Accounting Policies

3 Months Ended

Sep. 30, 2012

Accounting Policies:

Accounting Policies

1. Business

Commonwealth Income & Growth Fund V (the “Partnership”) is a limited partnership organized in the Commonwealth of Pennsylvania in May 2003. The Partnership offered for sale up to 1,250,000 units of the limited partnership at the purchase price of $20 per unit (the “offering”). The Partnership reached the minimum amount in escrow and commenced operations on March 14, 2005. As of February 24, 2006, the Partnership was fully subscribed.

The Partnership used the proceeds of the offering to acquire, own and lease various types of information technology, medical technology, telecommunications technology, inventory management equipment and other similar capital equipment, which is leased primarily to U.S. corporations and institutions.

Commonwealth Capital Corp. (“CCC”), on behalf of the Partnership and other affiliated partnerships, acquires equipment subject to associated debt obligations and lease agreements and allocate a participation in the cost, debt and lease revenue to the various partnerships that it manages based on certain risk factors.

The Partnership’s General Partner is Commonwealth Income & Growth Fund, Inc. (the “General Partner”), a Pennsylvania corporation which is an indirect wholly owned subsidiary of CCC. Approximately ten years after the commencement of operations, the Partnership intends to sell or otherwise dispose of all of its equipment, make final distributions to partners, and to dissolve. Unless sooner terminated, the Partnership will continue until February 4, 2017.

As a result of litigation with the City of Tempe, the Partnership has suspended distributions, beginning with the second quarter of 2011 and continuing through third quarter 2012.

Although the litigation was settled in March 2012, the General Partner has not recommenced distributions and will continue to reassess the

funding of limited partner distributions. If available cash flow or net disposition proceeds are insufficient to cover the Partnership expenses and liabilities on a short or

long term basis, the Partnership may attempt to obtain additional funds by refinancing equipment, or by borrowing within its permissible limits.

The General Partner and CCC will determine if related party payables owed to them by the Partnership may be deferred (if deemed necessary) in an effort to increase the Partnership’s cash flow.

2. Summary of Significant Accounting Policies

Basis of Presentation

The financial information presented as of any date other than December 31, 2011 has been prepared from the books and records without audit. Financial information as of December 31, 2011 has been derived from the audited financial statements of the Partnership, but does not include all disclosures required by generally accepted accounting principles to be included in audited financial statements. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the financial information for the periods indicated, have been included. For further information regarding the Partnership’s accounting policies, refer to the financial statements and related notes included in the Partnership’s annual report on Form 10-K for the year ended December 31, 2011. Operating results for the nine months ended September 30, 2012 are not necessarily indicative of financial results that may be expected for the full year ending December 31, 2012.

 Disclosure of Fair Value of Financial Instruments

Estimated fair value was determined by management using available market information and appropriate valuation methodologies. However, judgment was necessary to interpret market data and develop estimated fair value. Cash and cash equivalents, receivables, accounts payable and accrued expenses and other liabilities are carried at amounts which reasonably approximate their fair values as of September 30, 2012 and December 31, 2011 due to the short term nature of these financial instruments.

The Partnership’s long-term debt consists of notes payable, which are secured by specific equipment and are nonrecourse liabilities of the Partnership. The estimated fair value of this debt at September 30, 2012 and December 31, 2011 approximates the carrying value of these instruments, due to the interest rates on the debt approximating current market interest rates. The Partnership classifies the fair value of its notes payable within Level 2 of the valuation hierarchy based on the observable inputs used to estimate fair value.

Cash and cash equivalents

At September 30, 2012, cash was held in three accounts maintained at one financial institution with an aggregate balance of approximately $167,000. Bank accounts are federally insured up to $250,000, while pursuant to the Dodd/Frank Act of 2010, some accounts are fully insured by the FDIC.  At September 30, 2012, the total cash bank balance was as follows:

At September 30, 2012	Amount
Total bank balance	$	167,000
FDIC insured		(167,000	)
Uninsured amount	$	0

The Partnership's deposits are fully insured by the FDIC. The Partnership has not experienced any losses in our accounts, and believes it is not exposed to any significant credit risk.  The amounts in such accounts will fluctuate throughout 2012 due to many factors, including the pace of cash receipts, equipment acquisitions and distributions to limited partners.

