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B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (POLICIES)
12 Months Ended
Dec. 31, 2020
Accounting Policies [Abstract]  
Principles of Consolidation

Principles of Consolidation

 

The consolidated financial statements include the accounts of New Concept Energy, Inc. and its majority-owned subsidiaries (collectively, the “Company”, New Concept or “NCE”) and are prepared on the basis of accounting principles generally accepted in the United States of America “GAAP”.  All significant intercompany transactions and accounts have been eliminated. Certain accounting balances have been reclassified to conform to the current year presentation.

Depreciation

Depreciation

 

Depreciation is provided for in amounts sufficient to relate the cost of property and equipment to operations over their estimated service lives, ranging from 3 to 40 years. Depreciation is computed by the straight-line method.

 

Depreciation expense, which is included in operations, was $12,000, $18,000 and $43,000 for 2020, 2019 and 2018, respectively.

Segments

Segments

 

The Company operates one primary business segment: real estate rental.  Segment data is provided in “Note J” to these consolidated financial statements.

 

On August 31, 2020 the Company sold its oil and gas segment which is now reflected as Discontinued Operations

Accounting for Leases

Accounting for Leases

 

Leases of property, plant and equipment where the Company assumes substantially all the benefits and risks of ownership are classified as finance leases. Finance leases are capitalized at the estimated present value of the underlying lease payments. Each lease payment is allocated between the liability and finance charges so as to achieve a constant rate on the finance balance outstanding. The corresponding rental obligations, net of finance charges, are included in other long-term payables. The interest element of the finance charge is charged to the income statement over the lease period. Property, plant and equipment acquired under finance leasing contracts are depreciated over the useful life of the asset.

 

Leases of assets under which all the risks and benefits of ownership are effectively retained by the lessor are classified as operating leases. Payments made under operating leases are charged to the income statement on a straight-line basis over the period of the lease.  When an operating lease is terminated before the lease period has expired, any payment required to be made to the lessor by way of penalty is recognized as an expense in the period in which termination takes place.

Revenue Recognition

Revenue Recognition

 

Rental income for property leases are recorded when due from the tenant and is recognized monthly as it is earned.

Use of Estimates

Use of Estimates

 

In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and revenues and expenses during the reporting period.  Actual results could differ from those estimates.

Cash Equivalents

Cash Equivalents

 

The Company considers all short-term deposits and money market investments with a maturity of less than three months to be cash equivalents.

Impairment of Notes Receivable

Impairment of Notes Receivable

 

Notes receivable are identified as impaired when it is probable that interest and principal will not be collected according to the contractual terms of the note agreements.  The accrual of interest is discontinued on such notes, and no income is recognized until all past due amounts of principal and interest are recovered in full.

Impairment of Long-Lived Assets

Impairment of Long-Lived Assets

 

The Company reviews its long-lived assets and certain identifiable intangibles for impairment when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable.  In reviewing recoverability, the Company estimates the future cash flows expected to result from use of the assets and eventually disposing of them.  If the sum of the expected future cash flows (undiscounted and without interest charges) is less than the carrying amount of the asset, an impairment loss is recognized based on the asset’s fair value.

 

The Company determines the fair value of assets to be disposed of and records the asset at the lower of fair value less disposal costs or carrying value.  Assets are not depreciated while held for disposal.

Sales of Real Estate

Sales of Real Estate

 

Gains on sales of real estate are recognized to the extent permitted by Accounting Standards Codification Topic 360-20, “Real Estate Sales – Real Estate Sales”, (“ASC 360-20”).  Until the requirements of ASC 360-20 have been met for full profit recognition, sales are accounted for by the installment or cost recovery method, whichever is appropriate.

Income Taxes

Income Taxes

The Company accounts for income taxes in accordance with Accounting Standards Codification, (“ASC”) No. 740, “Accounting for Income Taxes”. ASC 740 requires an asset and liability approach to financial accounting for income taxes. In the event differences between the financial reporting basis and the tax basis of the Company’s assets and liabilities result in deferred tax assets, ASC 740 requires an evaluation of the probability of being able to realize the future benefits indicated by such assets. A valuation allowance is provided for a portion or all of the deferred tax assets when there is an uncertainty regarding the Company’s ability to recognize the benefits of the assets in future years. Recognition of the benefits of deferred tax assets will require the Company to generate future taxable income. There is no assurance that the Company will generate earnings in future years. Since management could not determine the likelihood that the benefit of the deferred tax asset would be realized, no deferred tax asset was recognized by the Company.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

 

In December 2019, the FASB issued ASU 2019-12. Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The amendments in this Update simplify the accounting for income taxes by removing certain exceptions from ASC 740. Also, the amendments in this Update simplify the accounting for income tax by requiring that an entity recognize a franchise tax (or similar tax) that is partially based on income as an income-based tax, requiring that an entity evaluate when a step up in the tax basis of goodwill should be considered part of the business combination, and other targeted changes. The effective date of the amendments is for fiscal years, and interim periods within those years, beginning after December 15, 2020. The adoption of the standard on January 1, 2020, did not have a material impact on our financial position and results of operations.