Nature of Activities and Significant Accounting Policies (Continued) Endowment Assets. The Board has interpreted Massachusetts General Law as requiring realized and unrealized gains and interest and dividend income of permanently restricted net assets to be retained in a restricted net asset classification until appropriated by the Board and expended. Massachusetts General Law allows the Board to appropriate for expenditure or accumulate so much of an endowment fund as the Communities determine is prudent for the uses, benefits, purposes and duration for which the endowment fund is established. In making a determination to appropriate or accumulate, the Communities shall act in good faith, with the care that an ordinarily prudent person in a like position would exercise under similar circumstances, and shall consider, if relevant, the following factors: the duration and preservation of the endowment fund; the purposes of the Communities and the endowment fund; general economic conditions; the possible effect of inflation or deflation; the expected total return from income and the appreciation of investments; other resources of the Communities; and the investment policy of the Communities. The Communities’ spending policy is to appropriate on an annual basis four percent of the average market value of the Xxxxxx Communities Endowment Funds, which will be used to support the charitable mission of Xxxxxx House, Inc., Xxxxxx Communities, Inc., and Xxxxxx Senior Living, Inc. For spending purposes, the average market value shall be established on the three most recent years ended June 30th. In establishing this policy, the Communities considered the long term expected return on its endowment. Accordingly, over the long term, the Communities expect the current spending policy to allow its endowment to grow by more than four percent annually. This is consistent with Xxxxxx’ objective to preserve the capital assets of the Communities in perpetuity as well as provide real growth through new gifts and investment return. During the year ended December 31, 2014, the Communities have decided to appropriate only investment income on donor restricted endowment funds. The Communities expect this to be the case in 2015 as well. The Board of Directors also has discretion to spend amounts over the four percent spending policy from the board- designated endowment. During the year ended December 31, 2014, the Communities made appropriations of investment income of $23,701. The Communities have adopted investment and spending policies for endowment assets that att...
