real property, 5 to 10 years for building improvements, and 3 to 10 years for equipment. Construction period interest is capitalized.
Repairs and maintenance are charged to operations in the period incurred. Replacements, additions and betterments are capitalized.

Debt Refinancing:

The gain or loss associated with enterprise fund debt refinanced is deferred and amortized to interest expense over the life
of the debt.

Lottery Revenues, Prizes and Operating Transfers:

Revenues and prizes of the Maryland State Lottery Agency (Lottery) are primarily recognized when drawings are held. Certain
prizes are payable in deferred installments. Such liabilities are recorded at the present value of amounts payable in the future. State
law requires the Lottery to transfer to the State revenues in excess of amounts allocated to prize awards, operating expenses and
capital expenditures. The excess revenues from certain select games are transferred to the States general fund, which then transfers
the amounts to the Maryland Stadium Authority for operations and to cover the State's capital lease payments to the Maryland
Stadium Authority.

Provisions for Insurance and Loan Losses:

Current provisions are made for estimated losses resulting from insuring loans and uncollectible loans. Loss provisions are based
on the current status of insured and direct loans, including delinquencies, economic conditions, loss experience, estimated value of
collateral and other factors which may affect their realization.

Inventories:

Inventories of the enterprise funds are stated at the lower of cost or market, using the first-in, first-out method.

D. Component Units-Higher Education Fund:

Basis of Accounting:

The financial statements of the Higher Education Component Unit have been prepared in accordance with Governmental
Accounting Standards which allow colleges and universities to follow the American Institute of Certified Public Accountants'
reporting model.

The accounts of the higher education institutions are maintained and reported on the accrual basis of accounting except for
tuition and fees revenue and depreciation expense as explained in the following paragraphs.

Fund Accounting:

The financial activities of the higher education institutions are recorded in funds which classify the various transactions by
specified activities or objectives. Fund balances of current restricted, loan and endowment funds are reported as reserved for higher
education programs and higher education general endowment funds.

Unrestricted revenue is accounted for in the current unrestricted fund. Restricted gifts, grants, endowment income and other
restricted resources are accounted for in the current restricted fund, loan funds, endowment and plant funds. Revenue and
expenditures are reported in the current restricted fund when financial resources are used for the current operating purposes for
which they have been provided. Transactions related to the various student loan programs are accounted for in loan funds. Resources
dedicated to the acquisition of and investment in property, plant and equipment are accounted for in the plant funds. To the extent
current funds are used to finance plant assets, these amounts provided are accounted for as (1) expenditures, in the case of normal
replacement of movable equipment and library books; (2) mandatory transfers, in the case of required provisions for debt repayment
and interest, and equipment renewals and replacements; and (3) transfers of a nonmandatory nature in all other cases. General
endowment resources are subject to the restrictions of gift instruments requiring that the principal be invested in perpetuity and that
only the income be utilized.

Grant Revenues:

Revenues from federal reimbursement type grants are recorded when the related expenditures are incurred in the restricted and
unrestricted current funds. A portion of the fund balance of the restricted current fund represents cash received in excess of grant
expenditures and is subject to refund to the Federal government if not expended for its intended purpose.

Student Revenues:

Student tuition and fees are fully recognized as revenues in the fiscal year in which the related courses or activities are principally
conducted. Student tuition and fees applicable to future courses and activities, collected as of the end of the fiscal year, are recorded
as deferred revenue.

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