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. THE JACKSON LAKE RESERVOIR AND IRRIGATION COMPANY NOTES TO FINANCIAL STATEMENTS Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Natur@ of anerations . The Company is a non-profit, Colorado corporation which owns and maintains water reservoir and distribution facilities. The Company deri ves revenues from shareholder assessments, water storage and recreation leases. The shareholders were assessed fees of $55 and $50 per share in 1998 and 1997, respectively. The controlling interest of the Company (68%) is owned by The Fort Morgan Reservoir and Irrigation Company. The Fort Morgan Reservoir and Irrigation Company is also a non-profit, Colorado corporation. The entities are homogeneous in operation of the total water supply and irrigation system. . A minority interest of the Company (.8%) is owned by The Fort Morgan Water Company, Ltd., a limited partnership engaged in purchasing, management and leasing of water rights. All of these entities have several common directors as well as arrangements for sharing office space, personnel and expenses. Basis of A~count.ina . The Company utilizes the accrual basis of accounting. The financial statements of the Company have been prepared in conformity with generally accepted accounting principles. Although the Company is a non-profit Company, it does not meet the definition of a not-for-profit organization as defined in Statement of Financial Accounting Standards (SFAS) No. 116 and therefore does not follow the Not-For-Profit Audit and Accounting Guide. For purposes of the statement of cash flows, the Company considers all investments purchased with an original maturity of three months or less to be cash equivalents. 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. I I . I Rec:eivables The Company considers all accounts to be collectible and has not recorded an allowance for uncollectible accountS. Procertv and Eauicment Equipment, land and improvements are recorded at cost and estimated cost. Equipment depreciation is computed using the straight-line method with estimated useful lives of 3 to 10 years. -5- I.