NOTE

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Consolidation Policy

The financial statements of Boston Omaha Corporation include the accounts of the Company and its wholly-owned and majority-owned subsidiaries, as follows:

Link Media Holdings, LLC which we refer to as “LMH”

Link Media Alabama, LLC which we refer to as “LMA”

Link Media Florida, LLC which we refer to as “LMF”

Link Media Wisconsin, LLC which we refer to as “LMW”

Link Media Georgia, LLC which we refer to as “LMG”

Link Media Midwest, LLC which we refer to as “LMM”

Link Media Omaha, LLC which we refer to as “LMO”

Link Media Southeast, LLC which we refer to as “LMSE”

Link Media Services, LLC which we refer to as “LMS”

General Indemnity Group, LLC which we refer to as “GIG”

The Warnock Agency, Inc. which we refer to as “Warnock”

United Casualty and Surety Insurance Company which we refer to as “UCS”

Surety Support Services, Inc. which we refer to as “SSS”

South Coast Surety Insurance Services, LLC which we refer to as “SCS”

Boston Omaha Investments, LLC which we refer to as “BOIC”

Boston Omaha Asset Management, LLC which we refer to as “BOAM”

BOC DFH, LLC which we refer to as "BOC DFH"

Fiber is Fast, LLC which we refer to as "BOC FIF"

FIF AireBeam LLC which we refer to as "AireBeam"

All significant intercompany profits, losses, transactions and balances have been eliminated in consolidation.

Reclassifications

Certain accounts in the prior year financial statements have been reclassified for comparative purposes to conform to the presentation in the current year financial statements.

Cash and Cash Equivalents

For purposes of the statement of cash flows, we consider all highly liquid investments, with the exception of U.S. Treasury securities, purchased with an original maturity of

three

months or less to be cash equivalents.

Restricted Cash

We have cash that is restricted for the payment of insurance premiums.

Accounts Receivable

Billboard Rentals

Accounts receivable are recorded at the invoiced amount, net of advertising agency commissions, sales discounts, and allowances for doubtful accounts. We evaluate the collectability of accounts receivable based on our knowledge of our customers and historical experience of bad debts. In circumstances where we are aware of a specific customer’s inability to meet its financial obligations, we record a specific allowance to reduce the amounts recorded to what we believe will be collected. For all other customers, we recognize reserves for bad debt based upon historical experience of bad debts as a percentage of revenue, adjusted for relative improvement or deterioration in its agings and changes in current economic conditions. As of

December 31, 2019

and

2018

, the allowance for doubtful accounts was

$127,635

and

$50,565,

respectively.

Insurance

Accounts receivable consists of premiums and anticipated salvage. All of the receivables have payment terms of less than

twelve

months.

Anticipated salvage is the amount we expect to receive from principals pursuant to indemnification agreements.

Deferred Policy Acquisition Costs

Policy acquisition costs consist primarily of commissions to agents and brokers and premium taxes, fees, and assessments. Such costs that are directly related to the successful acquisition of new or renewal insurance contracts are deferred and amortized over the related policy period, generally

one

three

years. The recoverability of these costs is analyzed by management quarterly, and if determined to be impaired, is charged to expense. We do

not

consider anticipated investment income in determining whether a premium deficiency exists. All other acquisition expenses are charged to operations as incurred.

Property and Equipment

Property and equipment are carried at cost less depreciation. Depreciation and amortization are provided principally on the straight-line method over the estimated useful lives of the assets, which range from

two

years to

fifteen

years as follows:

	Years

Structures		15
Digital displays and electrical		3 to 10
Static and tri-vision displays		7 to 15
Vehicles, equipment, and furniture		2 to 5

Maintenance and repair costs are charged against income as incurred. Significant improvements or betterments are capitalized and depreciated over the estimated life of the asset.

Periodic internal reviews are performed to evaluate the reasonableness of the depreciable lives for property and equipment. Actual usage, physical wear and tear, replacement history, and assumptions about technology evolution are reviewed and evaluated to determine the remaining useful lives of the assets. Remaining useful life assessments are made to anticipate the loss in service value that

may

precede physical retirement, as well as the level of maintenance required for the remaining useful life of the asset.

Property and equipment is reviewed periodically for impairment whenever events or changes in circumstances indicate that the carrying amount of property and equipment

may

not

be fully recoverable. The period over which property and equipment is expected to contribute directly to future cash flows is evaluated against our historical experience. Impairment losses are recognized only if the carrying amount exceeds its fair value.

