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Audited Financial Report for Fiscal Year
Ending 30 June 2001 (Notes to Financial Statements)
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NOTE: These notes to the financial statements have been superseded by
a corrected
version.
INTERNET
CORPORATION
FOR ASSIGNED NAMES AND NUMBERS
Notes to Financial Statements
June 30, 2001 and 2000
(1) Organization
Internet Corporation for
Assigned Names and Numbers (ICANN) was established in September 1998
under the laws of the state of California. ICANN coordinates a select
set of the internet's technical management functions such as the assignment
of protocol parameters, the management of the domain name system,
the allocation of internet protocol (IP) address space and the management
of the root server system. Categories of internet domains include
Generic Top Level Domains (gTLDs) which include the .com, .net, .org
and .edu domains and Country Code Top Level Domains (ccTLDs), examples
of which are .us, .uk and .fr. ICANN generates income from fees received
from domain name registrars and related accreditation activities.
Its primary sources of revenue are as follows:
-
Domain name registry
and registrar fees - Amounts contributed by organizations
responsible for the registration and administration of Internet
Domain Names
-
Address registry
fees - Amounts contributed by organizations responsible
for the assignment and administration of Internet addresses
-
Accreditation
fees - Amounts paid in connection with initial and renewal
accreditation of organizations engaged in the registration and administration
of domain names in the .com, .net, .biz, .info, .museum, .name and
.org Internet domains
-
Application fees
- Amounts paid in connection with processing of applications to
become accredited domain name registrars or to become operators
of new gTLD registries. (See note 2.)
ICANN also receives contributions
and grants from other organizations.
ICANN has three supporting
organizations which serve as advisory bodies to the ICANN board of
directors with respect to internet policy issues and structure within
three specialized areas, including the system of IP addresses, the
domain name system and parameters for internet protocols. The supporting
organizations are the primary source of substantive policy recommendations
for matters lying within their respective specialized areas. The three
supporting organizations are the Address Supporting Organization (ASO),
Domain Name Supporting Organization (DNSO) and the Protocol Supporting
Organization (PSO). The supporting organizations are not separately
incorporated entities. The accounts of DNSO are included in the accompanying
financial statements as ICANN, on behalf of DNSO, receives and processes
the contributions that DNSO receives from its membership.
(2) Summary
of Significant Accounting Policies
(a) Basis of Presentation
The accompanying financial statements are prepared on the accrual
basis of accounting and present the accounts of ICANN and DNSO (collectively
referred to herein as ICANN).
ICANN recognizes contributions, including unconditional promises
to give, as revenue in the period received. Contributions and net
assets are classified based on the existence or absence of donor-imposed
restrictions. As such, the net assets of ICANN and changes therein
are classified and reported as follows:
-
Unrestricted net assets - Net assets that are not
subject to donor-imposed stipulations and that may be expendable
for any purpose in performing the objectives of ICANN.
-
Temporarily restricted net assets - Net assets subject
to donor-imposed stipulations that may or will be met either by
actions of ICANN and/or the passage of time. As the restrictions
are satisfied, temporarily restricted net assets are reclassified
to unrestricted net assets and reported in the accompanying financial
statements as net assets released from restrictions.
-
Permanently restricted net assets - Net assets subject
to donor-imposed stipulations that resources be maintained in perpetuity.
Investment income generated from these funds is available for general
support of ICANN's programs and operations unless otherwise stipulated
by the donor.
As of June 30, 2001 and 2000, ICANN had no permanently restricted
net assets.
(b) Functional Allocation of Expenses
Expenses that can be identified with a specific program or supporting
service are charged directly to the related program or supporting
service. Expenses that are associated with more than one program or
supporting service are allocated based on methods determined by management.
As of and for the years ended June 30, 2001 and 2000, ICANN's expenses
are classified as follows:
|
2001 |
2000 |
Program services |
$ 4,078,071
|
2,379,018
|
Supporting services:
|
|
|
Management and general
|
1,821,399
|
462,891
|
Fundraising
|
|
10,000
|
Total
supporting services
|
1,821,399
|
472,891
|
Total
|
5,899,470
|
2,851,909
|
(c) Cash and Cash Equivalents
Cash and cash equivalents include deposits in bank and money market
accounts.
(d) Property and Equipment
Property and equipment are stated at cost or, for contributed items,
at fair market value at date of contribution. The equipment, furniture
and fixtures are being depreciated using the straight-line method
over estimated useful lives of five to seven years or the remaining
lease term, whichever is shorter for fixtures.
(e) Deferred Revenue - Accreditation Fees
Accreditation fees attributable to future activities are included
in cash and cash equivalents or accounts receivable and reflected
as deferred revenue until earned.
(f) Promises to Give
Unconditional promises to give that are expected to be collected
within one year are recorded at estimated net realizable value. Unconditional
promises to give that are expected to be collected in future years
are recorded at the present value of the estimated future cash flows.
Conditional promises to give are not included as support until the
conditions are substantially met.
(g) Contributed Services
Contributed services are recognized only if the services (a) create
or enhance long-lived assets, or (b) require specialized skills, are
provided by individuals possessing those skills and would typically
need to be purchased if not provided by donation. For the years ended
June 30, 2001 and 2000, contributed professional services totaling
$182,195 and $216,667, respectively, are included in the accompanying
statements of activities as contributed services and professional
services expense.