Recent Accounting Pronouncements

In October 2012, the FASB issued ASU No. 2012-04 (“ASC Update 2012-04), Technical Corrections and Improvements. The amendments in this Update represent changes to clarify the Codification,

correct unintended application of guidance, or make minor improvements to the Codification that are not expected to have a significant effect on current accounting practice or create a significant

administrative cost to most entities. The amendments in this ASU that will not have transition guidance are effective upon issuance of the ASU, which is the fourth quarter of 2012. The amendments that

are subject to transition guidance will be effective for fiscal periods beginning after December 15, 2012. The Partnership does not anticipate any impact on its financial statements as a result of the

adoption of this ASU.

In August 2012, the FASB issued ASU No. 2012-03 (“ASC Update 2012-03), Technical Amendments and Corrections to SEC Sections, Amendments to SEC Paragraphs Pursuant to SEC Staff

Accounting Bulletin No. 114, Technical Amendments Pursuant to SEC Release NO. 33-9250, and Corrections Related to FASB Accounting Standard Update 2010-22. The amendments in this Update

amend various SEC paragraphs within the FASB Accounting Standards Codification (“Codification”) pursuant to the issuance of Staff Accounting Bulletin (SAB) No. 114, SEC Release No. 33-9250, and

FASB Accounting Standards Update 2010-22. This ASU was effective in the third quarter of 2012. The Partnership adopted this ASU during the third quarter 2012 and it did not have a material effect on

its financial statements.

In May 2011, the FASB issued ASU No. 2011-04 (“ASC Update 2011-04”), Amendments to Achieve Common Fair Value Measurements and Disclosure Requirements in U.S. GAAP and IFRS. This ASU is

intended to update the fair value measurement and disclosure requirements in US GAAP for measuring fair value and for disclosing information about fair value measurements. The amendments in this

update are for interim and annual periods beginning after December 15, 2011. The Partnership adopted the provisions of this ASU during the first quarter of 2012, and the required changes in presentation

and disclosure requirements have been included in its financial statements and notes thereto. The adoption did not have a material impact on the Partnership’s financial position, results of operations or

cash flows.

3. Information Technology, Medical Technology, Telecommunications Technology, Inventory Management Equipment (“Equipment”)

The Partnership is the lessor of equipment under operating leases with periods that generally will range from 12 to 48 months. In general, associated costs such as repairs and maintenance, insurance and property taxes are paid by the lessee.

Remarketing fees are paid to the leasing companies from which the Partnership purchases leases. These are fees that are earned by the leasing companies when the initial terms of the lease have been met. The General Partner believes that this strategy adds value since it entices the leasing company to remain actively involved with the lessee and encourages potential extensions, remarketing or sale of equipment. This strategy is designed to minimize any conflicts the leasing company may have with a new lessee and may assist in maximizing overall portfolio performance. The remarketing fee is tied into lease performance thresholds and is a factor in the negotiation of the fee. Remarketing fees incurred in connection with lease extensions are accounted for as operating costs. Remarketing fees incurred in connection with the sale of computer equipment are included in the gain or loss calculations. For the nine months ended September 30, 2012 and 2011, the Partnership incurred remarketing fees of approximately $33,000 and 70,000, respectively. For the nine months ended September 30, 2012 and 2011, cash paid for remarketing fees was approximately $34,000 and $31,000, respectively. 

CCC, on behalf of the Partnership and on behalf of other affiliated partnerships, acquires equipment subject to associated debt obligations and lease agreements and allocates a participation in the cost, debt and lease revenue to the various partnerships based on certain risk factors. The Partnership’s share of the cost of the equipment in which it participates with other partnerships at September 30, 2012 was approximately $9,816,000 and is included in the Partnership’s equipment on its balance sheet.  The Partnership’s share of the outstanding debt associated with this equipment at September 30, 2012 was approximately  $533,000 and is included in the Partnership’s notes payable on its balance sheet. The total cost of the equipment shared by the Partnership with other partnerships at September 30, 2012 was approximately $30,455,000. The total outstanding debt related to the equipment shared by the Partnership at September 30, 2012 was approximately $1,119,000.

