position. Unrealized gains and losses are included in the change in net assets in the accompanying Statement of Activities. 6