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ValleyCrest Holding Co. and Subsidiaries <br />Notes to Consolidated Financial Statements (continued) <br />3. Summary of Significant Accounting Policies (continued) <br />Investments and Escrowed Retention <br />The Company accounts for investments as available for sale securities. Available- for -sale <br />securities are recorded at fair value based on quoted market prices. Unrealized gains and losses <br />are excluded from earnings and are reported as a separate component of accumulated other <br />comprehensive income included in stockholders' equity until realized. A decline in fair value of <br />any available for sale security below cost that is deemed to be other than temporary results in a <br />reduction of the carrying amount to fair value. The impairment is charged to earnings and a new <br />cost basis for the security is established. The cost of marketable securities sold is based on the <br />specific identification method. <br />Escrowed retention accounts consist of investments held by third -party trustees in escrowed <br />accounts. The escrowed accounts represent the retention receivable related to certain <br />construction contracts. The Company's access to these funds is granted by the terms of the <br />escrow agreements upon completion of the construction contracts. <br />Trade Receivables <br />Trade receivables are recorded at the invoiced amount and do not bear interest. The allowance <br />for doubtful accounts is the Company's best estimate of the amount of probable credit losses in <br />the Company's existing trade receivables. The Company determines the allowance based on <br />historical experience of expected collections. The Company reviews its allowance for doubtful <br />accounts on a quarterly basis. Account balances are charged off against the allowance after all <br />means of collection have been exhausted and the potential for recovery is considered remote. <br />Trade receivables include retentions receivable of $28,909,000 at April 30, 2008. <br />Inventories <br />Inventories, which principally represent trees, irrigation and other landscape materials, are <br />valued at the lower of cost (first in, first out) or market. <br />10 -ll -bl <br />-01 1a � <br />ValleyCrest Landscape N11a;4;i. <br />16400 NW 127 h AA, <br />Miami, FL 33018 -1051 <br />