SAE Foundation Annual Report 2017 - SAE-11

SAE Foundation
Notes to the Financial Statements (Continued)

2. Summary of Significant Accounting Policies (Continued)
Investments
Investments are presented at fair value as measured by quoted market prices. Those investments
received as gifts or donations are recorded at their fair value on the date received. Investment
activity includes unrealized and realized gains and losses on investments (net
appreciation/depreciation), interest and dividends.
The Foundation's investments are exposed to various risks, such as interest rate, market and
credit risks. Due to the level of risk associated with these investments and the level of
uncertainty related to changes in the value of these investments, it is at least reasonably possible
that changes in the near term could materially affect the amounts reported in the financial
statements. The Foundation maintains an investment policy under which its investments are kept
within limits designed to mitigate risks caused by concentrations.
The Foundation has received contributions that are permanently restricted by the donors, for the
purpose of granting scholarships and awards. The income from certain permanently restricted
contributions is required to be spent in predetermined amounts as specified by the donor. The
income from other permanently restricted donations does not have specified spending amounts.
SAE's Board of Directors has elected to follow a total return policy with respect to its permanently
restricted funds, where no specified spending amount has been stipulated by the donor, in
accordance with Pennsylvania law. As such, SAE has adopted a total return investment policy
seeking to achieve for the investments held in SAE's restricted accounts a reasonable long-term
total return, consistent with acceptable investment risk, derived both from appreciation of capital
and from earnings and distributions with respect to capital. The Board of Directors has
documented an investment spending policy consistent with state law. Under this policy, where
there is no stipulated spending amount from the donor, SAE may annually transfer up to 5.5% of
the three-year rolling average market value of total invested funds to operating funds.
The original contributions are maintained in permanently restricted net assets. Net appreciation
or depreciation in the fair value of investments is reflected in temporarily restricted investment
income (loss).
Unrealized gains and losses on permanently restricted investments are reflected in temporarily
restricted revenues and gains as described above. In years when the income transfer is greater
than the actual earnings, or when there is a loss, the excess is charged to temporarily restricted
net assets to the extent of accumulated prior year earnings. Any excess is charged to unrestricted
net assets.
Inventories
Inventories and supplies consist of medals and awards not yet distributed and are stated at the
lower of cost (determined on the first-in, first-out or average cost method) or market.
Revenue Recognition
Contributions received are recorded as unrestricted, temporarily restricted, or permanently
restricted support, depending on the existence or nature of any donor restrictions.
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SAE Foundation Annual Report 2017

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