Cornell University 2011-2012 Annual Report - DFA Home - Cornell ...

NOTES TO THECONSOLIDATEDFINANCIALSTATEMENTS1. SIGNIFICANT ACCOUNTING POLICIESA. Description of the OrganizationCornell University (“the University”) consists of three major organizational units: Endowed Ithaca, whichincludes the endowed colleges, the central University administration, and the enterprise and serviceoperations for the Ithaca campus; Contract Colleges at Ithaca (colleges operated by the University onbehalf of New York State); and the Joan and Sanford I. Weill Medical College and Graduate School ofMedical Sciences (“the Medical College”) in New York City. These three units are subject to the commonadministrative authority and control of the Cornell University Board of Trustees, but generally operate asfinancially discrete entities. The laws establishing the Contract Colleges at Ithaca prohibit other units ofthe University from using funds attributable to those colleges. Except as specifically required by law, thecontract and endowed colleges at Ithaca are, to the extent practicable, governed by common managementprinciples and policies determined at the private discretion of the University. In addition to the three majororganizational units, the University’s subsidiaries and certain affiliated organizations are included in theconsolidated financial statements. All significant intercompany transactions and balances are eliminatedin the accompanying consolidated financial statements.B. Basis of PresentationIn accordance with the guidance provided in the New York Prudent Management of Institutional FundsAct (NYPMIFA), the University’s Board of Trustees, with consideration of the actions, reports, information,advice and counsel provided by its duly constituted committees and appointed officers of theUniversity, including University Counsel, has instructed the University to preserve the historical dollarvalue of donor-restricted (true) endowment funds, absent explicit donor direction to the contrary. As aresult, the University classifies as permanently restricted net assets the original gift value of true endowments,plus any subsequent gifts and accumulations made in accordance with the directions of the applicablegift instruments. In accordance with accounting standards, the portion of the true endowmentfund not classified as permanently restricted net assets is classified as temporarily restricted net assetsexcept when the fair market value of the endowment fund is less than its historical dollar value. Forthese “underwater” funds, the difference between historic dollar value and fair market value is reflectedin unrestricted net assets.Temporarily restricted net assets also include gifts and appropriations from the endowment that can beexpended, but for which the donors’ purpose restrictions have not yet been met, as well as net assets withexplicit or implied time restrictions such as pledges and split interest agreements. Expiration of donorrestrictions is reported in the consolidated statement of activities as a reclassification from temporarilyrestricted net assets to unrestricted net assets on the net assets released from restriction lines.Unrestricted net assets are the remaining net assets of the University.13