SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	12 Months Ended
Dec. 31, 2012
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Cash and Cash Equivalents. Cash and cash equivalents include unrestricted demand deposits with banks and all highly liquid deposits with an original maturity of less than three months. The cash equivalents are not protected by federal deposit insurance. (b) Allowance for Doubtful Accounts. The Partnership reviews the accounts receivable to determine the adequacy of this allowance by regularly reviewing specific account payment history and circumstances, the accounts receivable aging, and historical write-off rates. If customer payment timeframes were to deteriorate, allowances for doubtful accounts would be required. There was no allowance for doubtful accounts at December 31, 2012 or 2011. (c) Financial Instruments. The fair value of the line of credit is approximately the carrying value due to the variability of the interest rate and frequency that the interest rate resets. The long-term financial instrument has a fixed interest rate and the fair value compared to carrying value is disclosed. (d) Consolidation. The consolidated financial statements include the accounts of the Partnership, Royal and RHR. All significant intercompany balances and transactions, including management fees and distributions, have been eliminated. (e) Farming Costs. The Partnership considers each orchard to be a separate cost center, which includes the depreciation/amortization of capitalized costs associated with each orchard’s acquisition and/or development and maintenance and harvesting costs directly attributable to each orchard. In accordance with industry practice in Hawaii, orchard maintenance and harvesting costs for commercially producing macadamia orchards are charged against earnings in the year that the costs are incurred. However, the timing and manner in which farming costs are recognized in the Partnership’s consolidated financial statements over the course of the year is based on management’s estimate of annual farming costs expected to be incurred. For interim financial reporting purposes, farming costs are recognized as expense based on an estimate of the cost incurred to produce macadamia nuts sold during the quarter. Management estimates the average cost per pound for each orchard based on the estimated annual costs to farm each orchard and the anticipated annual production from each orchard. The amount of farming costs recognized as expense throughout the year is calculated by multiplying each orchard’s estimated cost per pound by the actual production from that orchard. The difference between actual farming costs incurred and the amount of farming costs recognized as expense is recorded as either an increase or decrease in deferred farming costs, which is reported as an asset in the consolidated balance sheets. Deferred farming costs accumulate throughout the year, typically peaking midway through the third quarter, since nut production is lowest during the first and second quarter of the year. Deferred farming costs are expensed over the remainder of the year since nut production is highest at the end of the third and fourth quarters. Management evaluates the validity of each orchard’s estimated cost on a monthly basis based on actual production and farming costs incurred, as well as any known events that might significantly affect forecasted annual production and farming costs for the remainder of the year. (f) Inventory. Farming Supply Inventory. Farming supplies inventory is expensed on an average cost basis to cost of farming expense as used. There was no write down of supplies inventory in 2012 or 2011. Kernel and Packaging Supply Inventory. Kernel inventory is recorded at the lower of cost or market, and was valued at $721,000 and $240,000 at December 31, 2012 and 2011, respectively. Inventory of packaging and ingredients is recorded at the lower of cost or market, and was valued at $98,000 and $36,000 at December 31, 2012 and 2011, respectively. The kernel inventory, ingredients and packaging material is reclassified on an average cost basis to finished product as the Partnership’s new product line is manufactured. Finished Goods Inventory. Finished goods inventory, comprised of Royal Hawaiian Orchards apparel and Royal’s two product lines consisting of five savory macadamia nut flavors and seven fruit and nut clusters, was valued at $285,000 at December 31, 2012. The finished goods inventory includes the cost of kernel, ingredients, packaging supplies, manufacturing and the cost of apparel. (g) Land, Orchards and Equipment. Land, orchards and equipment are reported at cost, net of accumulated depreciation and amortization. Net farming costs for any “developing” orchards are capitalized on the consolidated balance sheets until revenues from that orchard exceed expenses for that orchard (or nine years after planting, if earlier). Developing orchards historically do not reach commercial viability until about 12 years of age. Depreciation of orchards and other equipment is reported on a straight-line basis over the estimated useful lives of the assets (40 years for orchards, between 10 and 20 years for irrigation and well equipment, and between 5 and 12 years for other equipment). A 5% residual value is assumed for orchards. The macadamia orchards acquired in 1986 situated on leased land are being amortized on a straight-line basis over the terms of the leases (approximately 33 years from the inception of the Partnership) with no residual value assumed. The macadamia orchards acquired in 1989 situated on leased land are being amortized on a straight-line basis over a 40 year period (the terms of these leases exceed 40 years) with no residual value assumed. For income tax reporting, depreciation is calculated under