6.2 SR 06-03-2024 - Laserfiche WebLink

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62 City of Elk River Notes to Basic Financial Statements NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) D. Assets, Liabilities, Deferred Outflows/Inflows of Resources, and Net Position or Equity (Continued) 3. Inventory and Prepaid Items (Continued) Inventory is valued at cost using the first in, first out (FIFO) method. Inventories of enterprise funds are recorded as expenditures when consumed rather than when purchased. Property held for resale consists of property that the City and Housing and Redevelopment Authority component unit holds for resale. Properties held for resale are reported as an asset at the lower of cost or estimated fair value. 4. Capital Assets Capital assets, which include property, plant, equipment, and infrastructure assets (e.g., roads, sidewalks, and similar items), are reported in the applicable governmental or business-type activities columns in the government-wide financial statements. Capital assets are defined by the City as assets with an initial cost of more than $10,000 and an estimated useful life in excess of two years. In the case of initial capitalization of general infrastructure assets (i.e., those reported by governmental activities) the City chose to include all items previously accounted for. The City had already accounted for its prior infrastructure at historical cost for the initial reporting of these assets. As the City constructs or acquires capital assets each period, including infrastructure assets, they are capitalized and reported at historical cost. The reported value excludes normal maintenance and repairs which are essentially amounts spent in relation to capital assets that do not increase the capacity or efficiency of the item or extend its useful life beyond the original estimate. In the case of donations, the City values these capital assets at acquisition value of the item at the date of its donation. Property, plant, and equipment of the City, as well as the component unit, are depreciated using the straight-line method over the following useful lives: Buildings and improvements 10-40 Other park improvements 10-20 Machinery and equipment 3-20 Public domain infrastructure 15-50 System infrastructure 4-50 Classification Years The City recognizes lease liabilities and intangible right-to-use lease assets (leased assets) in the government-wide financial statements. The City recognizes lease liabilities with an initial, individual value of $10,000 or more for equipment leases, and an initial, individual value of $25,000 or more property, plant and infrastructure leases. Page 183 of 464