| Significant Accounting Policies | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Business Red Trail Energy, LLC, a North Dakota limited liability company (the “Company”), owns and operates a 65 million gallon annual name-plate production ethanol plant near Richardton, North Dakota (the “Plant”). The Plant commenced production on January 1, 2007. Fuel grade ethanol, distillers grains and corn oil are the Company's primary products. All products are marketed and sold primarily within the continental United States. Reduced Carbon Dioxide Fuels Credits The Company recently entered a market to sell voluntary carbon dioxide reduction credits. The Company is generating these credits through our carbon dioxide sequestration project. The Company holds these credits in inventory as we seek buyers who are interested in purchasing the credits. The Company is using the inventory method of accounting for these credits and we are not including these credits as assets on our balance sheet as they have negligible incremental costs associated with generating the credits. When the Company enters into a contract to sell these credits, we will recognize income upon transferring of the credit. Accounting Estimates Management uses estimates and assumptions in preparing these financial statements in accordance with generally accepted accounting principles. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities and the reported revenues and expenses. Significant items subject to such estimates and assumptions include the useful lives of property, plant and equipment, inventory, asset retirement obligation and allowance for credit losses. Actual results could differ from those estimates. Cash and Equivalents The Company considers all highly liquid debt instruments purchased with an initial maturity of three months or less to be cash equivalents. The carrying value of cash and equivalents approximates fair value. Balances in excess of federally insured limits are not covered by FDIC insurance; these balances total $7.07 million. Restricted cash is cash deposited in our margin account with our commodities broker related to our risk management positions. Investment in RPMG RPMG is a subsidiary of Renewable Products Marketing Group, LLC ("RPMG, LLC"). We own approximately 5.0% of RPMG, LLC which allows us to realize favorable marketing fees for our products and allows us to share in the profits generated by RPMG, LLC. Our ownership interest in RPMG, LLC also entitles us to a seat on its board of directors which is filled by Jodi Johnson, our Chief Executive Officer. The Company accounts for the investment in RPMG at cost minus impairment. Accounts Receivable and Concentration of Credit Risk The Company generates accounts receivable from sales of ethanol, distillers grains and corn oil. The Company has entered into agreements with RPMG, Inc. (“RPMG”) for the marketing and distribution of the Company's ethanol, corn oil and dried distiller's grains. Under the terms of the marketing agreement, RPMG bears the risk of loss of nonpayment by their customers. The Company markets its modified distiller's grains internally. For sales of modified distiller's grains and industrial ethanol, credit is extended based on evaluation of a customer's financial condition and collateral is not required. Accounts receivable are due 30 days from the invoice date. Accounts outstanding longer than the contractual payment terms are considered past due. Internal follow up procedures are followed accordingly. Interest is charged on past due accounts. All receivables are stated at amounts due from customers net of any allowance for credit losses. The Company determines its allowance by considering a number of factors, including the length of time trade accounts receivable are past due, the Company's previous loss history, the customer's perceived current ability to pay its obligation to the Company, and the condition of the general economy and the industry as a whole. The Company writes off accounts receivable when they become uncollectible, and payments subsequently received on such receivables are credited to the allowance for credit losses. The Company had an allowance for credit losses of $46,305 and $41,675 at September 30, 2024 and 2023, respectively. Inventory Corn is the primary raw material and, along with other raw materials and supplies, is stated at the lower of cost or net realizable value on a first-in, first-out (FIFO) basis. Work in process and finished goods, which consists of ethanol, distillers grains and corn oil produced, is stated at the lower of average cost or net realizable value. Spare parts inventory is valued at lower of cost or net realizable value on a FIFO basis. Patronage Equity The Company receives, from certain vendors organized as cooperatives, patronage dividends, which are based on several criteria, including the vendor's overall profitability and the Company's purchases from the vendor. Patronage equity typically represents the Company's share of the vendor's undistributed current earnings which will be paid in either cash or equity interests to the Company at a future date. Investments in cooperatives are stated at cost, plus unredeemed patronage refunds received in the form of capital stock and are included in Other Assets on the Company's balance sheet. Derivative Instruments The Company enters into derivative transactions to hedge its exposure to commodity and interest rate price fluctuations. The Company is required to record these derivatives in the balance sheet at fair value. In order for a derivative to qualify as a hedge, specific criteria must be met and appropriate documentation