the straight line and declining balance methods over Alternative Depreciation System recovery periods. Repairs and maintenance costs are expensed unless they exceed $5,000 and extend the useful life beyond the depreciable life. The Partnership reviews long-lived assets held and used, or held for sale for impairment whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. If an evaluation is required, the estimated undiscounted future cash flows associated with the asset are compared to the asset’s carrying amount to determine if an impairment charge is required. If an impairment charge is required the Partnership would write the assets down to fair value. All long-lived assets for which management has committed to a plan of disposal are reported at the lower of carrying amount or fair value as determined by quoted market price or a present value technique. Changes in projected cash flows generated by an asset based on new events or circumstances may indicate a change in fair value and require a new evaluation of recoverability of the asset. (h) Goodwill and Other Intangible Assets. Goodwill and other indefinite-lived intangible assets are not amortized but are reviewed for impairment at least annually and if a triggering event were to occur in an interim period. The Partnership’s annual impairment testing is performed in the 4th quarter each year. The goodwill is allocated to the farming reporting unit. Goodwill impairment is determined using a two-step process for each reporting unit. The first step of the impairment test is used to identify potential impairment by comparing the fair value of a reporting unit to the book value, including goodwill. This evaluation utilizes a discounted cash flow analysis and multiple analyses of the historical and forecasted operating results of the Partnership’s reporting unit. If the fair value of a reporting unit exceeds its book value, goodwill of the reporting unit is not considered impaired, and the second step of the impairment test is not required. If the book value of a reporting unit exceeds its fair value, the second step of the impairment test is performed to measure the amount of impairment loss, if any. The second step of the impairment test compares the implied fair value of the reporting unit’s goodwill with the book value of the goodwill. If the book value of the reporting unit’s goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination. The impairment of goodwill in the amount of $306,000 was recorded by the Partnership as of August 1, 2010, the date of acquisition of the IASCO orchards. The elimination of the IASCO farming contract, which represented approximately 50% to 55% of the cash flow of the contract farming segment, resulted in the impairment of goodwill. In 2010, the Partnership recorded its estimate of the fair value of remaining goodwill, which was zero, based upon a discounted cash flow analysis using unobservable inputs. As a result of the IASCO orchards acquisition, the Partnership recorded $480,000 in intangible asset consisting of three nut purchase agreements and $137,500 in financing fees. The nut purchase agreements are being amortized over a ten-year life, or $48,000 per year. The financing fees are being amortized over the terms of the respective debt agreement. $105,000 of the financing fees is being amortized over 10 years or $10,500 per year. $37,500 of the financing fees was amortized over two years and became fully amortized in 2012. In 2012, the Partnership recorded $37,500 in intangible assets for financing fees and $88,000 for the Partnership’s e-commerce website development costs. The financing fees are being amortized over 23 months and the web development costs are being amortized over five years or $17,600 per year. (i) General Excise and Sales Taxes. The Partnership records Hawaii general excise and California sales taxes when goods and services are sold on a gross basis as components of revenues and expenses. For the years ended December 31, 2012, 2011 and 2010, Hawaii general excise taxes charged or passed on to customers and reflected in revenues and expenses amounted to $34,000, $32,000, and $53,000, respectively. There were no California sales taxes charged or collected in 2012, as food products are not subject to sales tax in California. (j) Income Taxes of Partnership. The income of the Partnership is not taxed directly; rather, the Partnership’s tax attributes are included in the individual tax returns of its partners. Neither the Partnership’s financial reporting income nor the cash distributions to unit holders can be used as a substitute for the detailed tax calculations which the Partnership must perform annually for its partners. The Partnership is subject to a gross income tax as a result of its election to continue to be taxed as a partnership rather than to be taxed as a corporation, as allowed by the Taxpayer Relief Act of 1997. This tax is calculated at 3.5% on partnership gross income (net revenues less cost of goods sold) beginning in 1998. Deferred tax liabilities are recognized for the future tax consequences attributable to differences between the financial reporting and tax reporting basis of assets and liabilities. The Partnership evaluates uncertain income tax positions utilizing a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. At December 31, 2012, management believes there were no uncertain income tax positions. The four tax years in the period ended December 31, 2012 remain open for federal purposes. (k) Deferred Tax Asset and Valuation Allowance. Royal derives its revenues from the sale of branded macadamia nut products which are reported under the corporation. For 2012, Royal is subject to taxation as a C Corporation at the 34% federal tax rate and 6.4% state tax rate on the corporation’s taxable income (loss). As a result of the