2006 NBAA Annual Report
2006 NBAA Annual Report 2006 NBAA Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSFor the Years Ended June 30, 2006 and 20051. Organization and Summary of SignificantAccounting PoliciesOrganizationNational Business Aviation Association, Inc. (NBAA) is a businessassociation of organizations that own or operate aircraft in theconduct of their business or provide services to the owners of businessaircraft. NBAA was organized in 1947 for the purpose of furtheringthe cause of safety and economy of business aircraft operators. NBAAhas been granted an exemption from federal income taxes under theprovisions of Section 501(c)(6) of the Internal Revenue Code, exceptfor any relevant tax on lobbying activities and unrelated businessincome. NBAA’s activities are funded primarily by Annual Meeting &Convention revenue, Membership dues and seminar registration fees.Principles of ConsolidationThe consolidated financial statements include the accounts of NBAAand the BASIC Fund (collectively the Association). NBAA and theBASIC Fund have been consolidated as required under accountingprinciples generally accepted in the United States of America due tothe presence of common control. All significant intercompanybalances and transactions have been eliminated in the consolidation.Method of AccountingThe Association presents its financial statements using the accrualbasis of accounting. Accordingly, support and revenue are recognizedin the year in which they are earned, and expenses are recognizedwhen incurred.Financial Statement FormatThe Association classifies its net assets into three classes: unrestricted,temporarily restricted and permanently restricted. The Association has notemporarily or permanently restricted net assets.Cash EquivalentsCash equivalents include highly liquid investments purchased withoriginal maturity dates of 90 days or less.InvestmentsInvestments consist of mutual funds, public equity, government bonds,structured products and real estate securities held for long-term investmentpurposes and are carried at fair value, as determined by quotedmarket prices.Furniture, Equipment and Improvements and Related Depreciationand AmortizationFurniture, equipment and improvements are recorded at cost. Furnitureand equipment are depreciated using the straight-line method overtheir estimated useful lives of five to seven years. Computer hardwareand software are depreciated using the straight-line method over threeyears. Leasehold improvements are amortized using the straight-linemethod over the shorter of the useful life of the asset or the remainingterm of the lease. Major additions are capitalized while replacements,maintenance and repairs which do not improve or extend the lives ofrespective assets are expensed. Upon the retirement or disposal ofassets, the cost and accumulated depreciation are eliminated from therespective accounts and the resulting gain or loss is included inrevenue or expenses, as appropriate.Unrestricted Net AssetsUnrestricted net assets are available for the overall operations of theAssociation.Revenue RecognitionThe Association’s membership dues, which are based on eachMember’s involvement with business aviation, are recognized asrevenue on a monthly pro rata basis during their membership year.Accordingly, dues paid by Members in advance of the membershipperiod are reported as deferred membership dues in the accompanyingconsolidated statements of financial position.Revenue for the Association’s meetings (Conventions, Seminars andBusiness Forums) consists principally of exhibit fees, registration feesand corporate sponsorships and is recognized as revenue in themonth in which the meetings are held. Advance receipts and disbursementsrelating to the Association’s meetings are reported as deferredrevenue and prepaid expenses, respectively, in the accompanyingconsolidated statements of financial position.16 2006 NBAA ANNUAL REPORT
Functional Allocation of ExpensesThe costs of providing the various programs and other activities havebeen summarized on a functional basis in the accompanying consolidatedstatements of activities. Accordingly, certain costs have beenallocated among the programs and supporting services benefited basedupon salaries and related costs.Use of EstimatesThe preparation of financial statements in conformity with generallyaccepted accounting principles requires management to make estimatesand assumptions that affect the reported amounts of assets and liabilitiesat the date of the financial statements and the reported amounts ofrevenue and expenses during the reporting period. Actual results coulddiffer from those estimates.2. Investments in Marketable SecuritiesInvestments in marketable securities are comprised of the following asof June 30, 2006 and 2005:2006 2005Cost Market Cost MarketMutual Funds $ 3,515,408 $ 3,478,614 $ 3,123,630 $ 3,183,361Public Equity 7,650,894 8,333,339 7,857,302 8,416,382Government Bonds 2,401,967 2,350,507 1,674,568 1,743,009Structured Products 1,472,900 1,539,978 1,275,000 1,294,196Real Estate Securities 505,200 639,748 464,159 538,939Total Investments $ 15,546,369 $16,342,186 $14,394,659 $15,175,887For the years ended June 30, 2006 and 2005, net investment income,including interest earned on the Association’s cash accounts, consistedof the following:2006 2005Dividends and interest income $ 629,868 $ 423,485Unrealized gains 5,046 607,673Realized gains 689,728 167,697Net investment income $ 1,324,642 $ 1,198,8553. Retirement PlansDuring the year ended June 30, 1998, the Association established theNational Business Aviation Association, Inc. 401(k) Profit Sharing Planand Trust for all eligible employees. All plan participants have theoption of deferring a percentage of their annual salary, subject tocertain