Goodwill

Goodwill represents future economic benefits arising from other assets acquired in a business combination that are

not

individually identified and separately recognized. Goodwill is subject to an annual impairment test. We designated

October 1

as the date of our annual goodwill impairment test. We are required to identify our reporting units and determine the carrying value of each reporting unit. We analyze financial information of our operations to identify discrete segments that constitute a reporting unit. We assign assets acquired and liabilities assumed in business combinations to those reporting units. We have identified

three

reporting units: billboard operations, insurance brokerage operations, and insurance carrier operations. We are required to determine the fair value of each reporting unit and compare it to the carrying amount of the reporting unit. To the extent the carrying amount of a reporting unit exceeds the fair value of the reporting unit, we would be required to book an impairment loss. For our annual review of reporting units, we employ a

third

party valuation expert.

Factors considered in the annual evaluation include deterioration in economic conditions (both macro and geographic), limitations on accessing capital, and our market value. Industry and market conditions such as changes in competition, the general state of the industry, regulatory and political developments, and changes in market multiples are additional components of the valuation. Changes in key personnel, strategy, and customer retention are also reviewed. If industry and economic conditions deteriorate, we

may

be required to assess goodwill impairment before the next annual test, which could result in impairment charges.

We performed our annual measurement for impairment of the goodwill of our reporting units and concluded the fair value of each reporting unit exceeded its carrying amount at its annual impairment test date on

October 1, 2019

and

2018;

therefore, we were

not

required to recognize an impairment loss.

During

2019

and

2018,

goodwill of more than

$3,500,000

and

$73,000,000,

respectively, was recorded in connection with our billboard acquisitions.

Purchased Intangibles and Other Long-Lived Assets

We amortize intangible assets with finite lives over their estimated useful lives, which range between

two

and

fifty

years as follows:

	Years

Customer relationships		3 to 10
Permits, licenses, and lease acquisition costs		10 to 50
Noncompetition and nonsolicitation agreements		2 to 5
Technology, trade names, and trademarks		2 to 3
Site location		15

Purchased intangible assets, including long-lived assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets

may

not

be fully recoverable. Factors considered in reviewing the asset values include consideration of the use of the asset, the expected life of the asset, and regulatory or contractual provisions related to such assets. Market participation assumptions are compared to our experience and the results of the comparison are evaluated. For finite-lived intangible assets, the period over which the assets are expected to contribute directly to future cash flows is evaluated against our historical experience. Impairment losses are recognized only if the carrying amount exceeds its fair value.

Asset Retirement Obligations

We are required to record the present value of obligations associated with the retirement of tangible long-lived assets in the period in which the obligation is incurred. The liability is capitalized as part of the long-lived asset’s carrying amount. With the passage of time, accretion of the liability is recognized as an operating expense and the capitalized cost is depreciated over the expected useful life of the related asset. Our asset retirement obligations relate to the dismantlement, removal, site reclamation, and similar activities related to the decommissioning of our billboard structures.

Investments, Short-term and Long-term

Investments include certificates of deposits, U.S Treasury securities, marketable equity securities, investments in corporate bonds, and equity investments as discussed below. U.S. Treasury securities held by our insurance entities are classified as held-to-maturity and are accounted for at amortized cost. We have both the intent and ability to hold the bonds to maturity. U.S. Treasury securities held by non-insurance entities are classified as available for sale and are accounted for at fair value. Because we have elected the fair value option for these securities, unrealized holding gains and losses during the period are included in earnings. Marketable equity securities are stated at fair value. Certificates of deposit are accounted for at carrying value with

adjustments for changes in fair value. Premiums and discounts are amortized or accreted over the lives of the related fixed maturities as an adjustment to the yield using the effective interest method. Dividend and interest income is recognized when earned. Realized investment gains and losses are included in earnings.

Equity

Investment

Our equity investments consist of investment in

two

private companies in which we do

not

have the ability to exercise significant influence over their operating and financial activities. These investments are carried at cost as there is

market for the common stock and LLC units, accordingly,

quoted market price is available. The investments are tested for impairment, at least annually, and more frequently upon the occurrences of certain events. We have adopted the provisions of ASU

2016

and use the measurement alternative, defined as cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments of the same issuer.

Investments in Unconsolidated Entities

We account for investments in less than

50%

owned and more than

20%

owned entities using the equity method of accounting. In accordance with ASC

323

30,

we account for investments in limited partnerships and limited liability companies using the equity method of accounting when its investment is more than minimal. Our share of income (loss) of such entities is recorded as a single amount as equity in income (loss) of unconsolidated affiliates. Dividends, if any, are recorded as a reduction of the investment.

