Condensed Consolidated Financial Statements (Policies)

9 Months Ended

Sep. 30, 2012

Condensed Consolidated Financial Statements

Principles of Consolidation

The consolidated financial statements include the accounts of MOCON, Inc. and its wholly-owned subsidiaries (collectively the Company).  All material intercompany balances and transactions have been eliminated in consolidation.

Fair Value of Financial Instruments

The carrying amounts for cash and cash equivalents, accounts receivable, accounts payable, revolving line of credit and accrued liabilities approximate fair value due to the immediate or short-term maturity of these financial instruments.  The fair value of held to maturity investments in marketable securities is based on quoted market prices and summarized in Note 5.  See Note 7 for fair value disclosure of the investment in Luxcel and Note 13 for the fair value disclosure of the derivative instrument.  The fair value of the Company’s term note payable and seller financed secured note payable at September 30, 2012 approximates the carrying value due to the proximity of the date at which the Company executed the agreements and period end.

Recently Adopted Accounting Pronouncements

On January 1, 2012, the Company adopted the FASB issued guidance on the presentation of comprehensive income, which requires entities to present reclassification adjustments included in other comprehensive income on the face of the financial statements and allows entities to present the total of comprehensive income, the components of net income and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements.  Adoption of this guidance did not have a material effect on our consolidated financial statements.

In September 2011, the FASB issued updated accounting guidance on the periodic testing of goodwill for impairment.  This guidance allows entities the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount.  If the entity concludes the fair value is higher than the carrying value, then no further testing is necessary.  However, if impairment is likely, the first step, which is to calculate the fair value of the reporting unit, is necessary.  Additionally, the entity is required to then perform step two in measuring the impairment loss for the period.  For public companies, this guidance is effective for fiscal years (and interim periods within those years) beginning after December 15, 2011, with earlier adoption permitted.  The Company adopted this guidance on January 1, 2012 and it did not have a material effect on our consolidated financial statements.