The financial statements of Sample University for the years ended June 30, 2010, and 2009, include a comprehensive overview of the university's financial position, liabilities, net assets, revenues, and expenses. The total assets increased from $215,140,816 in 2009 to $228,345,563 in 2010, and the university recorded an increase in net assets of $12,728,251 in 2010 compared to a decrease of $9,079,644 in 2009. The statements reflect the university's commitment to academic excellence and responsible financial management.

1. FINANCIAL STATEMENTS
SAMPLE UNIVERSITY
JUNE 30, 2010 AND 2009
Sample University
STATEMENTS OF FINANCIAL POSITION
June 30,
Temporarily Permanently Temporarily Permanently
ASSETS Unrestricted restricted restricted Total Unrestricted
restricted restricted Total
Cash and cash equivalents 2,980,738$ 852,121$
3,084,235$ 6,917,094$ 5,804,277$ 611,443$
2,619,482$ 9,035,202$
Student accounts receivable, less allowance of
$1,361,634 in 2010 and $1,385,071 in 2009 3,761,110 -
- 3,761,110 3,254,273 - -
3,254,273
Prepaid expenses, other receivables and other assets 2,083,125
575,089 128,559 2,786,773 913,844
322,577 1,107,168 2,343,589
Perpetual trust held by a third party - -
842,765 842,765 - -
803,003 803,003

2. Contributions receivable from remainder trusts -
270,479 1,209,081 1,479,560 -
257,079 1,105,753 1,362,832
Contributions receivable from lead trust - 131,444
- 131,444 - 91,842 -
91,842
Pledges receivable, net - 2,687,397 821,173
3,508,570 - 3,501,935 836,044
4,337,979
Estate receivable - - -
- - - 1,500,000
1,500,000
Investments 33,861,835 8,356,145 33,265,747
75,483,727 33,787,846 5,532,636 29,797,263
69,117,745
Student loans receivable, less allowance of
$260,777 in 2010 and $261,938 in 2009 3,284,232 -
570,398 3,854,630 3,231,542 -
570,398 3,801,940
Land, buildings and equipment, net 129,579,890 -
- 129,579,890 119,492,411 - -
119,492,411
TOTAL ASSETS 175,550,930$ 12,872,675$ 39,921,958$
228,345,563$ 166,484,193$ 10,317,512$ 38,339,111$
215,140,816$
LIABILITIES AND NET ASSETS
Liabilities
Accounts payable, accrued liabilities and
refundable deposits 6,854,092$ 45,141$ -$
6,899,233$ 8,825,439$ 47,982$ -$
8,873,421$

3. Deferred revenue 920,836 - -
920,836 786,650 - - 786,650
Short-term debt 2,500,000 - -
2,500,000 1,750,000 - -
1,750,000
Split-interest agreements 324,468 1,178,200 758,004
2,260,672 - 1,345,160 806,269
2,151,429
Refundable loan funds (Perkins loan) 1,364,442 -
- 1,364,442 1,351,320 - -
1,351,320
Interest rate swap agreement liability 3,265,075 -
- 3,265,075 1,998,667 - -
1,998,667
Capital lease obligations 229,688 - -
229,688 - - -
Bonds and mortgage payable 41,892,432 - -
41,892,432 41,944,395 - -
41,944,395
Total liabilities 57,351,033 1,223,341 758,004
59,332,378 56,656,471 1,393,142 806,269
58,855,882
Net assets
Current funds 3,401,370 2,127,144 -
5,528,514 3,216,874 1,120,025 -
4,336,899
Loan funds 2,508,257 - 570,398
3,078,655 2,196,991 - 570,398
2,767,389
Plant funds 77,297,219 473,615 -
77,770,834 72,792,147 273,566 -
73,065,713
Quasi-endowment funds 33,671,630 - -
33,671,630 30,860,557 - -

