In accordance with FIN 47, NAS recorded an asset retirement obligation for which fair value of the liability could be reasonably estimated relating to the regulatory remediation of asbestos and other hazardous materials in one of its office buildings. Accordingly, NAS recorded a charge to management and general expense of $1.5 million for the year ended December 31, 2007. NAS recorded a liability for asset retirement obligations of $1.7 million in other long term liabilities and increased the carrying value of the related building assets by $364,000, less accumulated depreciation of $291,000.


The NAS Council has authorized two agreements providing non-interest bearing, collateralized advances to two employees in connection with the purchase of the employee’s residence. The agreements between the parties were executed in May 2005 and May 2007. They each provide that the repayment obligation will be adjusted to allocate to each party its proportional share of the appreciation or depreciation in the value of the residence, which is based on the relative financing percentage provided by each party. The agreements will terminate upon pay-back of the advance, sale of the property, or the end of the individual’s employment with NAS, which will not exceed 12 years. The estimated present value of the receivables at December 31, 2007 and 2006, is $3.5 million and $2.5 million, respectively, and is included in other assets on the statement of financial position.


NAS is committed to several noncancelable operating leases for office space. Future minimum rental payments due under noncancelable operating leases are as follows (dollars in thousands):

Year ending December 31:





















Rental expense amounted to approximately $2.1 million and $3.7 million for the years ended December 31, 2007 and 2006, respectively.


NAS receives a portion of its revenues directly or indirectly from federal government grants and contracts, all of which are subject to audit by the Defense Contract Audit Agency, which has completed its examinations through December 31, 2004. A contingency exists relating to unexamined periods and final settlements of examined periods to refund any amounts received in excess of allowable costs. Management is of the opinion that no material liability will result from such audits.


NAS is a defendant or otherwise involved in several lawsuits. While the ultimate outcome of the litigation is uncertain, NAS management believes that it has strong legal positions, intends to vigorously defend its actions, and has concluded that the probable outcomes will not have a material impact on NAS.


NAS invests in various investment securities. Investment securities are exposed to various risks such as interest rate, market and credit risks. Due to the level of risk associated with investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect the amounts reported.

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