tax loss of Royal, the Partnership recorded a deferred tax asset of $412,000, against which the Partnership has recorded a valuation allowance equal to 100% of the deferred tax asset due to the uncertainty regarding future realization. Management evaluates uncertain income tax positions for Royal utilizing a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. At December 31, 2012, management believes there were no uncertain income tax positions. (l) Revenue. Macadamia nut sales are recognized when nuts are delivered to the buyer. Contract farming revenue and administrative services revenues are recognized in the period that such services are completed, that is, upon the incurrence of direct labor or equipment hours incurred on behalf of an orchard owner. The Partnership is paid for its services based upon a “time and materials” basis plus a percentage fee or fixed fee based upon each farming contract’s terms. Contract farming includes the regular maintenance of the owners’ orchards as well as harvesting of their nuts. The Partnership provides these services on a continuing basis throughout the year. Revenue for the sale of branded products is recognized when the product is shipped and invoiced. This may vary depending on the terms. Revenues for branded products are shown net of any trade discounts. (m) Pension Benefit and Intermittent Severance Costs. The funded status of the Partnership’s defined benefit pension plan and intermittent severance plan is recognized in the consolidated balance sheets. The funded status is measured as the difference between fair value of the plan assets and the benefit obligation at December 31, the measurement date. The benefit obligation represents the actuarial present value of benefits expected to be paid upon termination based on estimated future compensation levels. An overfunded plan, with the fair value of plan assets exceeding the benefit obligation, is recorded as a prepaid pension asset equal to this excess. An underfunded plan, with the benefit obligation exceeding the fair value of plan assets, is recorded as a retirement benefit obligation equal to this excess. The actuarial method used for financial accounting purposes is the projected unit credit method. (n) Estimates. The preparation of consolidated financial statements in conformity with generally accepted accounting principles 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 date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could materially differ from those estimates. (o) Net Consolidated Income (Loss) Per Class A Unit. In 2012, 2011 and 2010 consolidated net income (loss) per Class A Unit was calculated by dividing 100% of Partnership’s consolidated net income (loss) by the average number of Class A Units outstanding for the period. (p) Accumulated Other Comprehensive Loss. Accumulated other comprehensive loss represents the change in Partners’ capital from transactions and other events and circumstances arising from non-unit holder sources. Accumulated other comprehensive loss consists of deferred pension and intermittent severance gains or losses. At December 31, 2012 and 2011, our Consolidated Balance Sheets reflected Accumulated Other Comprehensive Loss in the amount of $365,000 and $329,000, respectively, in deferred pension and intermittent severance loss. (q) New Accounting Standards. In June 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2011-05 (“ASU 2011-05”), Comprehensive Income (Topic 220): Presentation of Comprehensive Income. The objective of this update is to improve the comparability, consistency, and transparency of financial reporting and to increase the prominence of items reported in other comprehensive income. ASU 2011-05 requires that all non-owner changes in equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements reporting net income and other comprehensive income. ASU 2011-05 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011 and should be applied retroactively. In December 2011, the FASB issued ASU 2011-12: Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05, which defers certain presentation requirements of ASU 2011-05. ASU 2011-05 and ASU 2011-12 were adopted during the first quarter of 2012 and do not have a material impact on the consolidated financial statements as they only require a change in the format of the Partnership’s current presentation. The Partnership’s other comprehensive income is presented in one consecutive statement in conjunction with the Partnership’s statement of comprehensive income. In February 2013, the FASB issued ASU No. 2013-02: Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, which requires an entity to provide information about the amounts reclassified out of Accumulated Other Comprehensive Income (“AOCI”) by component. In addition, an entity is required to present, either on the face of the financial statements or in the notes, significant amounts reclassified out of AOCI by the respective line items of net income, but only if the amount reclassified is required to be reclassified in its entirety in the same reporting period. For amounts that are not required to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures that provide additional details about those amounts. ASU 2013-02 does not change the current requirements for reporting net income or other comprehensive income in the financial statements. The Partnership intends to adopt the provisions of ASU 2013-02 in 2013 and they believe this will not have a material impact on its financial statements.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Cash and Cash Equivalents. Cash and cash equivalents include unrestricted demand deposits with banks and all highly liquid deposits with an original maturity of less than three months. The cash equivalents are not protected by federal deposit insurance.