4. 30,860,557
Endowed earnings funds 1,321,421 4,110,283 -
5,431,704 761,153 1,492,476 -
2,253,629
Endowment funds - 2,751,964 37,113,708
39,865,672 - 2,500,000 35,684,066
38,184,066
Split-interest agreement funds - 2,186,328
1,479,848 3,666,176 - 3,538,303
1,278,378 4,816,681
Total net assets 118,199,897 11,649,334 39,163,954
169,013,185 109,827,722 8,924,370 37,532,842
156,284,934
TOTAL LIABILITIES AND
NET ASSETS 175,550,930$ 12,872,675$ 39,921,958$
228,345,563$ 166,484,193$ 10,317,512$ 38,339,111$
215,140,816$
2010 2009
4
Sample University
STATEMENT OF ACTIVITIES
Year ended June 30, 2010
Temporarily Permanently
Unrestricted restricted restricted Total
Revenues
Tuition and fees 64,192,807$ -$ -$

5. 64,192,807$
Less financial aid (25,963,452) - -
(25,963,452)
Net tuition and fees 38,229,355 - -
38,229,355
Community education programs 639,462 - -
639,462
Contributions 4,061,054 2,303,281 1,385,685
7,750,020
Grants 5,000 727,277 - 732,277
Investment gain 4,373,387 4,006,821 -
8,380,208
-
Other support -
Auxiliary enterprises 11,120,367 - -
11,120,367
Rental 414,096 - - 414,096
Other sources 1,937,982 47,891 -
1,985,873
Net assets released from restrictions 4,931,725 (4,919,740)
(11,985) -
Total revenues and other support 65,712,428 2,165,530
1,373,700 69,251,658
Expenses
Instruction 20,330,485 - -
20,330,485
Academic support 5,539,435 - -
5,539,435
Intercollegiate athletics 3,177,449 - -

6. 3,177,449
Student services 6,297,615 - -
6,297,615
Institutional support 10,618,792 - -
10,618,792
Auxiliary enterprises 10,032,777 - -
10,032,777
Total expenses 55,996,553 - -
55,996,553
Increase in net assets 9,715,875 2,165,530 1,373,700
13,255,105
Other changes in net assets
Change in fair value of interest rate swap agreement (1,266,410)
- - (1,266,410)
Change in value of split-interest agreements -
559,434 257,412 816,846
Loss on disposal of long-lived assets (77,290) -
- (77,290)
CHANGE IN NET ASSETS 8,372,175 2,724,964
1,631,112 12,728,251
Net assets
Beginning of year 109,827,722 8,924,370 37,532,842
156,284,934
End of year 118,199,897$ 11,649,334$ 39,163,954$
169,013,185$
5
Sample University

7. STATEMENT OF ACTIVITIES
Year ended June 30, 2009
Temporarily Permanently
Unrestricted restricted restricted Total
Revenues
Tuition and fees 59,478,124$ -$ -$
59,478,124$
Less financial aid (22,429,897) - -
(22,429,897)
Net tuition and fees 37,048,227 - -
37,048,227
Community education programs 738,384 - -
738,384
Contributions 2,793,435 4,436,505 4,421,167
11,651,107
Grants - 584,875 - 584,875
Investment loss (9,116,632) (5,456,666) -
(14,573,298)
Other support
Auxiliary enterprises 10,161,495 - -
10,161,495
Rental 361,366 - - 361,366
Other sources 1,562,811 48,111 -
1,610,922
Net assets released from restrictions 6,480,655 (6,498,016)
17,361 -
Total revenues and other support 50,029,741 (6,885,191)
4,438,528 47,583,078

