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Description of Business and Summary of Significant Accounting Policies:

12 Months Ended

Mar. 31, 2012

Description of Business and Summary of Significant Accounting Policies:

Description of Business and Summary of Significant Accounting Policies:

1. Description of Business and Summary of Significant Accounting Policies:

Mesa Laboratories, Inc. was incorporated under the laws of the State of Colorado on March 26, 1982, for the purpose of designing, manufacturing and marketing electronic instruments, supplies and disposable products.

Reclassifications — Certain March 31, 2011, amounts have been reclassified to conform to the March 31, 2012, presentation. Approximately $1,400,000 of customer payments for shipping was reclassified from cost of revenue to revenue in the fiscal 2011 statement of income. This reclassification affects revenues, cost of revenues, and gross profit, but has no impact on other figures in the statements of income.

The other significant change was to net the $424,000 long-term deferred income tax asset at March 31, 2011, with the long-term deferred income tax liability. There was no impact to the statement of income.

Use of Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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. Actual results could differ from those estimates.

Cash Equivalents - Cash equivalents include highly liquid investments with an original maturity of three months or less.

Accounts Receivable - We estimate an allowance for doubtful accounts based on overall historic write-offs, the age of receivable balances, and the payment history and creditworthiness of the customer. If collection efforts or other information leads us to believe a balance is not collectible, we will write the amount off against the reserve.

Concentration of Credit Risk - Financial instruments which potentially subject us to concentrations of credit risk consist of money market funds, short-term investments and accounts receivable. We invest all excess cash primarily in money market funds administered by reputable financial institutions. To reduce credit risk, we periodically evaluate the money market fund administrators and perform credit analyses of customers and monitor their financial condition. Additionally, we maintain cash balances in bank deposit accounts which, at times, may exceed federally insured limits.

During the years ended March 31, 2012 and 2011, no individual customer represented more than 10% of our revenues or accounts receivable balance. Approximately 60% and 40% of our sales are to customers located in the United States and foreign countries, respectively.

Inventories - Inventories are stated at the lower of cost or market, based on standards using the first-in, first-out method (FIFO) to determine cost. We evaluate standard costs annually, unless circumstances necessitate a mid-year evaluation for specific items. Our work in process and finished goods inventory includes labor and overhead, which are estimated based on trailing twelve months of expense and standard labor hours for each product. Our biological indicator inventory is tracked by lot number, thus it is generally based on actual hours.

We monitor inventory cost compared to selling price in order to determine if a lower of cost or market reserve is necessary. At year end we perform a complete physical inventory observation. Throughout the year, we estimate and maintain an inventory reserve, as needed, for such matters as obsolete inventory, shrink and scrap.

Property, Plant and Equipment - Property, plant and equipment is stated at cost and depreciated using the straight-line method over estimated useful lives of 3 to 39 years.

Goodwill and Intangible Assets — Goodwill is the cost of an acquisition less the fair value of the net assets of the acquired business. Our intangible assets include intellectual property, non-compete agreements, and customer relationships and are being amortized on a straight-line basis over their estimated useful lives of 3 to 16 years. At the time of acquisition, marketing intangibles, such as trade names, were determined to have an indefinite life and were not being amortized. In February 2012, however, management determined we may phase out the use of these marketing intangibles and began amortizing them on a straight-line basis over an estimated useful life of 10 years.

Impairment of Long-lived Assets — We periodically evaluate depreciable and amortizable long-lived assets for impairment if qualitative circumstances indicate the carrying value of those assets may not be recoverable. If necessary, undiscounted cash flow projections are then compared to the carrying value. If the carrying value is higher than the undiscounted cash flows, then we must determine whether there has been an impairment loss.

Annually for goodwill, we assess qualitative factors to evaluate whether events or changes in circumstances indicate that it is more likely than not that the fair value of our reporting units is less than the carrying value. Our next step, if necessary, would be to estimate the fair value of the reporting unit, primarily using a discounted cash flow model.

