Page 16 - Child Care Resource Center

Child Care Resource Center, Inc. Notes to Financial Statements
Note 2 – Summary of Significant Accounting Policies (continued)
Recent accounting pronouncements – In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-02, Leases, which supersedes Accounting Standards Codification (ASC) 840, Leases, and creates a new topic, ASC 842, Leases. This update requires lessees to recognize a lease liability and a lease asset for all leases, including operating leases, with a term greater than 12 months on its statement of financial position. The update also expands the required quantitative and qualitative disclosures surrounding leases. The main difference between previous U.S. GAAP and the amended standard is the recognition of lease assets and lease liabilities by lessees on the statement of financial position for those leases classified as operating leases under previous U.S. GAAP. As a result, CCRC will have to recognize a liability representing its lease payments and a right-of-use asset representing its right to use the underlying asset for the lease term on the statement of financial position. ASU 2016-02 is effective for fiscal years beginning after December 15, 2021. Management is evaluating the effect that this guidance will have on the financial statements and related disclosures.
Note 3 – Concentration of Credit Risk
Financial instruments which potentially subject CCRC to concentrations of credit risk consist of cash and cash equivalents, cash held in reserve, government contracts receivable, other receivables, and investments. Although cash and cash equivalent balances may from time to time exceed federally insured limits, management believes CCRC is not exposed to any significant credit risk with respect to those deposits. Management believes that CCRC is not exposed to any significant credit risk on government contract and other receivables based on the creditworthiness of the counterparties. Investments are exposed to various risk factors such as market and credit risks. Although the investment value may from time to time change based on the performance of the investments, management believes CCRC is not exposed to any significant credit risk with respect to these investments.
Both governmental and private pay sources have instituted cost-containment measures designed to limit payments made to providers of child care services, and there can be no assurance that future measures designed to limit payments made to providers will not adversely affect reimbursement to CCRC. Furthermore, government reimbursement programs are subject to statutory and regulatory changes, retroactive rate adjustments, administrative rulings, and government funding restrictions, all of which could materially decrease the services covered or the rates paid to CCRC for its services.
A majority of CCRC’s annual funding, $401,162,658 or 99.6% and $334,309,541 or 99.8% in 2021 and 2020, respectively, of total revenue and support without donor restriction is derived from grant agreements and contracts for fees for services collected from federal and nonfederal agencies and family fees associated with those contracts. CCRC has no reason to believe that relationships with these agencies will be discontinued in the foreseeable future. However, any interruption of these relationships (e.g., the failure to renew grant agreements, withholding of funds, or significant decreases to funding) would adversely affect CCRC’s ability to finance its ongoing operations.
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