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Advanced Roofing, Inc. and Affiliates
<br />Notes to Consolidated Financial Statements
<br />Note 14. Consolidation of Variable Interest Entity and Departure From Generally Accepted
<br />Accounting Principles
<br />Power Panel, Inc. is a related party and a variable interest entity (VIE). The Company controls the
<br />significant activities of this VIE and would absorb more than a significant amount of the VIE's expected
<br />losses because it provides subordinated financial support to this entity. As a result, the Company is
<br />considered to be the primary beneficiary of this VIE. Accounting principles generally accepted in the
<br />United States of America require the consolidation of the financial statements of variable interest entities
<br />with the financial statements of their primary beneficiary. The Company has not consolidated the financial
<br />statements of this VIE which is a departure from generally accepted accounting principles.
<br />Had this entity been consolidated into the accompanying consolidated financial statements as of and for
<br />the years ended December 31, 2015 and 2014, the estimated impact based on unaudited balances of the
<br />VIE would have been to increase (decrease) the following by approximately:
<br />Note 15. Investment in Construction Joint Venture
<br />The Company has a joint venture agreement with an unrelated party. The Company owns a 49% share in
<br />the joint venture, AGT Solar/Moss Solar, a Joint Venture (the joint venture). All revenues, expenses and
<br />additions to assets of the entity are shared 50% (the Company) and 50% (Moss) by each of the two
<br />parties. For the years ended December 31, 2015 and 2014, the Company's share of contract revenues
<br />earned from the joint venture was $2,882,218 and $11,165,240, respectively. For the years ended
<br />December 31, 2015 and 2014, the Company's share of costs of revenues earned from the joint venture
<br />was $1,511,508 and $11,054,329, respectively.
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<br />2015 2014
<br />Revenues
<br />Cost of revenues
<br />$ 30,982 $ 55,027
<br />Operating expenses
<br />60,500 95,705
<br />Nonoperating income (expense)
<br />47,143 554,866
<br />Net income
<br />(145,927) (166,184)
<br />(222,588) (761,728)
<br />Current assets
<br />Noncurrent assets (primarily equipment, net of
<br />131,579 144,579
<br />related party advances)
<br />(1,074,281) (224,573)
<br />Current liabilities (primarily debt)
<br />Noncurrent liabilities (primarily debt)
<br />290,903 482,073
<br />1,775,108 2,224,059
<br />Noncontrolling interest
<br />3,008,713
<br />( ) (2,786,126)
<br />As of December 31, 2015 and 2014, the Company had $2,012,498
<br />advances due from Power Panel, Inc.
<br />and $1,325,333, respectively, of
<br />which is included in other noncurrent assets in the accompanying
<br />consolidated balance sheets. During the years ended December 31, 2015 and 2014, the Company
<br />charged Power Panel, Inc. interest income of $65,000
<br />and $44,035, respectively, and accounting and.
<br />corporate overhead fees of $30,208 and $38,713, respectively, which is included in the
<br />consolidated statements of income.
<br />accompanying
<br />Note 15. Investment in Construction Joint Venture
<br />The Company has a joint venture agreement with an unrelated party. The Company owns a 49% share in
<br />the joint venture, AGT Solar/Moss Solar, a Joint Venture (the joint venture). All revenues, expenses and
<br />additions to assets of the entity are shared 50% (the Company) and 50% (Moss) by each of the two
<br />parties. For the years ended December 31, 2015 and 2014, the Company's share of contract revenues
<br />earned from the joint venture was $2,882,218 and $11,165,240, respectively. For the years ended
<br />December 31, 2015 and 2014, the Company's share of costs of revenues earned from the joint venture
<br />was $1,511,508 and $11,054,329, respectively.
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