The Partnership’s share of the cost of the equipment in which it participates with other partnerships at December 31, 2011 was approximately $9,280,000 and is included in the Partnership’s equipment on its balance sheet.  The Partnership’s share of the outstanding debt associated with this equipment at December 31, 2011 was approximately $351,000 and is included in the Partnership’s notes payable on its balance sheet. The total cost of the equipment shared by the Partnership with other partnerships at December 31, 2011 was approximately $29,772,000. The total outstanding debt related to the equipment shared by the Partnership at December 31, 2011 was approximately $952,000.

The following is a schedule of future minimum rentals on noncancellable operating leases at September 30, 2012:

	Amount
Three months ended December 31, 2012	$	294,000
Year Ended December 31, 2013		870,000
Year Ended December 31, 2014		672,000
Year Ended December 31, 2015		83,000
	$	1,919,000

4. Related Party Transactions

As of September 30, 2012 and 2011, the Company’s related party receivables and payables are short term, unsecured and non-interest bearing.

During the year ended December 31, 2011, the Partnership recorded a payable to an affiliate in the amount of approximately $512,000, including interest. The balance is approximately $107,000 at September 30, 2012. The payable carries an annual interest rate of 6.25%.The payable is expected to be repaid during 2012.

Nine months ended September 30,	2012		2011
Reimbursable expenses
Reimbursable expenses, which are charged to the partnership by CCC in connection with the administration and operation of the Partnership, are allocated to the Partnership based upon several factors including, but not limited to, the number of investors, compliance issues, and the number of existing leases. During the nine months ended September 30, 2012 and 2011, there was approximately $0 and $97,000 of reimbursable expenses charged to the Partnership by CCC.	$	155,000	$	568,000
Equipment acquisition fee
The General Partner earned an equipment acquisition fee of 4% of the purchase price of each item of equipment purchases as compensation for the negotiation of the acquisition of the equipment and lease thereof or sale under a conditional sales contract. For the nine months ended September 30, 2012 and 2011, approximately $12,000 and $0 of acquisition fees were waived by the General Partner.	$	51,000	$	9,000

Debt placement fee
As compensation for arranging term debt to finance our acquisition of equipment, we will pay the general partner a fee equal to one percent of such indebtedness; provided, however, that such fee shall be reduced to the extent we incur such fees to third parties unaffiliated with the general partner or the lender with respect to such indebtedness. No such fee will be paid with respect to borrowings from the general partner or its affiliates. We intend to initially acquire leases on an all cash basis with the proceeds of this offering, but may borrow funds after the offering proceeds have been invested. The amount we borrow, and therefore the amount of the fee, will depend upon interest rates at the time of a loan, and the amount of leverage we determine is appropriate at the time. We do not intend to use more than 30% leverage overall in our portfolio. Fees will increase as the amount of leverage we use increases, and as turnover in the portfolio increases and additional equipment is purchased using leverage. During the nine months ended September 30, 2012 and 2011, the General Partner waived approximately $3,000 and $0 of debt placement fees.	$	6,000	$	0
Equipment management fee
The General Partner is entitled to be paid a monthly fee equal to the lesser of (i) the fees which would be charges by and independent third party for similar services for similar equipment or (ii) the sum of (a) two percent of (1) the gross lease revenues attributable to equipment which is subject to full payout net leases which contain net lease provisions plus (2) the purchase price paid on conditional sales contracts as received by the Partnership and (b) 5% of the gross lease revenues attributable to equipment which is subject to operating and capital leases. For nine months ended September 30, 2012 equipment management fees of approximately $9,000 were earned but were waived by the General Partner. For the nine months ended September 30, 2011, equipment management fees of approximately $9,000 were earned and were waived by the General Partner.	$	24,000	$	28,000
Equipment liquidation fee
With respect to each item of equipment sold by the General Partner (other than in connection with a conditional sales contract), a fee equal to the lesser of (i) 50% of the competitive equipment sale commission or (ii) three percent of the sales price for such equipment is payable to the General Partner. The payment of such fee is subordinated to the receipt by the limited partners of (i) a return of their net capital contributions and a 10% per annum cumulative return, compounded daily, on adjusted capital contributions and (ii) the net disposition proceeds from such sale in accordance with the Partnership Agreement. Such fee will be reduced to the extent any liquidation or resale fees are paid to unaffiliated parties. During the nine months ended September 30, 2012 and 2011, the General Partner waived approximately $1,000 and $11,000 of equipment liquidation fees.	$	0	$	5,000