8. Expenses
Instruction 19,956,767 - -
19,956,767
Academic support 5,555,666 - -
5,555,666
Intercollegiate athletics 2,897,617 - -
2,897,617
Student services 5,584,152 - -
5,584,152
Institutional support 10,079,150 - -
10,079,150
Auxiliary enterprises 9,499,621 - -
9,499,621
Total expenses 53,572,973 - -
53,572,973
(Decrease) increase in net assets (3,543,232) (6,885,191)
4,438,528 (5,989,895)
Other changes in net assets
Change in fair value of interest rate swap agreement (1,529,749)
- - (1,529,749)
Change in value of split-interest agreements -
(780,642) (763,618) (1,544,260)
Other transfers 3,448,823 (57,384) (3,391,439) -
Loss on disposal of long-lived assets (15,740) -
- (15,740)
CHANGE IN NET ASSETS (1,639,898) (7,723,217)
283,471 (9,079,644)
Net assets
Beginning of year 111,467,620 16,647,587 37,249,371
165,364,578
End of year 109,827,722$ 8,924,370$ 37,532,842$

9. 156,284,934$
6
Sample University
STATEMENTS OF CASH FLOWS
Years ended June 30,
2010 2009
Cash flows from operating activities
Change in net assets 12,728,251$ (9,079,644)$
Adjustments to reconcile change in net assets to
net cash provided by operating activities
Non-cash contributions (3,944,605) (1,065,917)
Change in pledge discount 56,544 123,056
Loss on disposal of long-lived assets 77,290 15,740
Provision for doubtful accounts (45,865) 257,736
Change in value of remainder and lead trusts (156,330)
414,580
Change in fair value of interest rate swap agreement 1,266,408
1,529,749
Change in amounts payable under split-interest
agreements 109,243 (560,255)
Realized and unrealized (gains) losses on
marketable securities (6,819,019) 16,866,698
Realized losses (gains) on other investments 99,130
(10,018)
Depreciation and amortization 4,560,182 3,707,977
Contributions restricted for permanent investment (1,385,685)
(5,421,167)

10. Investment income restricted for permanent
investment (45,531) (55,431)
Changes in operating assets and liabilities
Student accounts receivable (483,400) (773,165)
Prepaid expenses, other receivables and other assets (470,828)
(927,801)
Perpetual trust held by a third party (39,762) 279,106
Pledges receivable 794,131 574,247
Estate receivable 1,500,000 (1,500,000)
Student loans receivable (51,530) (18,025)
Accounts payable, accrued liabilities and
refundable deposits (1,974,188) 271,927
Deferred revenue 134,186 (226,828)
Refundable loan funds 13,122 812
Net cash provided by operating activities 5,921,744
4,403,377
Cash flows from investing activities
Purchases of land, buildings and equipment (11,959,785)
(31,546,567)
Purchases of investments (16,851,260) (19,529,723)
Proceeds from sales of investments 18,641,940 23,118,516
Net cash used in investing activities (10,169,105) (27,957,774)
7
Sample University
STATEMENTS OF CASH FLOWS - CONTINUED
Years ended June 30,

11. 2010 2009
Cash flows from financing activities
Proceeds from bond issuance -$ 17,000,000$
Disbursements to pay off short-term debt (1,750,000) -
Proceeds from short-term debt 2,500,000 1,750,000
Proceeds from contributions restricted for
investment in endowment 1,385,685 5,421,167
Investment income restricted for permanent
investment 45,531 55,431
Payments on long-term debt (51,963) (48,020)
Net cash provided by financing activities 2,129,253
24,178,578
NET CHANGE IN CASH AND
AND CASH EQUIVALENTS (2,118,108) 624,181
Cash and cash equivalents, beginning of year 9,035,202
8,411,021
Cash and cash equivalents, end of year 6,917,094$ 9,035,202$
Supplemental disclosure of cash flow information
Equipment obtained through capital lease obligations 287,470$
-$
Interest paid 1,045,333 689,051
8
Sample University