maintained. Gains and losses from derivatives that do not qualify as hedges, or are undesignated, must be recognized immediately in earnings. If the derivative does qualify as a hedge, depending on the nature of the hedge, changes in the fair value of the derivative will be either offset against the change in fair value of the hedged assets, liabilities, or firm commitments through earnings or recognized in other comprehensive income until the hedged item is recognized in earnings. Changes in the fair value of undesignated derivatives related to corn are recorded in costs of goods sold within the statements of operations. Changes in the fair value of undesignated derivatives related to ethanol are recorded in revenue within the statements of operations. Additionally the Company is required to evaluate its contracts to determine whether the contracts are derivatives. Certain contracts that literally meet the definition of a derivative may be exempted as “normal purchases or normal sales.” Normal purchases and normal sales are contracts that provide for the purchase or sale of something other than a financial instrument or derivative instrument that will be delivered in quantities expected to be used or sold over a reasonable period in the normal course of business. Certain corn, ethanol, and distillers grain contracts that meet the requirement of normal purchases or sales are documented as normal and exempted from the accounting and reporting requirements, and therefore, are not marked to market in our financial statements. Firm Purchase Commitments The Company typically enters into fixed price contracts to purchase corn to ensure an adequate supply of corn to operate its plant. The Company will generally seek to use exchange traded futures, options or swaps as an offsetting economic hedge position. The Company closely monitors the number of bushels hedged using this strategy to avoid an unacceptable level of margin exposure. Contract prices are analyzed by management at each period end and, if necessary, valued at the lower of cost or net realizable value in the balance sheets. Revenue Recognition The Company generally sells ethanol and related products pursuant to marketing agreements. The Company recognizes revenue from sales of ethanol and co-products at the point in time when the performance obligations in the contract are met, which is when the customer obtains control of such products and typically occurs upon shipment depending on the terms of the underlying contracts. Revenue is measured as the amount of consideration expected to be received in exchange for transferring goods or providing services. In some instances, the Company enters into contracts with customers that contain multiple performance obligations to deliver volumes of co-products over a contractual period of less than 12 months. The Company allocates the transaction price to each performance obligation identified in the contract based on relative standalone selling prices and recognizes the related revenue as control of each individual product is transferred to the customer in satisfaction of the corresponding performance obligation. Revenues are shown net of any fees incurred under the terms of the Company's agreements for the marketing and sale of ethanol and related products. Revenues are also shown net of any discounts given for sales of modified distillers grains. Long-lived Assets Property, plant, and equipment are stated at cost. Depreciation is provided over estimated useful lives by use of the straight line method. Maintenance and repairs are expensed as incurred. Major improvements and betterments are capitalized. For the year ended September 30, 2024 the Company capitalized $2.2 million in assets related to plant and CCS equipment, along with upgrades to the chemical tank and piping. The present values of finance lease obligations are classified as a liability and the related assets are included in property, plant and equipment. Amortization of equipment under finance leases is included in depreciation expense. Depreciation is computed using the straight-line method over the following estimated useful lives: Minimum Years Maximum Years Land improvements 15 30 Buildings 10 40 Plant and equipment 7 20 Railroad 10 30 Depreciation expense included in cost of goods sold is $5,950,362 for the year ended September 30, 2024, $5,298,318 for the year ended September 30, 2023 and $4,027,744 for the year ended September 30, 2022. Depreciation expense included in general and administrative expenses is $482,927 for the year ended September 30, 2024, $1,037,875 for the year ended September 30, 2023, and $299,962 for the year ended September 30, 2022. Long-lived assets, such as property, plant, and equipment subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require a long-lived asset be tested for possible impairment, the Company first compares undiscounted cash flows expected to be generated by an asset to the carrying value of the asset. If the carrying value of the long-lived asset is not recoverable on an undiscounted cash flow basis, impairment is recognized to the extent that the carrying value exceeds its fair value. Fair value is determined through various valuation techniques including, but not limited to, discounted cash flow models, quoted market values and third-party independent appraisals. Fair Value Measurements The Company has adopted guidance for accounting for fair value measurements of financial assets and financial liabilities and for fair value measurements of nonfinancial items that are recognized or disclosed at fair value in the financial statements on a recurring basis. The Company