Smithsonian Institution Statement of Cash Flows for the year ended 



September 30, 1995 (with comparative totals for 1994) (In thousands) (continued) 



Net cash provided (used) bv financing activities 



247 



247 



(8.433) 



Net increase (decrease) in cash and balances with 

 U.S. Treasury 



Cash and balances with U.S. Treasury: 



Beginning of vear 



(561) 1,880 



1,319 



6.096 



1,636 171,244 172,880 166,784 



End of vear 



$ 1,075 173,124 



174,199 172,880 



See accompanying notes to financial statements. 



SMITHSONIAN INSTITUTION 



Notes to Financial Statements, September 30, 1995 



(1) Summary of Significant Accounting Policies 



Basis of Presentation 



These financial statements reflect the Smithsonian Institution's receipt and 

 expenditure of funds obtained from all sources. These funding sources 

 include federal appropriations, private sources, government grants and 

 contracts, investment income, and certain business activities. 



Funds received from direct federal appropriations are reported in the 

 columns titled Federal Funds in the financial statements. All other funds are 

 reported in the columns titled Trust Funds in the financial statements. 

 Federal funds and trust funds are accounted for on the accrual basis of 

 accounting. 



These financial statements do not include the accounts of the National 

 Gallery of Art, the John F. Kennedy Center for the Performing Arts, or the 

 Woodrow Wilson International Center for Scholars, which were established 

 by Congress within the Institution, but are administered under separate 

 boards of trustees. 



Fund Accounting 



To ensure compliance with the limitations and restrictions placed on the use 

 of resources available to the Institution, accounts are maintained in accor- 

 dance with the principles of fund accounting. This procedure classifies 

 resources for control, accounting and reporting purposes into distinct funds 

 established according to their nature and purposes. Separate accounts are 

 maintained for each fund; however, in the accompanying financial state- 

 ments, funds that have similar characteristics have been combined for pre- 

 sentation into fund groups. Accordingly, all financial transactions have been 

 reported by fund group. 



The assets, liabilities, and fund balances of the Institution are self- 

 balancing as follows: 



Federal operating funds represent appropriated funds available for sup- 

 port of the Institution's operations and are generally available for obligation 

 only in the year received. Separate subfund groups are maintained for each 

 appropriation as follows: Salaries and Expenses; Special Foreign Currency; 

 and the Barro Colorado Island Trust Fund, which supports the Smithsonian 

 Tropical Research Institute. 



Federal construction funds represent the portion of appropriated funds 

 available for building and facility construction, restoration, renovation and 

 repair and are available for obligation until expended. Separate subfund 

 groups are maintained for each appropriation: Construction and 

 Improvements, Repairs and Restoration of Buildings, and the National 

 Zoological Park. 



Federal capital funds represent the depreciated historical cost of the 

 Institution's assets acquired with federal funds plus nonexpendable property 

 transfers from U.S. Government agencies. 



Trust current funds which include unrestricted and restricted resources, 

 represent nonappropriated funds available for support of the Institution's 

 operations. 



Trust endowment and similar funds include both true and quasi- 

 endowment funds. True endowments are subject to restrictions of gift instru- 

 ments and require that the principal be invested in perpetuity and that only 

 income be expended. Also classified as endowment and similar funds are 

 gifts which allow the expenditure of principal only under specified condi- 

 tions. Quasi-endowment funds are funds established by the governing board 

 for the same purposes as endowment funds; however, any portion of such 

 funds may be expended with board approval. Restricted quasi-endowment 

 funds represent gifts for restricted purposes where there is no stipulation that 

 the principal be maintained in perpetuity or for a period of time, but the 

 governing board has elected to invest the principal and expend only the 

 income for the purpose stipulated by the donor. 



Trust plant funds represent resources restricted or internally designated for 

 future plant acquisitions, and the depreciated historical cost of the 

 Institution's assets acquired with plant funds. 



Investments 



Investments are stated at cost or amortized cost. Investments are recorded at 

 cost on a trade date basis if purchased, or at estimated fair value at date of 

 acquisition if acquired by gift. 



All investment income, except that of endowment and similar funds, and 

 gains and losses arising from the sale of investments, are accounted for in the 

 fund in which the related assets are recorded. Income of endowment and 

 similar funds is accounted for using the total return method (note 4) in the 

 fund to which it is restricted or, if unrestricted, as revenue in unrestricted 

 current funds. Gains and losses on the sales of investments are recognized on 

 the trade date basis using the average cosr method. 



Inventory 



Inventories are reported at the lower of cost or market. Cost is determined 



using the first-in, first-out method. 



Deferred Revenue and Expense 



Revenue from subscriptions to Smithsonian magazine and Air & Space/ 

 Smithsonian magazine is recorded as income over the period of the related 

 subscription, which is generally one year. Certain costs to obtain subscrip- 

 tions to Smithsonian magazine and Air & Space/Smithsonian magazine are 

 charged against income over the subscription period. 



The Institution expenses promotion production costs the first time the 

 advertising takes place. Direct-response advertising is deferred and amortized 

 over one year. 



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