CULTURAL COUNCIL OF NOTES TO FINANCIAL STATEMENTS PALM BEACH COUNTY, INC.

For the Year Ended September 30, 2022

1. Business and Summary of Significant Accounting Policies, continued Fair Value of Financial Instruments

The Council follows FASB ASC 820, Fair Value Measurement. This standard defines fair value, establishes a framework for measuring fair value, establishes a fair value hierarchy based on the quality of inputs used to measure fair value, and requires expanded disclosures about fair value measurements of financial instruments.

The standard also establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs when available. Observable inputs are those that market participants would use in pricing the asset or liability based on the best information available in the circumstances.

The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and lowest priority to unobservable inputs (Level 3). If inputs used to measure the financial instruments fall within different levels of the hierarchy, the categorization is based on the lowest level of input that is significant to the fair value measurement of the instrument.

The three levels of the fair value hierarchy are described below:

Level 1 – Inputs that utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that the Council has the ability to access.

Level 2 – Inputs that include quoted prices for similar assets and liabilities in active markets and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. Fair values for these instruments are estimated using pricing models or quoted prices of assets and liabilities of similar characteristics.

Level 3 – Inputs that are unobservable for the assets or liabilities, which are typically based on an entity’s own assumptions, as there is little, if any, related market activity.

The asset’s or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.

Cash and Cash Equivalents

Cash and cash equivalents consist primarily of checking, and money market accounts at federally chartered banks. For purposes of the Statement of Cash Flows, all highly liquid investments with a maturity of three months or less when purchased are also considered to be cash equivalents, except for cash and money market balances held within the investment portfolio and as reported as part of the investment category. Cash equivalents include Board designated cash.

Investments

Investments include individual publicly traded equities and cash equivalents. The Council contracts with investment managers to perform ongoing investment functions and investment performance monitoring, and invests according to the guidelines that are established by the Council's Committee and approved by the Board of Directors.