IRS limitations. The Association may match a portion of thesalary deferred by each employee. For the years ended June 30, 2006and 2005, the Association contributed $584,691 and $431,593,respectively.4. Postretirement Benefits Other Than PensionsThe Association provides health care benefits to certain retiredemployees. Active employees become eligible for benefits after meetingcertain age and service requirements. The plan is contributory foremployees under the age of 62, non-contributory for employees whohave reached the age of 62 and contains other cost-sharing featuressuch as deductibles. The plan is unfunded.During the year ended June 30, 2006, the Association amended theplan to change eligibility requirements and employee contributionrequirements. These plan changes will be effective January 1, 2007.During the year ended June 30, 2005, the Association determinedthat previously amended eligibility requirements pertaining to theAssociation’s Postretirement Health Care Benefit plan had not beenproperly communicated to the plan actuary and all necessary adjustmentswere done.Obligations and Funded StatusA summary of the actuarial evaluation for this plan including the fundedstatus and the accrued benefit cost at June 30, are as follows:2006 2005Benefit obligation at June 30 $ 3,118,186 $ 2,811,285Fair value of plan assets at June 30 — —Funded status $ (3,118,186) $ (2,811,285)Accrued postretirement benefits cost reflectedin the accompanying consolidated statementsof financial position $ 3,118,186 $ 2,811,285The Association incurred investment management fees of $168,603and $64,905 during the years ended June 30, 2006 and 2005,respectively.2006 NBAA ANNUAL REPORT 17
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTSFor the Years Ended June 30, <strong>2006</strong> and 20051. Organization and Summary of SignificantAccounting PoliciesOrganizationNational Business Aviation Association, Inc. (<strong>NBAA</strong>) is a businessassociation of organizations that own or operate aircraft in theconduct of their business or provide services to the owners of businessaircraft. <strong>NBAA</strong> was organized in 1947 for the purpose of furtheringthe cause of safety and economy of business aircraft operators. <strong>NBAA</strong>has been granted an exemption from federal income taxes under theprovisions of Section 501(c)(6) of the Internal Revenue Code, exceptfor any relevant tax on lobbying activities and unrelated businessincome. <strong>NBAA</strong>’s activities are funded primarily by <strong>Annual</strong> Meeting &Convention revenue, Membership dues and seminar registration fees.Principles of ConsolidationThe consolidated financial statements include the accounts of <strong>NBAA</strong>and the BASIC Fund (collectively the Association). <strong>NBAA</strong> and theBASIC Fund have been consolidated as required under accountingprinciples generally accepted in the United States of America due tothe presence of common control. All significant intercompanybalances and transactions have been eliminated in the consolidation.Method of AccountingThe Association presents its financial statements using the accrualbasis of accounting. Accordingly, support and revenue are recognizedin the year in which they are earned, and expenses are recognizedwhen incurred.Financial Statement FormatThe Association classifies its net assets into three classes: unrestricted,temporarily restricted and permanently restricted. The Association has notemporarily or permanently restricted net assets.Cash EquivalentsCash equivalents include highly liquid investments purchased withoriginal maturity dates of 90 days or less.InvestmentsInvestments consist of mutual funds, public equity, government bonds,structured products and real estate securities held for long-term investmentpurposes and are carried at fair value, as determined by quotedmarket prices.Furniture, Equipment and Improvements and Related Depreciationand AmortizationFurniture, equipment and improvements are recorded at cost. Furnitureand equipment are depreciated using the straight-line method overtheir estimated useful lives of five to seven years. Computer hardwareand software are depreciated using the straight-line method over threeyears. Leasehold improvements are amortized using the straight-linemethod over the shorter of the useful life of the asset or the remainingterm of the lease. Major additions are capitalized while replacements,maintenance and repairs which do not improve or extend the lives ofrespective assets are expensed. Upon the retirement or disposal ofassets, the cost and accumulated depreciation are eliminated from therespective accounts and the resulting gain or loss is included inrevenue or expenses, as appropriate.Unrestricted Net AssetsUnrestricted net assets are available for the overall operations of theAssociation.Revenue RecognitionThe Association’s membership dues, which are based on eachMember’s involvement with business aviation, are recognized asrevenue on a monthly pro rata basis during their membership year.Accordingly, dues paid by Members in advance of the membershipperiod are reported as deferred membership dues in the accompanyingconsolidated statements of financial position.Revenue for the Association’s meetings (Conventions, Seminars andBusiness Forums) consists principally of exhibit fees, registration feesand corporate sponsorships and is recognized as revenue in themonth in which the meetings are held. Advance receipts and disbursementsrelating to the Association’s meetings are reported as deferredrevenue and prepaid expenses, respectively, in the accompanyingconsolidated statements of financial position.16 <strong>2006</strong> <strong>NBAA</strong> ANNUAL REPORT
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