11-13-01 SUMM OF SIGN ASSUMP/ACCOUNTING

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subject to donor-imposed stipulations and must be maintained permanently by the Organization. These forecasts assume there will not be any temporarily or permanently restricted net assets. ORONO SENIOR HOUSING, LLC SUMMARY OF SIGNIFICANT ASSUMPTIONS AND ACCOUNTING POLICIES - continued DECEMBER 31, 2001, 2002, 2003, 2004, 2005 AND 2006 Use of estimates - In preparing financial statements in conformity with generally accepted accounting principles, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, as well as the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates. Cash and cash equivalents - The Organization includes as cash equivalents certificates of deposit and all other investments with maturities of three months or less when purchased which are readily convertible into known amounts of cash. Fixed assets - Fixed assets are recorded at cost. Depreciation is forecasted using the straight-line method over estimated useful lives of thirty years for buildings and seven years for equipment. Expenditures for major renewals and betterments, which substantially increase the useful lives of existing assets, are capitalized. Maintenance and repairs are charged to operating expenses as incurred. Debt issuance costs - The costs of issuance of bonds have been forecasted to be capitalized and amortized over the life of the related bonds using the straight-line method which approximates the interest method. Debt service reserve fund - The debt service reserve fund includes forecasted funds to provide a reserve for payment of principal and interest on the Senior Bonds (as described herein) in the event cash flows are insufficient to meet debt service requirements. (3) FORECASTED PROJECT CONSTRUCTION AND FINANCING Project construction - These forecasts assume in November 2001 the Organization is expected to begin construction of the Sunrise on Superior assisted living facility, which is expected to open in October 2002. The purchase and development of this property is forecasted as follows: Building and land $ 6,320,646 Equipment 1 73,211 rchitectural 164,300 evelopment costs 333,577 6,891,646 et capitalized interest: - Capitalized construction period interest 408,851 Interest earned - project fund (55,494 ) Interest earned -capitalized interest fund (10,973 ) Interest earned - debt service reserve fund (11,476 ) Net capitalized interest 330,908