12. NOTES TO FINANCIAL STATEMENTS
June 30, 2010 and 2009
9
NOTE 1 - DESCRIPTION OF ORGANIZATION AND
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Sample University is an independent, comprehensive college of
the liberal arts and sciences
that offers more than 55 undergraduate majors and graduate
programming in six areas.
With more than 2,300 full-time undergraduates and nearly 450
part-time undergraduate and
graduate students (fall 2009), the College is committed to
academic excellence, a climate
that emphasizes leadership, ethics, values and service, a
curriculum that balances
job-related knowledge with a liberal arts foundation and a
caring environment with small
classes.
The College is accredited by the North Central Association of
Colleges and Schools and has
been in continuous operation since its founding.
Basis of Presentation
The financial statements of the College have been prepared in
accordance with accounting
principles generally accepted in the United States of America.
These financial statements,
presented on the accrual basis of accounting, have been

13. prepared to focus on the College as a
whole, and present balances and transactions classified
according to the existence or absence of
donor-imposed restrictions. This presentation has been
accomplished by classifying of net assets
and activities into three classes: permanently restricted,
temporarily restricted or unrestricted.
Accounting Pronouncements
In July 2009, the Financial Accounting Standards Board
(“FASB”) implemented the Accounting
Standards Codification (the “Codification”) as the single source
of Generally Accepted
Accounting Principles (“GAAP”). The Codification did not
change GAAP, but it introduced a
new structure to the accounting language and changed reference
to accounting standards and
other authoritative accounting guidance. Management has
determined that this pronouncement
has no impact on the College’s financial statements.
Classification of Net Assets
The accompanying financial statements have been prepared to
present balances and transactions
according to the existence or absence of donor-imposed
restrictions. Accordingly, net assets and
changes therein are classified as follows:
Unrestricted net assets are not subject to donor-imposed
stipulations. Unrestricted net assets may
be designated for specific purposes by actions of the Board of
Trustees or may otherwise be
limited by contractual agreements with outside parties.

14. Sample University
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2010 and 2009
10
NOTE 1 - DESCRIPTION OF ORGANIZATION AND
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES - Continued
Classification of Net Assets - Continued
Temporarily restricted net assets are subject to donor-imposed
stipulations that can be fulfilled
by actions of the College pursuant to those stipulations or
expire by the passage of time.
Permanently restricted net assets are subject to donor-imposed
stipulations that the funds be
maintained permanently by the College. Generally, the donors
of these assets permit the College
to use all or part of the income earned on these assets. Such
assets primarily include the
College’s permanent endowment and certain loan funds.
Revenues are reported as increases in unrestricted net assets
unless use of the related assets is
limited by donor-imposed restrictions. Expenses are reported as
decreases in unrestricted net
assets. Gains and losses on investments and other assets or
liabilities are reported as increases or
decreases in unrestricted net assets unless their use is restricted

15. by explicit donor stipulations or
by law. Expirations of donor-imposed stipulations that
simultaneously increase one class of net
assets and decrease another are reported as a reclassification
between applicable classes of net
assets (assets released from restriction).
Fund Accounting
In order to ensure observance of limitations and restrictions
placed on the use of the resources
available to the College, the accounts of the College are
maintained in accordance with the
principles of fund accounting. This is the method by which
resources for various purposes are
classified for accounting and reporting purposes into funds that
are in accordance with activities
or objectives specified. Separate accounts are maintained for
each fund; however, in the
accompanying financial statements, the various funds are
grouped into unrestricted, temporarily
restricted or permanently restricted net assets in accordance
with accounting guidance.
Cash and Cash Equivalents
Cash and cash equivalents are reported at cost, which
approximates fair value. Cash equivalents
represent short-term investments with original maturities of
three months or less.
The College maintains its cash balance in financial institutions
which, at times, may exceed
federally insured limits. The College has not experienced any
losses in such accounts and
believes it is not exposed to any significant credit risk on cash.

