4.1 ERMUSR 04-10-2018 - Laserfiche WebLink

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Elk River Municipal Utilities Elk River, Minnesota Notes to the Financial Statements December 31, 2017 Note 1: Summary of Significant Accounting Policies (Continued) The Utilities categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure the fair value of the asset. Level 1 inputs are quoted prices in active markets for identical assets; Level 2 inputs are significant other observable inputs; Level 3 inputs are significant unobservable inputs. The Utilities recurring fair value measurements are listed in detail on page 35 and are valued using a matrix pricing model (Level 2 inputs). The Utility has the following recurring fair value measurements as of December 31, 2017: • Negotiable certificates of deposit of$3,579,824 are valued using a matrix pricing model (Level 2 inputs) Restricted Assets The amounts in the restricted cash account are set aside in accordance with the issuing resolution for specific bond issues. They will be used for future debt service. Accounts Receivable Accounts receivable include amounts billed for services provided before year end. The Utilities has established a reserve for uncollectible accounts which is adjusted annually based on the receivable activity. No substantial losses from present receivable balances are anticipated. A summary of the uncollectible account balances at December 31, 2017 is as follows: 2017 Electric $ 109,845 Water 26,250 Total $ 136,095 Interfund 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 funds". Inventories and Prepaid items y Inventories of materials and supplies are recorded at average cost, using the first-in, first out(FIFO) method. Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items. 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. Donated capital assets are recorded at acquisition value at the date of donation. Major expenditures for improvements or capital asset projects are capitalized as projects are constructed. 31 95