(b) Allowance for Doubtful Accounts. The Partnership reviews the accounts receivable to determine the adequacy of this allowance by regularly reviewing specific account payment history and circumstances, the accounts receivable aging, and historical write-off rates. If customer payment timeframes were to deteriorate, allowances for doubtful accounts would be required. There was no allowance for doubtful accounts at December 31, 2012 or 2011.

(c) Financial Instruments. The fair value of the line of credit is approximately the carrying value due to the variability of the interest rate and frequency that the interest rate resets. The long-term financial instrument has a fixed interest rate and the fair value compared to carrying value is disclosed.

(d) Consolidation. The consolidated financial statements include the accounts of the Partnership, Royal and RHR. All significant intercompany balances and transactions, including management fees and distributions, have been eliminated.

(e) Farming Costs. The Partnership considers each orchard to be a separate cost center, which includes the depreciation/amortization of capitalized costs associated with each orchard’s acquisition and/or development and maintenance and harvesting costs directly attributable to each orchard. In accordance with industry practice in Hawaii, orchard maintenance and harvesting costs for commercially producing macadamia orchards are charged against earnings in the year that the costs are incurred.

However, the timing and manner in which farming costs are recognized in the Partnership’s consolidated financial statements over the course of the year is based on management’s estimate of annual farming costs expected to be incurred. For interim financial reporting purposes, farming costs are recognized as expense based on an estimate of the cost incurred to produce macadamia nuts sold during the quarter. Management estimates the average cost per pound for each orchard based on the estimated annual costs to farm each orchard and the anticipated annual production from each orchard. The amount of farming costs recognized as expense throughout the year is calculated by multiplying each orchard’s estimated cost per pound by the actual production from that orchard. The difference between actual farming costs incurred and the amount of farming costs recognized as expense is recorded as either an increase or decrease in deferred farming costs, which is reported as an asset in the consolidated balance sheets. Deferred farming costs accumulate throughout the year, typically peaking midway through the third quarter, since nut production is lowest during the first and second quarter of the year. Deferred farming costs are expensed over the remainder of the year since nut production is highest at the end of the third and fourth quarters. Management evaluates the validity of each orchard’s estimated cost on a monthly basis based on actual production and farming costs incurred, as well as any known events that might significantly affect forecasted annual production and farming costs for the remainder of the year.

(f) Inventory.

Farming Supply Inventory. Farming supplies inventory is expensed on an average cost basis to cost of farming expense as used. There was no write down of supplies inventory in 2012 or 2011.

Kernel and Packaging Supply Inventory. Kernel inventory is recorded at the lower of cost or market, and was valued at $721,000 and $240,000 at December 31, 2012 and 2011, respectively. Inventory of packaging and ingredients is recorded at the lower of cost or market, and was valued at $98,000 and $36,000 at December 31, 2012 and 2011, respectively. The kernel inventory, ingredients and packaging material is reclassified on an average cost basis to finished product as the Partnership’s new product line is manufactured.

Finished Goods Inventory. Finished goods inventory, comprised of Royal Hawaiian Orchards apparel and Royal’s two product lines consisting of five savory macadamia nut flavors and seven fruit and nut clusters, was valued at $285,000 at December 31, 2012. The finished goods inventory includes the cost of kernel, ingredients, packaging supplies, manufacturing and the cost of apparel.

(g) Land, Orchards and Equipment. Land, orchards and equipment are reported at cost, net of accumulated depreciation and amortization. Net farming costs for any “developing” orchards are capitalized on the consolidated balance sheets until revenues from that orchard exceed expenses for that orchard (or nine years after planting, if earlier). Developing orchards historically do not reach commercial viability until about 12 years of age.

Depreciation of orchards and other equipment is reported on a straight-line basis over the estimated useful lives of the assets (40 years for orchards, between 10 and 20 years for irrigation and well equipment, and between 5 and 12 years for other equipment). A 5% residual value is assumed for orchards. The macadamia orchards acquired in 1986 situated on leased land are being amortized on a straight-line basis over the terms of the leases (approximately 33 years from the inception of the Partnership) with no residual value assumed. The macadamia orchards acquired in 1989 situated on leased land are being amortized on a straight-line basis over a 40 year period (the terms of these leases exceed 40 years) with no residual value assumed. For income tax reporting, depreciation is calculated under the straight line and declining balance methods over Alternative Depreciation System recovery periods.

