CLAYTON HOMES, INC. 401(K) RETIREMENT PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 2018 and 2017
NOTE 1 - DESCRIPTION OF PLAN (Continued)
Notes Receivable from Participants
: Participants may borrow from their accounts a minimum of $1,000 up to a maximum of $50,000 or 50% of
their account balance, whichever is less. The notes are secured by the balance in the participants account and bear interest at fixed rates that are commensurate with local prevailing rates as determined quarterly by the Plan Administrator.
Principal and interest are paid through payroll deductions for active employees.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting
: The financial statements of the Plan are prepared on the accrual basis of accounting in conformity with accounting
principles generally accepted in the United States of America.
Use of Estimates
: The preparation of financial statements in
conformity with accounting principles generally accepted in the United States of America requires the Plan Administrator to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results may differ
from those estimates.
Risks and Uncertainties
: The Plan holds various investment securities. Investment securities are exposed to
various risks such as interest rate, market, liquidity and credit risks. Due to the level of risk associated with certain investment securities and the sensitivity of certain fair value estimates to changes in valuation assumptions, it is at least
reasonably possible that changes in the fair values of investment securities will occur in the near term and that such changes could materially affect participants account balances and the amounts reported in the statement of net assets
available for benefits.
Investment Valuation and Income Recognition
: The Plans investments are reported at fair value. Fair
value is the price that would be received by the Plan for an asset or paid by the Plan to transfer a liability (an exit price) in an orderly transaction between market participants on the measurement date in the Plans principal or most
advantageous market for the asset or liability.
Purchases and sales of securities are recorded on a trade-date basis. Interest income is
recorded on the accrual basis. Dividends are recorded on the
ex-dividend
date. Net appreciation (depreciation) includes the Plans gains and losses on investments bought and sold as well as held during
the year.
Fair value measurements are determined by maximizing the use of observable inputs and minimizing the use of unobservable
inputs. The hierarchy places the highest priority on unadjusted quoted market prices in active markets for identical assets or liabilities (Level 1 measurements) and gives the lowest priority to unobservable inputs (Level 3 measurements). The three
levels of inputs within the fair value hierarchy are defined as follows:
Level 1: Quoted prices
(unadjusted) for identical assets or liabilities in active markets that the Plan has the ability to access as of the measurement date.
Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for
similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
Level 3: Significant unobservable inputs that reflect the Plans own assumptions about the
assumptions that market participants would use in pricing an asset or liability.