5.1. ERMUSR 04-12-2011 - Laserfiche WebLink

Home Browse Search

ELK RIVER MUNICIPAL UTILITIES ELK RIVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2010 AND 2009 Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -CONTINUED In[erfund receivables and payables Transactions between funds that are representative of lending borrowing arrangements outstanding at the end of the fiscal year are referred to as either "interfund receivables/payables" (i.e., the current portion of interfund loans) or "advances to/from other funds" (i.e., the non-current portion of interfund loans). All other outstanding balances between funds are reported as "due to/from other firnds". Inventories Inventories are stated at lower of average cost or market on the firs[-in, first-out (FIFO) method. Prepaid items Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items. Restricted assets The amounts in the restricted cash account are se[ aside in accordance with the issuing resolution for specific bond issues. They will be used for future debt service. Capital assets Capital assets are stated at cost. Capital assets are defined by the Utilities as assets with an initial individual cost of more than $5,000 and an estimated useful life in excess of two years. Expenditures for maintenance and repairs are charged to operations and expenditures that extend the useful life of the asset are capitalized and depreciated. When assets are retired or sold, the related cost and accumulated depreciation are removed from the accounts and any gain or loss on disposition is included in operations. Major expenditures for improvements or capital asset projects are capitalized as projects are constructed. In[ewst incurred during the construction phase is reflected in [he capitalized value of the asset constructed, net of interest earned on the invested proceeds over the same period. Interest incurred during the construction phase of capital assets of business-type activities is included as part of the capitalized value of the assets constructed. The Utilities follow the policy of providing depreciation on the straight-line method over the estimated useful lives of the assets, which are as follows: Description Lives in Years Electric Water Production Transmission Distribution General Long-term obligations 4-20 25-50 30 - 10-33 25-50 10-50 10-50 Long-term debt is retected as a liability in the fund issuing the obligation. Bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the bonds using [he straight-line method. Bond issuance costs are reported as deferred charges and amortized over the term of the related deb[. -34-