Repairs and maintenance costs are expensed unless they exceed $5,000 and extend the useful life beyond the depreciable life.

The Partnership reviews long-lived assets held and used, or held for sale for impairment whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. If an evaluation is required, the estimated undiscounted future cash flows associated with the asset are compared to the asset’s carrying amount to determine if an impairment charge is required. If an impairment charge is required the Partnership would write the assets down to fair value. All long-lived assets for which management has committed to a plan of disposal are reported at the lower of carrying amount or fair value as determined by quoted market price or a present value technique. Changes in projected cash flows generated by an asset based on new events or circumstances may indicate a change in fair value and require a new evaluation of recoverability of the asset.

(h) Goodwill and Other Intangible Assets. Goodwill and other indefinite-lived intangible assets are not amortized but are reviewed for impairment at least annually and if a triggering event were to occur in an interim period. The Partnership’s annual impairment testing is performed in the 4th quarter each year. The goodwill is allocated to the farming reporting unit. Goodwill impairment is determined using a two-step process for each reporting unit. The first step of the impairment test is used to identify potential impairment by comparing the fair value of a reporting unit to the book value, including goodwill. This evaluation utilizes a discounted cash flow analysis and multiple analyses of the historical and forecasted operating results of the Partnership’s reporting unit. If the fair value of a reporting unit exceeds its book value, goodwill of the reporting unit is not considered impaired, and the second step of the impairment test is not required. If the book value of a reporting unit exceeds its fair value, the second step of the impairment test is performed to measure the amount of impairment loss, if any. The second step of the impairment test compares the implied fair value of the reporting unit’s goodwill with the book value of the goodwill. If the book value of the reporting unit’s goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination.

The impairment of goodwill in the amount of $306,000 was recorded by the Partnership as of August 1, 2010, the date of acquisition of the IASCO orchards. The elimination of the IASCO farming contract, which represented approximately 50% to 55% of the cash flow of the contract farming segment, resulted in the impairment of goodwill. In 2010, the Partnership recorded its estimate of the fair value of remaining goodwill, which was zero, based upon a discounted cash flow analysis using unobservable inputs.

As a result of the IASCO orchards acquisition, the Partnership recorded $480,000 in intangible asset consisting of three nut purchase agreements and $137,500 in financing fees. The nut purchase agreements are being amortized over a ten-year life, or $48,000 per year. The financing fees are being amortized over the terms of the respective debt agreement. $105,000 of the financing fees is being amortized over 10 years or $10,500 per year. $37,500 of the financing fees was amortized over two years and became fully amortized in 2012.

In 2012, the Partnership recorded $37,500 in intangible assets for financing fees and $88,000 for the Partnership’s e-commerce website development costs. The financing fees are being amortized over 23 months and the web development costs are being amortized over five years or $17,600 per year.

(i) General Excise and Sales Taxes. The Partnership records Hawaii general excise and California sales taxes when goods and services are sold on a gross basis as components of revenues and expenses. For the years ended December 31, 2012, 2011 and 2010, Hawaii general excise taxes charged or passed on to customers and reflected in revenues and expenses amounted to $34,000, $32,000, and $53,000, respectively. There were no California sales taxes charged or collected in 2012, as food products are not subject to sales tax in California.

(j) Income Taxes of Partnership. The income of the Partnership is not taxed directly; rather, the Partnership’s tax attributes are included in the individual tax returns of its partners. Neither the Partnership’s financial reporting income nor the cash distributions to unit holders can be used as a substitute for the detailed tax calculations which the Partnership must perform annually for its partners.

The Partnership is subject to a gross income tax as a result of its election to continue to be taxed as a partnership rather than to be taxed as a corporation, as allowed by the Taxpayer Relief Act of 1997. This tax is calculated at 3.5% on partnership gross income (net revenues less cost of goods sold) beginning in 1998.

Deferred tax liabilities are recognized for the future tax consequences attributable to differences between the financial reporting and tax reporting basis of assets and liabilities.

The Partnership evaluates uncertain income tax positions utilizing a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. At December 31, 2012, management believes there were no uncertain income tax positions. The four tax years in the period ended December 31, 2012 remain open for federal purposes.