Funds Held as Collateral Assets

Funds held as collateral assets consist principally of cash collateral received from principals to guarantee performance on surety bonds issued by us, as well as all other contractual obligations of the principals to the surety. For

2018,

we held long-term certificates of deposit as collateral.

Land Leases

Most of the advertising structures are located on leased land. Land leases related to the structures are typically paid in advance for periods ranging from

one

twelve

months. The lease contracts include those with fixed payments and those with escalating payments. Some of the lease contracts contain a base rent payment plus an additional amount up to a particular percentage of revenue. Prepaid land leases are recorded as assets and expensed ratably over the related term and rent payments in arrears

are recorded as an accrued liability. At

December 31, 2018,

prepaid expenses include

$2,056,195

in prepaid land leases which are included within ROU assets at

December 31, 2019.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

The more significant areas requiring the use of management estimates relate to allocation of asset acquisition price between tangible and intangible assets, useful lives for depreciation, amortization and accretion, impairment of goodwill, valuation of insurance loss reserves, and the valuation of deferred tax assets and liabilities. Accordingly, actual results could differ from those estimates. During the

fourth

quarter of

2019,

management extended the useful lives of certain intangible assets (see further discussion within Note

Revenue

January 1, 2018,

we adopted Financial Accounting Standards Board, which we refer to as “FASB,” Accounting Standards Update, which we refer to as “ASU,”

No.

2014

(Codified as Accounting Standards Codification, which we refer to as “ASC,”

606

Revenue from Contracts with Customers

using the cumulative effect transition method applied to those contracts which were

not

completed as of

January 1, 2018

and are

not

accounted for under ASC

840

Leases.

A majority of our billboard contracts have historically been accounted for under ASC

840.

Contracts which began prior to

January 1, 2019

and are accounted for under ASC

840

will continue to be accounted for as a lease until the contract ends or is modified. Contracts beginning or modified on or after

January 1, 2019

which do

not

meet the criteria of a lease under FASB ASU

No.

2016

(Codified as ASC

842

Leases

are accounted for under ASC

606,

Revenue from Contracts with Customers

. The majority of our advertising space contracts do

not

meet the definition of a lease under ASC

842.

Premium revenues derived from our insurance operations are

not

subject to this guidance, since they are subject to ASC

944,

Financial Services – Insurance

Revenue Recognition

Billboard Rentals

We generate revenue from outdoor advertising through the leasing of advertising space on billboards. The terms of the operating leases generally range from less than

one

month to

three

years and are generally billed monthly. Revenue for advertising space rental is recognized on a straight-line basis over the term of the contract. Advertising revenue is reported net of agency commissions. Agency commissions are calculated based on a stated percentage applied to gross billing revenue for operations. Payments received in advance of being earned are recorded as deferred revenue. Another component of billboard rentals consists of production services which include creating and printing advertising copy. Contract revenues for production services are accounted for under ASC

606.

Revenues are recognized at a point in time upon satisfaction of the contract, which is typically less than

one

week. Production services revenue recognized in

2019

was

$1,341,995

and in

2018

was

$561,779.

Deferred Revenues

We record deferred revenues when cash payments are received in advance of being earned or when we have an unconditional right to consideration before satisfying our performance obligation. The term between invoicing and when a payment is due is

not

significant. For certain services we require payment before the product or services are delivered to the customer. The balance of deferred revenue is considered short-term and will be recognized in revenue within

twelve

months.

Premiums and Unearned Premium Reserves

Premiums written are recognized as revenues based on a pro-rata daily calculation over the respective terms of the policies in-force. The cost of reinsurance ceded is initially written as prepaid reinsurance premiums and is amortized over the reinsurance contract period in proportion to the amount of insurance protection provided. Premiums ceded are netted against premiums written.

Commissions

We generate revenue from commissions on surety bond sales and account for commissions under ASC

606.

Insurance commissions are earned from various insurance companies based upon our agency agreements with them. We arrange with various insurance companies for the provision of a surety bond for entities that require a surety bond. The insurance company sets the price of the bond. The contract with the insurance company is fulfilled when the bond is issued by the insurance agency on behalf of the insurance company. The insurance commissions are calculated based upon a stated percentage applied to the gross premiums on bonds. Commissions are recognized at a point in time, on a bond-by-bond basis as of the policy effective date and are generally nonrefundable.

Practical Expedients and Exemptions

Upon our transition to ASC

606

from ASC

840,

we utilized the following practical expedients and exemptions from ASC

606.

