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. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . " NOTE 1. Revenlle and Cost Recognition (continlled) - BERMELLO, AJAMIL & PARTNERS, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2006 AND 2005 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) The asset "costs and estimated earnings in excess of billings on uncompleted contracts" represents revenues recognized in excess of amounts billed. The liability "billings in excess of costs and estimated earnings on uncompleted contracts" represents billings in excess of revenues recognized. Cas" mId Cas" Eqllivalents For purpose of the consolidated statements of cash flows, the Company considers all highly liquid instruments purchased with a maturity of three months or less to be cash equivalents. The Company places its cash with quality financial institutions. Such balances may temporarily exceed at a given day the insured limits of the Federal Deposit Insurance Corporation due to the volume of daily cash activity. The Company has not experienced any losses in such accounts. Property and Eqllipmelll Property and equipment arc carried at cost, less accumulated depreciation and amortization. Depreciation is detennined using the straight-line method over the estimated useful lives of the assets. Amortization of leasehold improvements is determined using the straight-line method over the lesser of the term of the lease or the life of the asset. Depreciation and amortization is included in general and administrative expenses in the consolidated statements of operations. Estimated useful Jives of property and equipment arc as follows: Asset Computer and transponation equipment Furniture and equipment Leasehold improvements Equipment held under capital leases Life 3 - 5 years 5 - 7 years Shorter of useful life or lease tenn 5 - 7 years Maintenance and repairs arc charged to expense as incurred; improvements and betterments are capitalized. When items are retired or are otherwise disposed of, the related eosts and accumulated depreciation and amortization arc removed from the accounts and any resulting gains or losses are credited or charged to income. -8-