16. Sample University
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2010 and 2009
11
NOTE 1 - DESCRIPTION OF ORGANIZATION AND
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES - Continued
Student Accounts Receivable
The majority of the College’s accounts receivable are due from
students of the College for
tuition and fees. Credit is extended based on evaluation of a
student’s financial condition and
collateral is not required. Student accounts receivables are
stated at amounts due, net of an
allowance for doubtful accounts. Accounts outstanding longer
than the contractual payment
terms are considered past due. The College determines its
allowance for doubtful accounts by
considering a number of factors, including the length of time
accounts receivable are past due,
the College’s previous loss history, and the individual student’s
current ability to pay his or her
obligation to the College.
Perpetual Trust Held by a Third Party

17. The perpetual trust balance represents funds that are held and
administered by an outside trustee.
These funds represent certain endowed scholarship funds.
Contributions Receivable from Remainder Trusts
The College is a beneficiary of certain remainder trusts that are
controlled by independent
trustees. The contributions receivable from the trusts are
measured at fair value of the trust’s
investments less an aggregate actuarial liability. The net
amount represents the present value of
expected cash flows. In the temporarily restricted
classification, the actuarial liability is
$297,848 ($305,177 in 2009), with a net receivable amount of
$270,479 ($257,079 in 2009). In
the permanently restricted classification, the actuarial liability
is $226,309 ($254,444 in 2009),
with a net receivable amount of $1,209,081 ($1,105,753 in
2009).
Contribution Receivable from Lead Trust
The College is a beneficiary of a lead trust held and controlled
by an independent trustee. The
contribution receivable is measured at the present value of the
expected cash flows to be received
by the College over the term of the trust agreement. Upon
termination of the trust, the remaining
assets will be paid to the beneficiaries of the donor’s estate.
The contribution receivable of
$131,444 ($91,842 in 2009) is net of a present value discount of
$20,867 ($19,385 in 2009).

18. Sample University
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2010 and 2009
12
NOTE 1 - DESCRIPTION OF ORGANIZATION AND
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES - Continued
Investments
Investments in marketable equity and debt securities are stated
principally at published market
quotations. Real estate holdings are stated at cost at date of
acquisition or the appraised value at
the time of donation, less accumulated depreciation.
Investments in certificates of deposit are
stated at cost, which approximates fair value. Investments in
real estate funds, limited
partnerships, venture capital funds and private equity funds are
recorded at cost unless the
investment or the underlying assets are deemed to be
permanently impaired, at which time the
asset would be adjusted down to market value. Based on this
methodology, this adjusted value
would become the new cost basis.
Investments are exposed to various risks, such as interest rate,
market and credit. Due to the
level of risk associated with investments, it is at least
reasonably possible that changes in risk in
the near term would materially affect the amounts reported in

19. the statements of financial
position.
Dividends and interest earned on investments are recorded on
the accrual basis.
Land, Buildings and Equipment
Land, buildings and equipment are stated at cost at the date of
acquisition or estimated fair value
at the date of donation less accumulated depreciation. Only
major replacements and
improvements are capitalized.
Depreciation is computed over estimated useful lives of the
assets using the straight-line method.
Buildings and improvements are depreciated over 40 to 45 years
and equipment is depreciated
over a range of 3 to 20 years.
Furniture and equipment is capitalized when its purchase price
is greater than $1,000 and it has a
useful life of more than 2 years. In addition, items that are part
of a group purchase with a useful
life greater than 2 years may also be capitalized even though
individually the items may fall
under the $1,000 threshold.
Deferred Revenue
The majority of deferred revenue represents students’ tuition for
the summer term and other
College programs, received in advance, to be held substantially
after year-end. Also included in
deferred revenue are the following: (1) summer camp fees
received prior to year-end for camps