We expense sales commissions when incurred because the amortization period is

one

year or less. These costs are reported within cost of billboard revenues (exclusive of depreciation and amortization) in the consolidated statements of operations. We do

not

disclose the value of unsatisfied performance obligations as the majority of our contracts with customers have an original expected length of less than

one

year. We have used the practical expedient and

not

adjusted the amount of consideration for the effects of a significant financing component for deferred revenues where the period between our performance and our customers’ payments is less than

one

year. For contracts with customers which exceed

one

year the future amount to be invoiced to the customer corresponds directly with the value to be received by the customer.

Right of Use Assets and Lease Liabilities

Right of use, which we refer to as “ROU", assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. The present value of lease payments is determined primarily using the incremental borrowing rate based on the information available at the lease commencement date. We have elected

not

to recognize ROU assets and lease liabilities for short-term leases for all classes of underlying assets. Short-term leases are leases with terms greater than

month, but less than

months.

Redeemable Noncontrolling Interest

Redeemable noncontrolling interests are interests in subsidiaries that are redeemable outside of our control either for cash or other assets. These interests are classified as mezzanine equity and measured at the greater of estimated redemption value at the end of each reporting period or the historical cost basis of the noncontrolling interest adjusted for cumulative earnings allocations. The resulting increases or decreases in the estimated redemption amount are affected by corresponding charges against retained earnings, or in the absence of retained earnings, additional paid-in capital.

Losses and Loss Adjustment Expenses

Unpaid losses and loss adjustment expenses represent estimates for the ultimate cost of unpaid reported and unreported claims incurred and related expenses. Estimates for losses and loss adjustment expenses are based on past experience of investigating and adjusting claims and consideration of the level of premiums written during the current and prior year. Since the reserves are based on estimates, the ultimate liability

may

differ from the estimated reserve. The effects of changes in estimated reserves are included within cost of insurance revenues in our results of operations in the period in which the estimates are updated. The reserves are included within accounts payable and accrued expenses in our consolidated balance sheets.

Segment Information

Operating segments are defined as the components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. Our chief operating decision makers direct the allocation of resources to operating segments based on the profitability, cash flows, and growth opportunities of each respective segment.

Our current operations for the years ended

December 31, 2019

and

2018

include the outdoor advertising industry and the insurance industry.

Earnings Per Share

Basic loss per common share is computed by dividing the net loss available to Class A common stockholders and Class B common stockholders by the weighted average number of Class A common and Class B common shares outstanding during the year. Diluted earnings per share reflect the potential dilution of securities that could share in earnings of an entity. In a loss year, dilutive common equivalent shares are excluded from the loss per share calculation as the effect would be anti-dilutive. For the years ended

December 31, 2019

and

2018

, we had potentially dilutive securities in the form of stock warrants. However, such securities were excluded due to their anti-dilutive effect.

Income Taxes

We account for income taxes in accordance with ASC Topic

740

which requires us to provide a net deferred tax asset or liability equal to the expected future tax benefit or expense of temporary reporting differences between book and tax accounting, any available operating loss or tax credit carry forwards. Income taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due plus deferred taxes related primarily to differences between the bases of certain assets and liabilities for financial and income tax reporting. Deferred tax assets and liabilities represent the future tax return consequences of those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled. Deferred taxes also are recognized for operating losses that are available to offset future federal income taxes. Valuation allowances are established when necessary to reduce deferred tax assets to amounts expected to be realized.

We recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses. During the years ended

December 31, 2019

and

2018

, we recognized

interest and penalties. As of

December 31, 2019

and

2018

, we had

accruals for interest and penalties.

Recent Accounting Pronouncements

May 2014,

the FASB issued ASU

No.

2014

(Codified as ASC

606

Revenue from Contracts with Customers

, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU replaced most existing revenue recognition guidance in U.S. GAAP when it became effective. In

August 2015,

the FASB issued ASU

No.

2015

deferring the effective date from

January 1, 2017

January 1, 2018,

while allowing for early adoption as of

January 1, 2017.

The standard permits the use of either the retrospective or cumulative effect transition method. We adopted the provisions of ASU

No.

2014

January 1, 2018

using the cumulative effect transition method. We did

not

have an adjustment to our opening balance of accumulated deficit for the adoption of this update.

February 2016,

the FASB issued ASU

No.

2016

01,

Recognition and Measurement of Financial Assets and Financial Liabilities

, which requires entities to carry all investments in equity securities at fair value and recognize any changes in fair value in net income. Under the standard, equity investments that do

not

have readily determinable fair values and do

not

qualify for the net asset value practical expedient are eligible for the measurement alternative. We adopted the provisions of ASU

No.

2016

January 1, 2018,

for our equity investments in private companies

not

accounted for under the equity method, using the measurement alternative, defined as cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments of the same issuer.

