SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

6 Months Ended

Dec. 31, 2011

Notes to Financial Statements

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The preparation of 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 dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Significant estimates are made in relation to the allowance for doubtful accounts and the fair value of certain financial instruments.  Actual results could differ from those estimates.

Principles of Consolidation

The consolidated financial statements include the accounts of Studio One Media, Inc. and its subsidiaries. All significant inter-company accounts and transactions have been eliminated.

Fair Value of Financial Instruments

ASC 820, Fair Value Measurements and Disclosures, clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows:

Level 1 - Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.

Level 2 - Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data.

Level 3 - Inputs are unobservable inputs which reflect the reporting entity’s own assumptions on what assumptions the market participants would use in pricing the asset or liability based on the best available information.

The Company’s financial instruments include cash, notes and other receivables, accounts payable and notes payable. The carrying amounts of cash, notes and other receivables, and accounts payable approximate their fair value due to their short maturities.

The financial instrument assets and liabilities carried at fair value on a recurring basis of December 31, 2011 are as follows:

Description		Total Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Prepaid Expenses	$	331,768	$	—	$	—	$	331,768
Notes payable, net		258,885		—		—		258,885
Notes payable, net – related party		1,592,875						1,592,875
Total	$	2,183,528	$	—	$	—	$	2,183,528

The financial instrument assets and liabilities carried at fair value on a recurring basis at December 31, 2010 are as follows:

Description		Total Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Prepaid Expenses	$	288,389	$	—	$	—	$	288,389
Notes payable, net		50,000		—		—		50,000
Notes payable, net – related party		531,002		—		—		531,002
	$	819,391	$	—	$	—	$	819,391

Market prices are not available for the Company's loans due to related parties or its other notes payable, nor are market prices of similar loans available. The Company determined that the fair value of the notes payable based on its amortized cost basis due to the short term nature and current borrowing terms available to the Company for these instruments.

The method described above may produce a current fair value calculation that may not be indicative of net realizable value or reflective of future fair values. If a readily determined market values became available or if actual performance were to vary appreciably from assumptions used, assumptions may need to be adjusted, which could result in material differences from the recorded carrying amounts. The Company believes its method of determining fair value is appropriate and consistent with other market participants. However, the use of different methodologies or different assumptions to value certain financial instruments could result in a different estimate of fair value.

The following tables present the fair value of financial instruments as of December 31, 2011, by caption on the condensed balance sheet and by ASC 820 valuation hierarchy described above.

	Equity Related		Notes		Notes Payable -
Level 3 Reconciliation:	Prepaid Expenses		Payable, net		Related Party
Level 3 assets and liabilities at December 31, 2010:	$	288,389	$	50,000	$	531,002
Purchases, sales, issuances and settlements (net)		43,379		208,885		1,592,875
Total level 3 assets and liabilities at December 31, 2011:	$	331,768	$	258,885	$	1,061,873

The Company is also required periodically to measure certain other assets at fair value on a nonrecurring basis, including long-lived assets, including intangible assets. The Company determined the fair value used in the impairment analysis with its own discounted cash flow analysis. The Company has determined the inputs used in such analysis as Level 3 inputs. The Company did not record any impairment charges on long-lived assets as no significant events requiring non-financial assets and liabilities to be measured at fair value occurred during the periods ended December 31, 2011 and 2010.

Income Taxes

There was no income tax provision for the six months ended December 31, 2011 and 2010 due to net operating losses for which there is no benefit currently available.

At December 31, 2011, the Company had deferred tax assets associated with state and federal net operating losses. The Company has recorded a corresponding full valuation allowance as it is more likely than not that some portion of all of the deferred tax assets will not be realized.

Recent Accounting Pronouncements

Management has considered all recent accounting pronouncements issued since the last audit of our consolidated financial statements. The Company’s management believes that these recent pronouncements will not have a material effect on the Company’s consolidated financial statements.

Reclassification of Financial Statement Accounts

Certain amounts in the December 31, 2010 consolidated financial statements have been reclassified to conform to the presentation in the December 31, 2011 consolidated financial statements.