1.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

	Business – Canterbury Park Holding Corporation was incorporated on March 24, 1994. On March 29, 1994, the Company acquired all the outstanding securities of Jacobs Realty, Inc. (JRI) from Irwin Jacobs and IMR Fund, L.P. (an investment fund for various pension plans and trusts). JRI was merged into the Company, and the acquisition was accounted for under the purchase method of accounting whereby the acquired assets and liabilities have been recorded at the Company's cost. The primary asset of JRI was Canterbury Downs Racetrack and the 325 acres of surrounding land.

	On May 20, 1994, the Company adopted a plan of Reorganization pursuant to which the sole shareholder of Canterbury Park Concessions, Inc. (CPC), and majority shareholder of the Company, agreed to exchange his shares of CPC stock for 198,888 shares of the Company's common stock concurrent with the closing of a public offering. Pursuant to the Plan of Reorganization, CPC became a wholly owned subsidiary of the Company in August 1994 when the Company completed the initial public offering of its common stock. This reorganization was treated in a manner similar to a pooling of interests. Net proceeds received by the Company from the public offering were approximately $4,847,000, which along with additional borrowings under the Company's line of credit with the majority shareholder, were used to pay off the remaining notes payable from the acquisition of JRI.

	The consolidated financial statements include the accounts of the Company, CPC and Shakopee Valley RV Park Acquisition Company, LLC after elimination of intercompany accounts and transactions.

	Reclassifications – Certain cash flow classifications included in the consolidated financial statements have been reclassified from the prior years' presentations to conform to the current year presentation.

	Revenue Recognition – Our revenues are derived primarily from the operations of a Card Casino, pari-mutuel wagering on simulcast and live horse races, concession sales, and related activities. Collection revenue from Card Casino operations, a set percentage of wagers, is recognized at the time that the wagering process is complete. Pari-mutuel revenues are recognized upon occurrence of the live race that is presented for wagering and after that live race is made official by the respective state's racing regulatory body. Revenues related to concession and publication sales and parking and admission fees are recognized as revenue when the service has been performed or the product has been delivered. All sales taxes are presented on a net basis and are excluded from revenue.

	Estimates – The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America 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 differ from these estimates.

	Unrestricted Cash – Cash includes all investments with original maturities of three months or less or which are readily convertible into known amounts of cash and are not legally restricted. Accounts at each institution are insured by the Federal Deposit Insurance Corporation up to $250,000. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on cash.

	Restricted Cash – Restricted cash represents refundable deposits and amounts due to horsemen for purses, stakes and awards, and amounts accumulated in card game progressive jackpot pools, the player pool and poker promotional fund to be used to repay card players in the form of promotions, giveaways, prizes, or by other means.


	Uncashed Winning Tickets – The Company records a liability for winning tickets upon the completion of a race. As winning tickets are redeemed, this liability is reduced for the respective cash payment. We recognize revenue associated with the uncashed winning tickets when the likelihood of the redemption of the winning ticket is remote.

	Promotional Allowances – The Company offers certain promotional allowances at no charge to patrons who participate in our player rewards program. The retail value of these promotional items is shown as a deduction from total revenues on the Company's consolidated statements of operations.

	Due to Minnesota Horsemen's Benevolent and Protective Association, Inc. ("MHBPA") – The Minnesota Pari-Mutuel Horse Racing Act specifies that the Company is required to segregate a portion of funds (recorded as purse expense in the statements of operations), received from card room operations and wagering on simulcast and live horse races, for future payment as purses for live horse races or other uses of the horsepersons' associations. Pursuant to an agreement with the MHBPA, the Company has transferred into a trust account or paid directly to the MHBPA, approximately $5,235,000 and $5,207,000 for the years ended December 31, 2011 and 2010, respectively, related to thoroughbred races. Minnesota Statutes specify that amounts transferred into the trust account are the property of the trust and not of the Company.

	Impairment of Long-Lived Assets – Management of the Company periodically reviews the carrying value of property and equipment for potential impairment by comparing the carrying value of these assets with their related expected future net cash flows. Should the sum of the related expected future net cash flows be less than the carrying value, management will determine whether an impairment loss should be recognized. An impairment loss would be measured by the amount by which the carrying value of the asset exceeds the fair value of the asset. To date, management has determined that no impairment of these assets exists.

	Advertising and Marketing – Advertising and marketing costs are charged to expense as incurred. The related amounts are presented separately in the Company's consolidated statements of operations.

	Land, Buildings, and Equipment – Land, buildings, equipment, and building improvements are capitalized at a level of $1,000 or greater and are recorded at cost. Repair and maintenance costs are charged to operations when incurred. Furniture, fixtures, and equipment are depreciated using the straight-line method over estimated useful lives ranging from 5 – 7 years, while buildings are depreciated over 15 – 39 years. Building improvements are amortized using the straight-line method over the useful life of the assets.

	Card Casino Accruals – Minnesota law allows the Company to collect amounts from patrons to fund progressive jackpot pools in the Card Casino. These amounts, along with amounts earned by the player pool, promotional funds, and the outstanding chip liability, are accrued as short-term liabilities at each balance sheet date.

	Income Taxes – Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to reverse.

	Interest and penalties associated with uncertain income tax positions are presented in income tax expense. During the twelve months ended December 31, 2011, we recognized no expenses for interest and penalties. During the twelve months ended December 31, 2010, we recognized expenses of $19,003 for interest and penalties. We do not have any amounts accrued at December 31, 2011 for the payment of interest and penalties.


	As of December 31, 2011 the Company had state net operating losses of approximately $390,000. These losses, if unutilized, will expire in 2024. The Company also has approximately $13,000 of state alternative minimum tax credits as of December 31, 2011, which carry forward indefinitely.

	Net Income Per Share – Basic net income per common share is based on the weighted average number of common shares outstanding during each year. Diluted net income per common share takes into effect the dilutive effect of potential common shares outstanding. The Company's only potential common shares outstanding are stock options.

	Fair Values of Financial Instruments – Due to the current classification of all financial instruments of the Company and given the short-term nature of the related account balances, carrying amounts reported in the consolidated balance sheets approximate fair value.

	Stock Based Employee Compensation – We recognize employee services provided in exchange for a share-based payment based on the grant date fair market value over the requisite period.

	The Company uses the Black-Scholes method to measure the compensation cost for stock options. The Black-Scholes method requires the use of significant assumptions to estimate the fair value of the stock option awards. The expected term of both the board of director and key employee options was calculated using the simplified method. The expected volatility was calculated primarily with reliance on historical volatility rates. During 2010, the Company adjusted its dividend yield rate to reflect the current expectation that no dividends will be declared. This assumption was also used in 2011. The risk-free rate utilized in the Black-Scholes calculations was the U.S. Constant Maturity Treasury Security for the period equivalent to the expected term of the option.

	The fair value of options granted under the 1994 Stock Plan during 2011 and 2010 was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions and results:


	2011			2010
Dividend yield		0.00	%		0.00	%
Expected volatility		50	%		44	%
Risk-free interest rate		2.02	%		2.54	%
Expected term of options in years		5.5			5.9
Fair value of options on grant date	$	93,750		$	345,855

For more information on our stock-based compensation plans, see Note 6.