This excerpt taken from the NOVA 8-K filed Aug 14, 2007.
B. Summary of Significant Accounting Policies
1. Basis of presentation - The financial statements have been presented in conformity with accounting principles generally accepted in the United States of America in accordance with the American Institute of Certified Public Accountants (AICPA) audit and accounting guide for Audits of Health Care Organizations and other pronouncements applicable to the health care field.
2. Net patient service revenues - The Center has agreements with third-party payors that provide for payments to the Center at amounts different from its established rates. Net patient service revenues are reported at estimated net realizable amounts from patients and third-party payors for services rendered.
3. Use of estimates - The process of preparing financial statements in conformity with accounting principles generally accepted in the United States of America requires the use of estimates and assumptions regarding certain types of assets, liabilities, revenues and expenses. Such estimates relate primarily to unsettled transactions and events as of the date of the financial statements. Accordingly, upon settlement, actual results may differ from estimated amounts.
4. Cash and cash equivalents - For purposes of financial statement presentation, the Center considers all highly liquid instruments with a maturity of three months or less to be cash equivalents.
5. Accounts receivable - The Center carries its accounts receivable at the estimated net realizable value from third-party payors and patients, which includes an allowance for contractual adjustments from third-party payors and doubtful accounts. On a periodic basis, the Center evaluates its accounts receivable and establishes an allowance for doubtful accounts based on a history of past write-offs and collections and current credit conditions. Contractual adjustments to accounts receivable are recorded based on contractual and payment terms with third-party payors.
6. Supplies - Supplies consist of various pharmaceuticals, lenses and other medical supplies. Supplies are stated at the lower of cost or market using the first-in, first-out method.
7. Property, equipment, improvements and depreciation - Property, equipment and improvements are stated at cost. Depreciation is provided over the estimated useful lives of the assets using the straight-line method. Estimated useful lives range from five to fifteen years. Depreciation expense for the three months ended March 31, 2007 and 2006 was $99,974 and $99,039, respectively.
8. Loan origination fee - Loan origination fee is amortized using the straight-line method over the life of the loan of 60 months. Amortization expense for both the three months ended March 31, 2007 and 2006 was $578.
9. Income taxes - The Center is a limited liability company that has chosen to be treated as a partnership for both federal and state income tax purposes. The Centers income is ratably allocated to all members, who are then responsible for the federal and state income taxes, where applicable, at their respective tax rates. Accordingly, no provision or liability for federal income taxes has been made. The state of Michigan does have an entity level tax based on adjusted income. A provision for this tax has been made at March 31, 2007.
10. Advertising - The Center expenses advertising costs as they are incurred. Advertising costs for the three months ended March 31, 2007 and 2006 were $529 and $129, respectively.