4.1c ERMUSR 04-11-2023 - Laserfiche WebLink

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Elk River Municipal Utilities Elk River, Minnesota Notes to the Financial Statements December 31, 2022 Note 1: Summary of Significant Accounting Policies (Continued) Lease Receivable The Utilities' lease receivable is measured at the present value of lease payments expected to be received during the lease term. Under the lease agreement, the Utilities may receive variable lease payments that are dependent upon the lessee's revenue. The variable payments are recorded as an inflow of resources in the period the payment is received. A deferred inflow of resources is recorded for the lease. The deferred inflow of resources is recorded at the initiation of the lease in an amount equal to the initial recording of the lease receivable. The deferred inflow of resources is amortized on a straight-line basis over the term of the lease. 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 as non -operating revenues or expenses. 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. 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 Production Transmission Distribution General Machinery, Tools and Equipment Automobiles Deferred Outflows of Resources Lives in Years Electric Water 4-20 25-50 30 0 10-33 25-50 10-50 10-50 5-10 5-10 3-8 3-8 In addition to assets, the statement of net position will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to a future period(s) and so will not be recognized as an outflow of resources (expense/expenditure) until then. The Utilities has one item, deferred pension resources, which qualifies for reporting in this category. Deferred pension resources result from actuarial calculation and current year pension contributions subsequent to the measurement date. Compensated Absences Vacation: All vacation benefits can carry over from year to year and will be payable upon termination or retirement. Upon retirement, vacation can also be converted to cash and deposited into their Post Health Care Savings account. Unused vacation carryover is limited to the number of hours accrued during the previous year. 32 115