CLAYTON HOMES, INC. 401(K) RETIREMENT PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 2021 and 2020
NOTE 1 - DESCRIPTION OF PLAN (Continued)
Administrative and Investment Management Expenses: Certain expenses of maintaining the Plan are paid directly by the Company and are excluded from these
financial statements. Plan recordkeeping and trustee fees are paid by the Plan and are reflected in the financial statements as administrative expenses. Fees related to the administration of notes receivable from participants are charged directly to
the participant’s account and are included in administrative expenses. Investment management fees are charged to the Plan as a reduction of investment return and included in the investment income (loss) reported by the Plan.
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 participant’s 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.
Plan Changes Related to the CARES Act and SECURE Act: The Plan has implemented certain requirements
by the Coronavirus Aid, Relief, and Economic Security (the CARES Act) and the Setting Every Community Up for Retirement Enhancement Act of 2019 (the SECURE Act), which laws change the Plan to, among others, allow certain eligible individuals to
receive coronavirus-related relief for the repayment of notes receivable from participants, suspend required minimum distributions, and delay the commencement date for required minimum distributions. Written amendments to the Plan to reflect these
operational changes were formally adopted during the 2020 plan year in accordance with applicable law and IRS guidance.
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.
Investment Valuation and Income Recognition: The Plan’s 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 Plan’s 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 Plan’s 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.