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1 STUDEBAKER NATIONAL MUSEUM, INC. ' Notes to Financial Statements December 31,2016 NOTE 1 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-CONTINUED ' Property Equipment and Depreciation Property and equipment are stated at cost. Donations of property and equipment are recorded at fair market value as of the date received and are reported as unrestricted support unless the ' donor has restricted the donated asset to a specific purpose. Assets donated with explicit restrictions regarding their use and contributions of cash that must be used to acquire property and equipment are reported as restricted support. Absent donor stipulations regarding how long ' those donated assets must be maintained, the Museum reports expirations of donor restrictions when the donated or acquired assets are placed in service. The Museum reclassifies temporarily restricted net assets to unrestricted net assets at that time. Major improvements and ' betterments are capitalized; maintenance and repairs are charged to expenses as incurred. When items of property and equipment are sold or retired, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is included in the results of operations. Property, equipment, improvements and betterments are depreciated for both financial and income tax reporting purposes using the straight-line method over the estimated useful lives of the assets as shown below: 1 YEARS Equipment 3-7 Leasehold improvements 15 ' Building 39 Depreciation expense was$65,998-2016 and $67,399 -2015. Income Taxes The Museum's policy is to record an unrecognized tax benefit from an uncertain tax position ' only if it is more likely than not that the tax position will be sustained upon examination by the tax authorities. Interest and penalties related to gross unrecognized tax benefits would be included within the provision for income taxes. To the extent accrued interest and penalties do not ultimately become payable, amounts accrued would be reduced in the period that such ' determination is made and reflected as a reduction of the overall income tax provision. The Museum does not have any uncertain tax positions at December 31,2016. ' The Museum is incorporated as a not-for-profit organization under the laws of Indiana, and is exempt from federal and state income taxes pursuant to provisions of Internal Revenue Code Section 501(c)(3) and a similar section of the Indiana tax law. Accordingly, federal and state ' income taxes are not reflected in the Statements of Activities. The Museum is no longer subject to examination by the federal and Indiana tax jurisdictions for ' income tax returns filed for the years ended prior to December 31, 2013. Fair Value of Financial Instruments ' Financial instruments consist of cash and cash equivalents, investments, accounts receivable, accounts payable and accrued liabilities. The carrying amounts reported in the statements of financial position for these assets and liabilities approximate fair value. (See auditors' report.) 9