NOTE 1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business. Citadel EFT, Inc. ("we", "our" or "Citadel") was incorporated in the state of Nevada on September 1, 2009. Prior to its formation, Citadel was a sole proprietorship formed in 1989 for the purpose of offering credit card transaction processing and merchant account services to businesses located in North America. Today, Citadel provides the retail industry with the tools and services for credit transactions.
Basis of Presentation. Citadel prepared its financial statements in accordance with accounting principles generally accepted in the United States of America.
Use of Estimates. The preparation of financial statements in conformity with U.S. 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. Actual results could differ from those estimates.
Recently Issued Accounting Pronouncements. Citadel does not believe that there are any other new pronouncements that have been issued that might have a material impact on its financial position or results of operations.
Cash and Cash Equivalents. Citadel considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.
Income Taxes. Deferred tax assets and liabilities are recorded to reflect the future tax consequences attributable to the effects of differences between the carrying amounts of existing assets and liabilities for financial reporting and for income tax purposes. Deferred taxes are calculated by applying enacted statutory tax rates and tax laws to future years in which temporary differences are expected to reverse. The impact on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that the rate change is enacted.
A deferred tax valuation reserve is established if it is more likely than not that a deferred tax asset will not be realized.
Citadel recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon settlement.
Revenue Recognition and Accounts Receivable. Citadel derives revenues primarily from the electronic processing of credit, charge and debit card transactions that are authorized and captured through third-party networks. Typically, merchants are charged for these processing services based on a percentage of the dollar amount of each transaction and in some instances, additional fees are charged for each transaction. Certain merchant customers are charged a flat fee per transaction and may also be charged miscellaneous fees, including fees for handling charge backs, monthly minimums, equipment rentals, sales or leasing and other miscellaneous services.
Revenues are reported net of amounts paid to sponsor banks, as well as interchange and assessments paid to credit card associations (MasterCard and Visa) under revenue sharing agreements pursuant to which such parties receive payments based primarily on processing volume for particular groups of merchants.
We follow the requirements of ASC 605-45, "Revenue Recognition, Principal Agent Considerations," in determining our revenue reporting. Generally, we report revenues at the time of sale on a net basis where we are not the primary obligor in the arrangement, have minimal latitude in establishing the price of the services, do not change the product and perform part of the service, do not have discretion in supplier selection, do not have latitude in determining the product and service specifications to meet our client's needs and do not assume credit risk. This amount includes interchange paid to card issuing banks and assessments paid to credit card associations pursuant to which such parties receive payments based primarily on processing volume for particular groups of merchants.
Accounts receivable are primarily comprised of amounts due from our clearing and settlement banks from revenues earned, net of related interchange and bank processing fees, on transactions processed during the month ending on the balance sheet date. Such balances are typically received from the clearing and settlement banks within 30 days following the end of each month. Bad debt expense is recognized based on management's estimate of likely losses per year, based on the nature of the revenues and subsequent month receipt. As of September 30, 2011 and 2010 respectively, no allowance for doubtful accounts was deemed necessary
Advertising Costs. Citadel's policy regarding advertising is to expense advertising when incurred. For the years ended September 30, 2012and 2011 Citadel incurred advertising expenses of approximately $73,090 and $66,952, respectively.
Financial Instruments. Citadel believes the carrying amounts of financial instruments As of September 30, 2012 and 2011, including cash and accounts receivable approximate fair value. Due to the short maturities of the cash and cash equivalents and accounts receivable, carrying amounts approximate the respective fair values
Basic and diluted net income (loss) per share. Basic income (loss) per share is computed using the weighted average number of shares of common stock outstanding during each period. Diluted income (loss) per share includes the dilutive effects of common stock equivalents on an "as if converted" basis. For the years ended September 30, 2012 and 2011, the Company had 51,000,000 of Series A Convertible preferred shares outstanding which are convertible into one common share which are potentially dilutive securities if considered on a "as if converted" method.