(h) Application Fees
As described in note 1, application fees represent amounts paid to
ICANN in connection with the processing of applications to either
become accredited domain name registrars requiring an application
fee of $1000, or to become an operator of a new gTLD. Each application
to become an operator of a new gTLD requires a nonrefundable application
fee of $50,000. During 2001, there were 47 gTLD applications processed
and reviewed, resulting in seven new TLDs approved and selected for
contract negotiation, including .biz, .info, .name, .pro, .museum,
.coop and .aero. Application fees totaled $2,283,994 and $121,847
for the years ended June 30, 2001 and 2000, respectively.
(i) Income Taxes
ICANN is exempt from federal and state income taxes under the provisions
of Section 501(c)(3) of the Internal Revenue Code and Section 23701(d)
of the California Revenue and Taxation Code. Accordingly, no provision
for income taxes has been made in the accompanying financial statements.
(j) Concentration of Credit Risk
ICANN holds a majority of its cash and cash equivalents at two financial
institutions. Cash and cash equivalents consist of cash on deposit,
money market accounts and commercial paper. ICANN is exposed to credit
loss for the amount of cash in excess of the federally insured limit
of $100,000 in the event of nonperformance by the counterparties.
At June 30, 2001 and 2000, ICANN had cash in banks in excess of Federal
Deposit Insurance Corporation (FDIC) insurance limits of approximately
$556,038 and $684,000, respectively.
(k) Use of Estimates
The preparation of 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 at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
(l) Reclassifications
Certain reclassifications may have been made to the 2000 financial
data to conform with the 2001 presentation.
(3) Accounts Receivable
Accounts receivable include amounts receivable from the following constituencies
for various registry and accreditation fees at June 30, 2001 and 2000:
|
2001 |
2000 |
ccTLDs |
$ 629,475 |
781,342
|
gTLDs |
1,271,119 |
769,033
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IP address registries |
856,000 |
428,000
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Other |
61,513 |
|
|
2,818,107 |
1,978,375
|
Less allowance for doubtful accounts |
(27,381) |
|
|
$2,790,726 |
1,978,375
|
(4) Grants and Contributions Receivable
Included in grants and contributions receivable at June 30, 2000 were
$100,000 of unconditional promises to give which were collected during
the year ended June 30, 2001.
(5) Property and Equipment
Property and equipment at June 30, 2001 and 2000 consists of the following:
|
2001 |
2000 |
Computer equipment |
$261,362 |
128,200 |
Furniture and fixtures |
88,470 |
22,764 |
Leasehold improvements |
112,315 |
|
Construction in progress |
|
7,764 |
Total
|
462,147 |
158,728 |
Less accumulated depreciation |
(135,259) |
(30,200) |
|
$326,888 |
128,528 |
Depreciation expense totaled $105,059 and $27,882 for the years ended
June 30, 2001 and 2000, respectively.
(6) Notes Payable
As of June 30, 2001 and 2000, notes payable are summarized as follows:
|
2001 |
2000 |
Note payable to Cisco Systems, Inc., dated August 2, 1999, bearing
interest at 6.5%; principal and interest payable at maturity date
on August 2, 2000; unsecured; the maturity date was extended to
February 2, 2001 |
$ |
$ 150,000 |
Note payable to Deutsche Telekom AG, Inc., dated October 13, 1999,
bearing interest at 6.6%; principal and unpaid interest due on demand;
unsecured |
200,000 |
200,000 |
Note payable to 3COM, dated August 23, 1999, bearing interest
at 6.5%; principal and interest payable at maturity date on August
23, 2000; unsecured; the maturity date was extended to August 23,
2001 |
175,000 |
175,000 |
Note payable to MCI Worldcom, Inc., dated July 28, 1999, bearing
interest at 6.5%; principal and interest payable at maturity date
on July 28, 2000; unsecured; the maturity date was extended to July
28, 2001 |
500,000 |
500,000 |
|
$ 875,000 |
1,025,000 |
Subsequent to June 30, 2001, ICANN repaid all notes in full.
(7) Commitments and Contingencies
(a) Lease Commitments
ICANN subleases real property under noncancelable operating leases
that expire through September 2003. Future minimum lease payments
under the operating lease as of June 30, 2001 are as follows:
Fiscal year ending June 30: |
|
2002 |
$ 103,415 |
2003 |
103,415 |
2004 |
25,854 |
|
$ 232,684 |
Rent expense totaled $134,137 and $41,904 for the years ended June
30, 2001 and 2000, respectively.
(b) Legal Matters
In the ordinary course of business, ICANN is subject to lawsuits
and other potential legal actions. In the opinion of management, such
matters will not have a material effect on the financial position
of ICANN.
(8) Related Party Transactions
The services of ICANN's former president and chief executive officer
were provided to ICANN through a professional services agreement with
a company that is owned by the president and his spouse. Total payments
for the 9 months ended March 31, 2001 and the 12 months ended June 30,
2000, including fees for professional services and reimbursed travel,
were $218,819 and $287,595, respectively.
(9) Temporarily Restricted Net Assets
Temporarily restricted net assets totaled $179,648 and $135,000 at
June 30, 2001 and 2000, repectively. These net assets were restricted
by donors for specific activities and projects as follows:
Markle Foundation - At-Large project |
$ |
100,000 |
Meeting sponsorships |
|
35,000 |
Domain Name Supporting Organization sponsorships |
179,648 |
|
|
$ 179,648 |
135,000 |
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Page Updated
01-Feb-2002
©2001, 2002 The Internet Corporation for Assigned
Names and Numbers. All rights reserved.
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