20. occurring in July or August of the subsequent fiscal year; (2)
Fine Arts subscriptions and single
ticket sales for shows taking place in the following fiscal year;
and (3) advanced payments for
study abroad programs starting on or after July 1st.
Sample University
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2010 and 2009
13
NOTE 1 - DESCRIPTION OF ORGANIZATION AND
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES - Continued
Split-Interest Agreements
The College’s split-interest agreements consist principally of
irrevocable charitable remainder
trusts for which the College serves as trustee. Assets held in
these trusts are included in
investments at fair value. Such assets totaled $4,140,283 at
June 30, 2010 ($5,608,399 at June
30, 2009). Contribution revenues are recognized at the date the
trusts are established after
recording liabilities for the present value of the estimated future
payments to be made to
beneficiaries. Amounts payable under split-interest agreements
represent the present value of the
aggregate liability for split-interest agreement payments to be
made over the expected lives of

21. the beneficiaries. The discount rates used to calculate the
liability for present value of estimated
future payments under the split-interest agreements were 3.2%
in 2010 and 2.8% in 2009.
During 2010 real estate was donated that had a fair market value
of $2,250,000. The property is
recorded in property, plant and equipment in the accompanying
statement of financial position.
Related revenue recognized during this year was $1,949,235.
As part of the split-interest
agreement, the donor will receive five annual payments of
approximately $65,000 per year. The
College has included this obligation in the unrestricted split-
interest agreements liability on the
accompanying statement of financial position.
The College also has split-interest agreements with donors that
consist of charitable remainder
trusts, perpetual trusts held by a third party and charitable lead
trusts. Under these agreements,
the College is either the remainder beneficiary, lead beneficiary
or both the trustee and remainder
or lead beneficiary. These agreements are recorded at the
present value of estimated future
payments to be received by the College.
Interest Rate Swap Agreement
The College uses an interest rate swap agreement to manage the
impact of interest rate changes
on underlying floating-rate debt. The College’s swap portfolio
consists of a pay fixed/receive
floating swap, which synthetically converts a floating-rate
obligation into a fixed-rate instrument.

22. The College accounts for its interest rate swaps by using FASB
guidance that defines Accounting
for Derivative Instruments and Hedging Activities.
Accordingly, the College has recorded its
interest rate swap on the statement of financial position based
on fair value. If the fair value is
positive, the interest rate swap agreement will be listed in the
asset section of the statements of
financial position and if the fair value is negative, the interest
rate swap agreement will be listed
in the liabilities section of the statements of financial position.
Changes in fair value are
recorded as other changes in net assets in the statements of
activities.
Sample University
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2010 and 2009
14
NOTE 1 - DESCRIPTION OF ORGANIZATION AND
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES - Continued
Contributions
Contributions, including unconditional promises to give and
grants accounted for as
contributions, are recognized as revenues when the donor’s
commitment is received.

23. Unconditional promises are recognized at the present value of
expected future cash flows net of
allowances. Promises made and collected in the same reporting
period are recorded when
received in the appropriate net asset category. Promises of non-
cash assets are recorded at their
estimated fair value. Conditional promises are recorded when
conditions are substantially met.
Auxiliary Enterprises
The College’s auxiliary enterprises exist primarily to furnish
goods and services to students,
faculty and staff. Managed as essentially self-supporting
activities, the College’s auxiliary
enterprises consist of residence halls, dining halls, the activities
center and the College
bookstore. Auxiliary enterprise revenues and expenses are
reported in the accompanying
statements of activities in unrestricted net assets.
Endowment Spending Rate Policy
The College’s endowment fund investments are managed to
achieve the maximum long-term
total return. The College’s Board of Trustees has authorized a
policy permitting the use of total
returns at a rate (“spending rate”) of up to 6.0% of the average
market value of the endowment
portfolio on the last day of the three preceding fiscal years for
current operations. The remainder
is retained to support operations in future years. This policy is
designed to preserve the value of
the portfolio in real terms (after inflation) and provide a
predictable flow of funds to support
operations currently and into the future. In 2010, the actual

