Principle

financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and include our consolidated accounts and the accounts of our wholly owned subsidiary, TPWR. All intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates

GAAP requiresmanagement 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 income and expenses during the reporting period. Actual results could differ from those estimates.

Revenue Recognition

“O&G royalties”) are received in connection with royalty interests owned by the Trust. O&G royalties are recognized as revenue when crude oil and gas products are removed from the respective mineral reserve locations. O&G royalty payments are generally received to months after the crude oil and gas products are removed. An accrual is included in accrued receivables for amounts received during the month removed based on historical trends.

O&G royalties which the Trust receives are dependent upon the market prices for oil and gas. The market prices for oil and gas are subject to national and international economic and political conditions and, in the past, have been subject to significant price fluctuations.

operating where the Trust has an O&G royalty interest in an effort to identify unpaid royalties associated with royalty interests owned by the Trust. Rights to certain O&G royalties believed by the Trust to be due and payable be subject to dispute with the oil company involved as a result of disagreements with respect to drilling and related engineering information. Disputed O&G royalties are recorded when these contingencies are resolved.

Revenue Recognition -

akes available the respective parcel of land to the grantee. Though a small number of payments received are for perpetual easements, the vast majority are for terms of years.

industries, including: agricultural, oil and gas, construction, wind power and other industries. Lease income is recognized when earned. These leases generally require fixed annual payments or royalties. Lease terms generally range from month-to-month arrangements to years. Lease cancellations are allowed.

not

Revenue Recognition - W

s are recognized as earned.

Revenue Recognition

For income tax purposes, land sales are recognized on the installment method. The sales price of land sales are reflected as income and the cost of the respective parcels of land are reflected as expenses as these parcels of land are primarily held as income-producing “operating” properties.

Cash and

investments in bank deposits, money market funds and highly-liquid cash investments with original maturities of months or less to be cash equivalents.

Accrued

, water sales or royalty agreements, and sundry leases. Accrued receivables are reflected at their net realizable value based on historical royalty and lease receipt information and other factors anticipated to affect valuation. A valuation allowance is recorded if amounts expected to be received are considered impaired. allowance was considered necessary at and

.

Property, Plant and

Trust capitalizes the cost of software developed by a party for the Trust’s internal use. Costs associated with our development of water well fields and re-use facilities are capitalized. We account for depreciation of property, plant and equipment on the straight-line method over the estimated useful lives of the assets. Depreciable lives by category are as follows:

Real Estate Acquired

not

may

not

Real Estate and Royalty Interests Assigned Through the Declaration of Trust

’s land and royalty interests was determined in when the Trust was formed; therefore, value is assigned to the land, royalty interests, Certificates of Proprietary Interest, and Sub-share Certificates in Certificates of Proprietary Interest in the accompanying consolidated balance sheets. Consequently, in the consolidated statements of income and total comprehensive income, allowance is made for depletion and cost is deducted from the proceeds of original land sales. Even though the value of real properties cannot be precisely determined, it has been concluded that the effect of this matter can longer be significant to the Trust’s financial position or results of operations. For Federal income tax purposes, however, deductions are made for depletion, computed on the statutory percentage basis of income received from royalties. Minimal real estate improvements are made to land.

Income Taxes

uture tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

sition taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are offset or aggregated with other positions. Tax positions that meet the more-likely-than- recognition threshold are measured as the largest amount of tax benefit that is more than likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying balance sheet along with any associated interest and penalties that would be payable to the taxing authorities upon examination. The liability for unrecognized tax benefits is at and

Concentrations of Credit Risk

two

three

imize exposure to any of these entities. As of and we had cash and cash equivalents deposited in our financial institutions in excess of federally-insured levels. We regularly monitor the financial condition of these financial institutions and believe that we are exposed to any significant credit risk in cash and cash equivalents.

Net

  

s of Sub-share Certificates purchased and retired are charged to net proceeds from all sources.

Comprehensive Income (Loss)

GAAP, are excluded from net income.

Significant Customers

Two

represented, in the aggregate, and of the Trust’s total revenues (prior to any revenue deferral) for the years ended and respectively.

 

May 2014,

Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) - “

The ASU introduces a new -step revenue recognition model in which an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The ASU allows for a practical expedient for companies to exclude sales or similar taxes collected from customers from the transaction price. Additionally, the ASU requires disclosures sufficient to enable users to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers, including qualitative and quantitative disclosures about contracts with customers, significant judgments and changes in judgments, and assets recognized from the costs to obtain or fulfill a contract. This standard is effective for fiscal years beginning after including interim periods within that reporting period.

January 1, 2018,

y to enable the preparation of financial information and have reached conclusions on key accounting assessments related to the standard, including our assessment that the impact of accounting for costs incurred to obtain a contract is immaterial.

of the standard is related to our accounting for easement agreements and to a lesser extent oil and gas royalties. Specifically, for term easement agreements, we will recognize revenue for term easements upon execution of these agreements, and as a result, we will longer defer revenue on our term easements. Historically, oil and gas royalties have been adjusted for production taxes paid by operators with a charge to taxes, other than income taxes and a corresponding increase to revenue. We have elected the practical expedient allowed by the ASU and will exclude production taxes from revenue. Revenue recognition related to our land sales and other sundry income will remain substantially unchanged. Adoption of the standard will result in (i) the acceleration of easement and sundry income as unearned revenue decreases

, (ii) a reduction in oil and gas royalty revenue with a corresponding reduction in taxes, other than income taxes, and (iii) an increase in deferred income tax expense for the years ended and In addition, we are implementing appropriate changes to our business processes, systems, and controls to support recognition and disclosure requirements as a result of the new standard. We plan to apply the full retrospective method with optional practical expedients upon adoption. Under this transition approach, all prior periods presented in the financial statements will be presented as though the new standard had always been in effect.

Expected Impact to Reported Results

(in thousands, except per share amounts):

February 2016,

No.

2016

02,

.” This ASU requires lessees to recognize a right of use asset and lease liability on the balance sheet for all leases, with the exception of short-term leases. The new guidance will also require significant disclosures about the amount, timing and uncertainty of cash flows from leases. In the FASB issued ASU - “” that clarifies the application of the new lease guidance to land easements. The ASU allows an optional transition practical expedient, which if elected, would require an entity to reassess the accounting treatment on existing or expired land easements previously accounted for as leases under the current lease guidance. Any new or modified land easements would be evaluated under the new lease guidance upon adoption of the new lease standard. The new lease standard is effective for fiscal years beginning after including interim periods within those fiscal years, which for the Trust is the quarter of The Trust is currently evaluating the new guidance to determine the impact it will have on our consolidated financial statements.

June 2016,

No.

2016

13,

“ .” This ASU modifies the measurement of expected credit losses of certain financial instruments. This standard is effective for fiscal years beginning after including interim periods within those fiscal years, which for the trust is the quarter of The Trust is currently evaluating the new guidance to determine the impact it will have on our consolidated financial statements.

March 2017,

No.

2017

07,

.” This ASU requires employers to disaggregate the service cost component from the other components of net benefit cost in the income statement, provides explicit guidance on the presentation of the service cost component and the other components of net benefit cost in the income statement and allows only the service cost component of net benefit cost to be eligible for capitalization. The requirements of the new standard are effective for annual and interim reporting periods beginning after We intend to adopt the standard beginning using retrospective adoption. The Trust currently records service costs and net benefit costs within salaries and related employee benefits expense. Upon adoption, the service cost will be recorded within salaries and related employee benefits expense, and the other components of net benefit costs will be recorded in other income. The retrospective impact of future adoption for the years ended and is shown in the table below (in thousands):

No