November 2016,

the FASB issued ASU

No.

2016

18,

Statement of Cash Flows (Topic

230

)

Restricted Cash.

The guidance requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The standard is effective for public business entities for fiscal years beginning after

December 15, 2017,

and interim periods within those fiscal years. We adopted ASU

No.

2016

January 1, 2018.

In accordance with the guidance of ASU

No.

2016

18,

changes in restricted cash have been included with cash and cash equivalents in the consolidated statements of cash flows. We retrospectively adopted the standard.

The adoption increased the ending cash balance within our consolidated statements of cash flows by the aggregate amount of our restricted cash balances and required a new disclosure to reconcile the cash balances within our consolidated statements of cash flows to the consolidated balance sheets.

January 2017,

the FASB issued ASU

2017

04,

Intangibles - Goodwill and Other (Topic

350

): Simplifying the Test for Goodwill Impairment

. The update simplifies how an entity is required to test goodwill for impairment by eliminating Step

from the goodwill impairment test. Step

measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. It affects public entities that have goodwill reported in their financial statements and have

not

elected the private company alternative for the subsequent measurement of goodwill. A public entity that is a U.S. Securities and Exchange Commission ("SEC") filer should adopt the amendments in this update for its annual or any interim goodwill impairment tests in fiscal years beginning after

December 15, 2019.

We adopted this update beginning with our

October 1, 2017

goodwill impairment test.

January 1, 2018,

we adopted ASU

No.

2016

, Statement of Cash Flows (Topic

230

), Classification of Certain Cash Receipts and Payments

. The ASU is required to be reflected on a retrospective basis and provides guidance on the classification of certain cash receipts and cash payments, including distributions received from an equity method investee. We adopted the cumulative earnings approach, whereby distributions received are considered to be returns on investment and, thus, should be classified as cash inflows from operating activities on our consolidated statement of cash flows, unless the cumulative distributions received less distributions received in prior periods that were determined to be returns of investment exceed cumulative equity in earnings recognized. When such an excess occurs, the current period distribution up to this excess is considered a return of investment and classified as cash inflows from investing activities. The adoption of ASU

No.

2016

did

not

have a material impact on our consolidated financial statements.

December 2019,

the FASB issued guidance which simplifies the accounting for income taxes by removing certain exceptions to the general principles and improves consistent application of GAAP for other areas by clarifying and amending existing guidance. This guidance is effective

January 1, 2021.

We are evaluating the effect of adopting this new accounting guidance but do

not

expect adoption will have a material impact on our disclosures.

January 2020,

the FASB issued ASU

No.

2020

01,

Clarifying the Interactions between Topic

321,

Investments—Equity Securities

Topic

323,

Investments—Equity Method and Joint Ventures, and Topic

815,

Derivatives and Hedging

This ASU clarifies that when accounting for certain equity securities, a Company should consider observable transactions before applying or upon discontinuing the equity method of accounting for the purposes of applying the measurement alternative. This guidance is effective

January 1, 2021,

with early adoption permitted. We are evaluating the effect of adopting this new accounting guidance but do

not

expect adoption will have a material impact on our financial statements.

February 2016,

the FASB established Topic

842,

Leases

, by issuing ASU

No.

2016

02,

which requires lessees to recognize leases on-balance sheet and disclose key information about leasing arrangements. Topic

842

was subsequently amended by ASU

No.

2018

01,

Land Easement Practical Expedient for Transition to Topic

842

; ASU

No.

2018

10,

Codification Improvements to Topic

842

Leases

; and ASU

No.

2018

11,

Targeted Improvements

. The new standard establishes a right-of-use model that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than

months. Leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement.

We adopted Topic

842

effective

January 1, 2019,

using the modified retrospective transition approach. Additionally, we adopted the package of practical expedients, which permitted us

not

to reassess under the new standard our prior conclusions about lease identification, lease classification, and initial direct costs. We also adopted the use of hindsight and the practical expedient pertaining to land easements. The most significant effects of Topic

842

were the recognition of

$49,066,289

of operating lease assets and liabilities and the de-recognition of

$811,709

of favorable lease assets,

$1,945,820

of prepaid land lease assets and

$1,316,000

of accrued rent liabilities. We applied Topic

842

to all leases as of

January 1, 2019

with comparative periods continuing to be reported under Topic

840.

In the adoption of Topic

842,

we carried forward the assessment from Topic

840

of whether our contracts contain or are leases, the classification of our leases, and remaining lease terms. We do

not

have any finance leases. The adoption of the standard did

not

have a significant effect on our consolidated results of operations or cash flows. Note

contains further details.