24. spending rate was 4.0%, and in 2009
it was 0.0%. Due to the economic conditions for the 2008-2009
year, the Board of Trustees
deemed it prudent to not draw down from the endowment.
Use of Estimates
The preparation of financial statements in conformity with
accounting principles generally
accepted in the United States of America requires management
to make estimates and
assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements, and
the reported amounts of revenues
and expenses during the reporting period. Actual results could
differ from those estimates.
Sample University
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2010 and 2009
15
NOTE 1 - DESCRIPTION OF ORGANIZATION AND
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES - Continued
Tax Status
The College has received a favorable determination letter from

25. the Internal Revenue Service
stating that it is a not-for-profit entity, as described in Section
501(c)(3) of the Internal Revenue
Code (“IRC”), and is exempt from federal income taxes on
related income pursuant to Section
501(a) of the IRC.
Reclassification
In the course of internal evaluation of endowment fund
classifications, it was determined that
certain endowment funds should have been classified as quasi or
unrestricted endowment funds.
The correction to move these funds to the correct classification
was made as of July 1, 2008. The
total amount reclassified to unrestricted net assets was
$3,448,823 and is reported as other
transfers in the accompanying statement of activities.
Fair Value Measurements
Effective July 1, 2008, Sample University adopted FASB
guidance that defines fair value
measurements, establishes a framework for measuring fair
value, establishes a fair value
hierarchy based on the inputs used to measure fair value and
enhances disclosure requirements
for fair value measurements. This guidance maximizes the use
of observable inputs and
minimizes the use of unobservable inputs by requiring that the
observable inputs be used when
available.
Observable inputs are inputs that market participants would use
in pricing the asset or liability
based on market data obtained from independent sources.

26. Unobservable inputs reflect
assumptions that market participants would use in pricing the
asset or liability based on the best
information available in the circumstances. The fair value
hierarchy is broken down into three
levels based on the transparency of inputs as follows:
Level 1 - Quoted prices are available in active markets for
identical assets or liabilities as of the
report date. A quoted price for an identical asset or liability in
an active market provides the
most reliable fair value measurement because it is directly
observable to the market. These
include active listed equities, certain U.S. Government and
sovereign obligations, and certain
money market securities.
Sample University
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2010 and 2009
16
NOTE 1 - DESCRIPTION OF ORGANIZATION AND
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES - Continued
Fair Value Measurements - Continued
Level 2 - Pricing inputs are other than quoted prices in active
markets, which are either directly

27. or indirectly observable as of the report date. The nature of
these securities includes investments
for which quoted prices are available but which are traded less
frequently and investments that
are fairly valued using other securities, the parameters of which
can be directly observed. These
include certain U.S. Government and sovereign obligations,
most government agency securities,
investment-grade corporate bonds, certain mortgage products,
certain bank loans and bridge
loans, less liquid listed equities, state, municipal and provincial
obligations, most physical
commodities and certain loan commitments and interest rate
swap agreements. Also included in
Level 2 are investments measured using a net asset value
(“NAV”) per share, or its equivalent,
that may be redeemed at that net asset value at or near the
reporting date.
Level 3 - Securities and trusts that have little to no observable
pricing as of the report date.
These instruments are measured using management’s best
estimate of fair value, where the
inputs into the determination of fair value are not observable
and require significant management
judgment or estimation. These primarily consist of trust
receivable accounts. The inputs used by
the College in estimating the value of Level 3 instruments is the
fair value of the assets held by
the trusts, less any projected obligations to the donor
beneficiary. Also included in Level 3 are
investments measured using a NAV per share, or its equivalent,
that cannot be redeemed at NAV
at or near the reporting date, or for which redemption at net
asset value is uncertain due to lockup
periods or other investment restrictions.

28. Subsequent Events
In May 2009, the FASB issued new guidance related to
subsequent events to incorporate the
accounting and disclosure requirements for subsequent events
into U.S. GAAP. This guidance
introduces new terminology, defines a date through which
management must evaluate
subsequent events, and lists the circumstances under which an
entity must recognize and disclose
events or transactions occurring after the balance-sheet date.
The College adopted these
amended principles as of June 30, 2009, which was the required
effective date.