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ELK RIVER MUNICIPAL UTILITIES <br />ELK RIVER, MINNESOTA <br />NOTES TO FINANCIAL STATEMENTS <br />DECEMBER 31, 201 I AND 2010 <br />Note I: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-CONTINUED <br />Compensated absences <br />All vacation benefits can be carried over from year to year and will be payable upon termination. Sick leave can be <br />accumulated to a maximum of 960 hours from year to year. Upon termination or retirement, employees will have 50 <br />percent of unused sick leave, up to a maximum of 800 hours, converted to cash and deposited into [heir Pos[ Health <br />Care Savings account. The liability for vacation and sick pay is reported as a liability in [he respective funds at year <br />end. <br />Postemployment Beneftts Other Than Pensions <br />Under Minnesota statute 471.61, subdivision 26., public employers must allow retirees and their dependents to <br />continue coverage indefinitely in an employer-sponsored health care plan, under the following conditions: I) <br />Retirees must be receiving (or eligible to receive) an annuity from a Minnesota public pension plan, 2) Coverage <br />must continue in group plan until age 65, and retirees must pay no more than the group premium, and 3) Retirees <br />may obtain dependent coverage immediately before retirement. All premiums are funded on apay-as-you-go basis <br />The liability was actuarially determined, in accordance with GASB Statement 45, at January 1, 201 I. <br />Net assets <br />Net assets represent the difference between assets and liabilities. Net assets are displayed in three components: <br />a. Invested in capital assets, net of related debt -Consists of capital assets, net of accumulated depreciation <br />reduced by any outstanding debt attributable to acquire capital assets. <br />b. Restricted net assets - Consist of net assets restricted when [here are limitations imposed on their use <br />through external restrictions imposed by creditors, grantors, laws or regulations of other governments. <br />c. Unrestricted net assets -All other net assets that do not meet the definition of "restricted" or "invested in <br />capital assets, net of related deb[". <br />Comparative data and reclassifications <br />Comparative total data for the prior year have been presented in the selected sections of the accompanying <br />financial statements in order to provide an understanding of changes in the Utilities' financial position and <br />operations. Also, certain amounts presented in the prior year data have been reclassified in order to be consistent <br />with the current year's presentation. <br />35 <br />