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City of Elk River <br />Notes to Basic Financial Statements <br />NOTE I — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) <br />D. Assets, Liabilities, Deferred Outflows/Inflows of Resources, and Net Position or Equity <br />(Continued) <br />4. Capital Assets (Continued) <br />Property, plant, and equipment of the City, as well as the component unit, are depreciated using the <br />straight-line method over the following useful lives: <br />Classification <br />Years <br />Buildings and improvements <br />10-40 <br />Other park improvements <br />10-20 <br />Machinery and equipment <br />3-20 <br />Public domain infrastructure <br />15-50 <br />System infrastructure <br />4-50 <br />5. Deferred Outflows/Inflows of Resources <br />In addition to assets, the statement of financial position will sometimes report a separate section for <br />deferred outflows of resources. This separate financial statement element represents a consumption <br />of net assets that applies to a future period(s) and so will not be recognized as an outflow of <br />resources (expense/expenditure) until that time. The City has two items that qualify for reporting in <br />this category. The City presents deferred outflows of resources on the Statement of Net Position for <br />deferred outflows of resources related to pensions and OPEB for various estimate differences that <br />will be amortized and recognized over future years. <br />In addition to liabilities, the statement of financial position and fund financial statements will <br />sometimes report a separate section for deferred inflows of resources. This separate financial <br />statement element represents an acquisition of net assets that applies to a future period(s) and so will <br />not be recognized as an inflow of resources (revenue) until that time. The City has three items that <br />qualify for reporting in this category. The City presents deferred inflows of resources on the <br />Governmental Fund Balance Sheet as unavailable revenue. The governmental funds report <br />unavailable revenues from three sources: property taxes, special assessments, and other. These <br />amounts are deferred and recognized as an inflow of resources in the period that the amounts <br />become available. The City presents deferred inflows of resources on the Statement of Net Position <br />for deferred inflows of resources related to pensions and OPEB for various estimate differences that <br />will be amortized and recognized over future years. <br />6. Compensated Absences <br />It is the City's policy to permit employees to accumulate earned but unused vacation and sick pay <br />benefits. Unused vacation can be accrued by the employees up to a maximum of 240 hours, the limit <br />of which is determined by years of service. All vacation pay is accrued when incurred in the <br />government -wide and proprietary fund financial statements. A liability for these amounts is reported <br />in governmental funds only if they have matured, for example, as a result of employee resignations <br />and retirements. In the event a liability is recorded in the governmental funds, the General fund would <br />be used to liquidate the compensated absences payable. <br />63 <br />