has adopted guidance for fair value measurement related to nonfinancial items that are recognized and disclosed at fair value in the financial statements on a nonrecurring basis. The guidance establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to measurements involving significant unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows: · Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. · Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability. · Level 3 inputs are unobservable inputs for the asset or liability. The level in the fair value hierarchy within which a fair measurement in its entirety falls is based on the lowest level input that is significant to the fair value measurement in its entirety. Except for those assets and liabilities which are required by authoritative accounting guidance to be recorded at fair value in our balance sheets, the Company has elected not to record any other assets or liabilities at fair value. No events occurred during the fiscal years ended September 30, 2024 and 2023 that required adjustment to the recognized balances of assets or liabilities, which are recorded at fair value on a nonrecurring basis. Fair Value of Financial Instruments The carrying amounts of cash and cash equivalents, restricted cash, accounts receivable, and accounts payable approximate their fair values because of their short-term nature. The fair values of notes payable approximates the carrying value based on estimated discounted future cash flows using the current rates at which similar loans would be made. Income Taxes The Company is treated as a partnership for federal and state income tax purposes and generally does not incur income taxes. Instead, its earnings and losses are included in the income tax returns of the members. Therefore, no provision or liability for federal or state income taxes has been included in these financial statements. Differences between financial statement basis of assets and tax basis of assets is primarily related to depreciation, derivatives, inventory, compensation and capitalization and amortization of organization and start-up costs for tax purposes, whereas these costs are expensed for financial statement purposes. The Company has evaluated whether it has any significant tax uncertainties that would require recognition or disclosure. Primarily due to its partnership tax status, the Company does not have any significant tax uncertainties that would require recognition or disclosure. The Company's policy is to recognize interest expense and penalties related to uncertain tax positions as incurred. Net Income (Loss) Per Unit Net Income (Loss) per unit is calculated on a basic and fully diluted basis using the weighted average units outstanding during the period. Environmental Liabilities The Company's operations are subject to environmental laws and regulations adopted by various governmental entities in the jurisdiction in which it operates. These laws require the Company to investigate and remediate the effects of the release or disposal of materials at its location. Accordingly, the Company has adopted policies, practices and procedures in the areas of pollution control, occupational health and the production, handling, storage and use of hazardous materials to prevent material, environmental or other damage, and to limit the financial liability which could result from such events. Environmental liabilities, if any, are recorded when the liability is probable and the costs can reasonably be estimated. The Company is not aware of any environmental liabilities identified as of September 30, 2024. Restatement of Prior Financial Information The Company's previously filed audited balance sheet and the 2022 cash flow statement has been restated to correct errors in an asset retirement obligation. From a quantitative and qualitative perspective, the Company determined that correcting the previously filed financial statements would not require amendment to its previously filed reports on Form 10-Q and 10-K. The statement increased land improvements and long-term liabilities by $900,521 as of September 30, 2023. The effect of the correction and the non-cash investing and financing activity as of September 30, 2022 is summarized below: September 30, 2023 As Previously Reported Adjustment Restated Consolidated Balance Sheet Land Improvements $ 17,662,538 $ 900,521 $ 18,563,059 Property, plant and equipment, net 75,539,485 900,521 76,440,006 Total Assets $ 116,790,200 $ 900,521 $ 117,690,721 Asset Retirement Obligation — 900,521 900,521 Total Liabilities and Equity $ 116,790,200 $ 900,521 $ 117,690,721 |
| Reclassifications | Restatement of Prior Financial Information The Company's previously filed audited balance sheet and the 2022 cash flow statement has been restated to correct errors in an asset retirement obligation. From a quantitative and qualitative perspective, the Company determined that correcting the previously filed financial statements would not require amendment to its previously filed reports on Form 10-Q and 10-K. The statement increased land improvements and long-term liabilities by $900,521 as of September 30, 2023. The effect of the correction and the non-cash investing and financing activity as of September 30, 2022 is summarized below: September 30, 2023 As Previously Reported Adjustment Restated Consolidated Balance Sheet Land Improvements $ 17,662,538 $ 900,521 $ 18,563,059 Property, plant and equipment, net 75,539,485 900,521 76,440,006 Total Assets $ 116,790,200 $ 900,521 $ 117,690,721 Asset Retirement Obligation — 900,521 900,521 Total Liabilities and Equity $ 116,790,200 $ 900,521 $ 117,690,721 |
