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ValleyCrest Holding Co. and Subsidiaries Notes to Consolidated Financial Statements (continued) 3. Summary of Significant Accounting Policies (continued) Use of Estimates The preparation of the Company's consolidated financial statements in conformity with accounting principles generally accepted in the United States 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 consolidated balance sheet date and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from the estimates made. Fair Values of Financial Instruments The fair value of the Company's long -term debt is estimated based on current rates offered to the Company for debt of the same remaining maturity plus early termination costs to refinance existing debt, which approximates the carrying value. All other financial instruments have relatively short-term maturities, and accordingly, the carrying amount of these instruments approximates fair value. New Accounting Standards In July 2006, the FASB issued Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income Taxes — an Interpretation of FASB Statement No. 109. FIN 48 clarifies the accounting for uncertainty in income taxes recognized in the Company's financial statements. FIN 48 requires companies to determine whether it is "more likely than not" that a tax position will be sustained upon examination by the appropriate taxing authorities before any part of the benefit can be recorded in the financial statements. It also provides guidance on the recognition, measurement and classification of income tax uncertainties, along with related interest and penalties. FIN 48 applies to all tax positions related to income taxes that are subject to SFAS No. 109, Accounting for Income Taxes. The Company will adopt FIN 48 effective May 1, 2008 on a prospective basis. The Company is currently evaluating the impact of the adoption of FIN 48 on its consolidated financial statements. lo—u-01 4 q ValieyCrest Landscape Maint, 13 1 400 N' "V 127th Ave, Mj-=!, FL "13018 -1051