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Summary Of Significant Accounting Policies
12 Months Ended
Dec. 31, 2012
Summary Of Significant Accounting Policies [Abstract]  
Summary Of Significant Accounting Policies

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

BusinessCanterbury Park Holding Corporation (the “Company”) was incorporated on March 24, 1994 and conducts pari-mutuel wagering operations and hosts “unbanked” card games at its Canterbury Park Racetrack and Card Casino facility (the “Racetrack”) in Shakopee, Minnesota. 

 

The Company’s pari-mutuel wagering operations include both wagering on thoroughbred and quarter horse races during live meets at the Racetrack each year from May until September and year-round wagering on races held at out-of-state racetracks that are televised simultaneously at the Racetrack (“simulcasting”).  Unbanked card games, in which patrons compete against each other, are hosted in the Card Casino at the Racetrack.  The Card Casino operates 24 hours a day, seven days a week.  The Card Casino offers both poker and table games at up to 80 tables, which is the maximum number of tables permitted by Minnesota law.   The Company also derives revenues from related services and activities, such as concessions, parking, advertising, publication sales, operation of an RV park and from other entertainment events held at the Racetrack.

 

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.

 

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. 

 

EstimatesThe 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. 

 

Cash and Cash EquivalentsCash and cash equivalents include 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 and cash equivalents. 

 

Restricted CashRestricted 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. 

 

Short-term Investments – Securities are classified as held to maturity when the Company has the positive intent and ability to hold them to maturity, and are measured at amortized cost.  At December 31, 2012 and December 31, 2011, all investments were classified as held-to-maturity.    The Company continually reviews its investments to determine whether a decline in fair value below the cost basis is other than temporary.  If the decline in fair value is judged to be other than temporary, the cost basis of the security is written down to fair value and the amount of the write-down is included in earnings.  Short-term investments consist of certificates of deposits at December 31, 2012 and December 31, 2011.  Amortized cost approximated fair value for both periods. 

 

Accounts Receivable – Accounts receivable are initially recorded for amounts due from other tracks for simulcast revenue, net of amounts due to other tracks, and for amounts due from customers related to special events.  Credit is granted in the normal course of business without collateral.  Accounts receivable are stated net of allowances for doubtful accounts, which represent estimated losses resulting from the inability of customers to make the required payments.  Accounts that are outstanding longer than the contractual terms are considered past due.  When determining the allowances for doubtful accounts, we take several factors into consideration including the overall composition of the accounts receivable aging, our prior history of accounts receivable write-offs, the type of customers and our day-to-day knowledge of specific customers.  We write off accounts receivable when they become uncollectible.  Changes in the allowances for doubtful accounts are recorded as bad debt expense and are included in other operating expenses in our consolidated statements of operations.

 

Inventory – Inventory consists primarily of food and beverages, small wares and supplies and retail goods and are recorded at the lower of cost (first-in, first-out) or market. 

 

Uncashed Winning TicketsThe 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 Casino 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 transferred into a trust account or paid directly to the MHBPA, approximately $5,175,000 and $5,235,000 for the years ended December 31, 2012 and 2011, 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 undiscounted 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.  Management has determined that no impairment of these assets exists at December 31, 2012. 

 

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 57 years, while buildings are depreciated over 1539 years.  Building improvements are amortized using the straight-line method over the useful life of the assets.   

 

Card Casino AccrualsMinnesota 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 pools 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. 

 

We recognize the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more likely than not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the relevant tax authority.

 

Interest and penalties associated with uncertain income tax positions are presented in income tax expense.  For the years ended December 31, 2012 and 2011, we did not recognize any expense related to interest and penalties.  Additionally, we do not have any amounts accrued at December 31, 2012 for the payment of interest and penalties. 

 

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 – The Company accounts for share based compensation awards on a fair value basis. The estimated grant date fair value of each stock-based award is recognized as expense over the requisite service period (generally the vesting period).  The estimated fair value of each option is calculated using the Black-Scholes option-pricing model.

 

For more information on our stock-based compensation plans, see Note 5.