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Notes to Consolidated Financial Statements
(continued)
June 30, 2011 and 2010
(f) Rental Revenue Recognition
Base rent income relating to the LLC is recognized on a straight-
line basis, rather than in accordance with lease payment sched-
ules, for purposes of recognizing a constant annual rental income.
Scheduled base rent increases and the effects of rent abatements
are spread evenly over the terms of the respective leases. Differ
ences between the straight-line rents recorded and the amounts
actually received are included in deferred rent receivable. Allow
ances are provided for uncollectible amounts.
(g) Rental Property
Building and building improvements of the LLC are carried at cost
and are depreciated, using the straight-line method, over their
estimated useful lives of 39 years or the life of the improvements,
whichever is shorter. Significant renovations or improvements,
which extend the economic life of the Property, are capitalized.
Expenditures for maintenance and repairs are expensed as incurred.
The LLC reviews the carrying amount of the Property for impair
ment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. No
impairment adjustments have been made as a result of this review
process during 2011 or 2010.
(h) Fixed Assets
Furniture, fixtures, and equipment and leasehold improvements
are stated at cost. Depreciation of furniture, fixtures, and equipment
is computed on a straight-line basis, over the estimated useful
lives of the assets, ranging from five to seven years. Amortization
of leasehold improvements is computed on a straight-line basis,
over the estimated useful lives of the assets, not to exceed the
remaining life of the lease.
Equipment purchased by the Foundation on behalf of various
units of the University from grant and contract funds is to be used
in the project for which it was purchased and is not included in
the Foundation’s fixed assets on the accompanying consolidated
balance sheets.
(i) Purchase Accounting for Acquisition of Real Estate
The fair value of the LLC’s acquired rental property was allocated
to the acquired tangible assets, consisting of land and building;
and identified intangible assets and liabilities, consisting of the
value of above-market and below-market leases, other value of
in-place leases, and value of tenant relationships, based in each
case on their fair values.
Above-market and below-market leases were recorded as assets
and liabilities, respectively, and amortized as direct charges
against rental revenues over the noncancelable periods of the
respective leases. The value of in-place leases is amortized to
expense over the remaining noncancelable periods of the respec-
tive leases.
The weighted average amortization period for value of above-
market leases, below-market leases, and in-place leases is
approximately five years.
(j) Deferred Costs
Deferred leasing costs, included in deferred costs, represent costs
incurred in the successful negotiation of leases, including legal
and brokerage fees. These costs are amortized on a straight-line
basis over the terms of the related tenant lease.
Deferred financing costs, included in deferred costs, were
incurred in obtaining long-term financing for the LLC. Such costs
are being amortized on a straight-line basis over the term of the
related debt and are recorded as a component of interest expense.
(k) Restricted Cash
Restricted cash of the LLC includes amounts to be funded for
tenant improvements, replacements and repairs, and leasing
commissions as required by the LLC’s loan agreement. Restricted
cash also includes tenant security deposits held in accordance
with tenant leases and other tenant deposits held for improve-
ments to leased space. Restricted cash relating to the LLC’s loan
agreement and tenant security deposits was $3,172,559 and
$3,069,026 at June 30, 2011 and 2010, respectively.
(l) Deposits Held in Custody for CUNY Colleges
Deposits held in custody for CUNY colleges reflect those resources
held on behalf of the individual colleges of the University. These
deposits are credited with facilities and administrative cost,
released time, summer salary recoveries, and interest income for
the respective colleges.
Released time recoveries represent personal service costs for
individuals on the various colleges’ payrolls who report effort
under grants or contracts. When colleges replace an individual
providing time and effort to sponsored projects, the Foundation
processes payroll for these individuals or the school will process
the payroll and the Foundation will reimburse the school. The
reimbursement of personal service costs is reflected as deduc-
tions of deposits held in custody for CUNY.
Facilities and administrative costs are considered recoveries of
the specific colleges and, accordingly, are credited to deposits
held in custody for CUNY colleges.
(m) Fair Value Measurements
Fair value is determined as the price that would be received to
sell an asset or paid to transfer a liability in an orderly transaction
between market participants as of the measurement date. The
Organization measures the fair value of its financial and nonfinan-
cial assets and liabilities using a three-level hierarchy for fair value
measurements based on the observable inputs to the valuation of
an asset or liability at measurement date. It prioritizes the inputs
to the valuation techniques used to measure fair value by giving
the highest priority to unadjusted quoted prices in active markets
for identical assets or liabilities (Level 1 measurements), and the
lowest priority to measurements involving significant unobservable
inputs (Level 3 measurements).
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