(k) Deferred Tax Asset and Valuation Allowance. Royal derives its revenues from the sale of branded macadamia nut products which are reported under the corporation. For 2012, Royal is subject to taxation as a C Corporation at the 34% federal tax rate and 6.4% state tax rate on the corporation’s taxable income (loss). As a result of the tax loss of Royal, the Partnership recorded a deferred tax asset of $412,000, against which the Partnership has recorded a valuation allowance equal to 100% of the deferred tax asset due to the uncertainty regarding future realization.

Management evaluates uncertain income tax positions for Royal utilizing a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. At December 31, 2012, management believes there were no uncertain income tax positions.

(l) Revenue. Macadamia nut sales are recognized when nuts are delivered to the buyer. Contract farming revenue and administrative services revenues are recognized in the period that such services are completed, that is, upon the incurrence of direct labor or equipment hours incurred on behalf of an orchard owner. The Partnership is paid for its services based upon a “time and materials” basis plus a percentage fee or fixed fee based upon each farming contract’s terms. Contract farming includes the regular maintenance of the owners’ orchards as well as harvesting of their nuts. The Partnership provides these services on a continuing basis throughout the year. Revenue for the sale of branded products is recognized when the product is shipped and invoiced. This may vary depending on the terms. Revenues for branded products are shown net of any trade discounts.

(m) Pension Benefit and Intermittent Severance Costs. The funded status of the Partnership’s defined benefit pension plan and intermittent severance plan is recognized in the consolidated balance sheets. The funded status is measured as the difference between fair value of the plan assets and the benefit obligation at December 31, the measurement date. The benefit obligation represents the actuarial present value of benefits expected to be paid upon termination based on estimated future compensation levels. An overfunded plan, with the fair value of plan assets exceeding the benefit obligation, is recorded as a prepaid pension asset equal to this excess. An underfunded plan, with the benefit obligation exceeding the fair value of plan assets, is recorded as a retirement benefit obligation equal to this excess. The actuarial method used for financial accounting purposes is the projected unit credit method.

(n) Estimates. The preparation of consolidated financial statements in conformity with generally accepted accounting principles 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 date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could materially differ from those estimates.

(o) Net Consolidated Income (Loss) Per Class A Unit. In 2012, 2011 and 2010 consolidated net income (loss) per Class A Unit was calculated by dividing 100% of Partnership’s consolidated net income (loss) by the average number of Class A Units outstanding for the period.

(p) Accumulated Other Comprehensive Loss. Accumulated other comprehensive loss represents the change in Partners’ capital from transactions and other events and circumstances arising from non-unit holder sources. Accumulated other comprehensive loss consists of deferred pension and intermittent severance gains or losses. At December 31, 2012 and 2011, our Consolidated Balance Sheets reflected Accumulated Other Comprehensive Loss in the amount of $365,000 and $329,000, respectively, in deferred pension and intermittent severance loss.

(q) New Accounting Standards. In June 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2011-05 (“ASU 2011-05”), Comprehensive Income (Topic 220): Presentation of Comprehensive Income. The objective of this update is to improve the comparability, consistency, and transparency of financial reporting and to increase the prominence of items reported in other comprehensive income. ASU 2011-05 requires that all non-owner changes in equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements reporting net income and other comprehensive income. ASU 2011-05 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011 and should be applied retroactively. In December 2011, the FASB issued ASU 2011-12: Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05, which defers certain presentation requirements of ASU 2011-05. ASU 2011-05 and ASU 2011-12 were adopted during the first quarter of 2012 and do not have a material impact on the consolidated financial statements as they only require a change in the format of the Partnership’s current presentation. The Partnership’s other comprehensive income is presented in one consecutive statement in conjunction with the Partnership’s statement of comprehensive income.

In February 2013, the FASB issued ASU No. 2013-02: Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, which requires an entity to provide information about the amounts reclassified out of Accumulated Other Comprehensive Income (“AOCI”) by component. In addition, an entity is required to present, either on the face of the financial statements or in the notes, significant amounts reclassified out of AOCI by the respective line items of net income, but only if the amount reclassified is required to be reclassified in its entirety in the same reporting period. For amounts that are not required to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures that provide additional details about those amounts. ASU 2013-02 does not change the current requirements for reporting net income or other comprehensive income in the financial statements. The Partnership intends to adopt the provisions of ASU 2013-02 in 2013 and they believe this will not have a material impact on its financial statements.