5.1. ERMUSR 05-14-2013 - Laserfiche WebLink

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ELK RIVER MUNICIPAL UTILITIES ELK RIVER,MINNESOTA NOTES TO FINANCIAL STATEMENTS DECEMBER 31,2012 AND 2011 Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-CONTINUED Proprietary funds are accounted for on the flow of economic resources measurement focus and use the accrual basis of accounting.Under this method,revenues are recorded when earned and expenses are recorded at the time liabilities are incurred.Proprietary funds include the following fund type: Enterprise funds account for those operations that are financed and operated in a manner similar to private business or where the Utilities has decided that the determination of revenues earned,costs incurred and/or net income is necessary for management accountability. Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund's principal ongoing operations.The principal operating revenues of the Water and Electric enterprise funds are charges to customers for sales and service. Operating expenses for enterprise funds include the cost of sales and services,administrative expenses and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. The Utilities reports the following major proprietary funds: The Electric fund accounts for the electric distribution operations. The Water fund accounts for the water distribution system. When both restricted and unrestricted resources are available for use,it is the Utilities' policy to use restricted resources first,then unrestricted resources as they are needed. C. Assets,liabilities,deferred inflows,and net position Cash and cash equivalents The Utilities'cash and cash equivalents are considered to be cash on hand,demand deposits and short-term investments with original maturities of three months or less from the date of acquisition. Cash balances from all finds are pooled and invested,to the extent available,in certificates of deposit and other authorized investments. Eamings from such investments are allocated on the basis of applicable participation by each of the funds. 32