Indefinite-lived intangibles are assessed at least annually for impairment by comparing the estimated fair value to the carrying value.

In all cases, an impairment loss is measured as the excess of the asset’s carrying value over its fair value.

Revenue Recognition — We recognize revenue for sales and services under the four revenue recognition criteria: a) persuasive evidence of an arrangement exists — our customary practice is to obtain written evidence, typically in the form of a purchase order; b) delivery — our shipping terms are typically such that custody is transferred at our facilities as new and serviced products are shipped, with no right of return or further obligations, such as installation or training; c) the price is fixed or determinable — prices are typically fixed at the time the order is placed and no price protections or variables are offered; d) collectibility is reasonably assured — new and existing customers are subject to a credit review process and pre-payment may be required, depending on this review.

Shipping and handling — For product sold, payments by customers to us for shipping and handling costs are included in revenue on the statements of income, while our expense is included in cost of revenue. Shipping and handling for inventory and materials purchased by us is included as a component of inventory on the balance sheets, and in cost of revenue when the product is sold.

Accrued Warranty Expense — We provide limited product warranty on our products and, accordingly, accrue an estimate of the related warranty expense at the time of sale.

Research & Development Costs — Internal costs related to research and development efforts on existing or potential products are expensed as incurred. The costs of intangible assets that are purchased from others for use in research and development activities and have alternative future uses are capitalized and amortized over their expected useful life.

Under certain agreements, we may receive advance payments from customers to perform research and development on their behalf. These payments are recovered by the customer through lower product prices. In these circumstances, we initially record deferred revenue, included in other accrued liabilities on the Balance Sheet. As product is sold, this liability will be reduced through revenues on the Statements of Income.

Stock-based Compensation — Equity classified stock-based compensation is measured at fair value, based on the closing stock price at grant date. We recognize expense on a straight-line basis over the service period net of an estimated forfeiture rate, resulting in a compensation cost for only those shares expected to vest. We do not have any liability classified stock-based compensation.

Income Taxes — We recognize deferred income tax assets and liabilities for the expected future tax consequences of temporary differences between the income tax and financial reporting carrying amount of our assets and liabilities. We monitor our deferred tax assets and evaluate the need for a valuation allowance based on the estimate of the amount of such deferred tax assets that we believe do not meet the more-likely-than-not recognition criteria. We also evaluate whether we have any uncertain tax positions and would record a reserve if we believe it is more-likely-than-not our position would not prevail with the applicable tax authorities. We have not recorded a valuation allowance or a reserve for uncertain tax positions. Any penalties and interest are included in other income (expense) on the statements of income.

Fair Value of Measurements - Our financial instruments include cash, accounts receivable, accounts payable, and accrued liabilities. The carrying value of these financial instruments is considered to be representative of their fair value due to the short maturity of these instruments. Our debt has a variable interest rate, so the carrying amount approximates fair value because interest rates on these instruments approximate the interest rate on debt with similar terms available to us.

Accounting guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. The guidance establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from independent sources. Unobservable inputs are inputs that reflect assumptions of what market participants would use in pricing the asset or liability based on the best information available in the circumstances. The financial and non-financial assets and liabilities are categorized based on the lowest level of input that is significant to the fair value measurement. The hierarchy is broken down into three levels based on the reliability of the inputs as follows:

Level 1:	Quoted prices in active markets for identical assets or liabilities;
Level 2:	Quoted prices in active markets for similar assets and liabilities and inputs that are observable for the asset or liability; or
Level 3:	Unobservable inputs in which there is little or no market data, which requires the reporting entity to develop its own assumptions.

Recently Issued Accounting Pronouncements — In May 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS. ASU 2011-04 contains technical adjustments and clarifications to more closely align the U.S. GAAP and International Financial Reporting Standards (“IFRS”) for fair value and will be effective for us in the first quarter of fiscal 2013. We do not believe the adoption of this standard will have a material effect on our Financial Statements.