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Elk River Municipal Utilities <br />Elk River, Minnesota <br />Notes to the Financial Statements <br />December 31, 2024 <br />Note 1: Summary of Significant Accounting Policies (Continued) <br />Deferred Inflows of Resources <br />In addition to liabilities, the statement of net position and fund financial statements will sometimes report a separate <br />section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, <br />represents an acquisition of net position that applies to a future period(s) and so will not be recognized as an inflow of <br />resources (revenue) until that time. The Utilities has two types of items which qualify for reporting in this category. The <br />items, deferred pension resources and deferred lease resources, are reported in the statement of net position and results <br />from actuarial calculations and future lease receipts. <br />Net Position <br />Net position represents the difference between assets and deferred outflows of resources and liabilities and deferred <br />inflows of resources. Net position is displayed in three components: <br />a. Net investment in capital assets - Consists of capital assets, net of accumulated depreciation reduced by any <br />outstanding debt attributable to acquired capital assets. <br />b. Restricted net position - Consists of net position restricted when there are limitations imposed on their use <br />through external restrictions imposed by creditors, grantors, laws or regulations of other governments. <br />c. Unrestricted net position -All other net positions that do not meet the definition of "restricted" or "net investment <br />in capital assets". <br />When both restricted and unrestricted resources are available for use, it is the Utilities' policy to use restricted resources <br />first, then unrestricted resources as they are needed. <br />Note 2: Detailed Notes on All Funds <br />A. Deposits and Investments <br />Custodial credit risk for deposits and investments is the risk that in the event of a bank failure, the Utilities' deposits and <br />investments may not be returned or the Utilities will not be able to recover collateral securities in the possession of an <br />outside party. In accordance with Minnesota statutes and as authorized by the Commission, the Utilities maintains <br />deposits at those depository banks, all of which are members of the Federal Reserve System. <br />Minnesota statutes require that all Utilities deposits be protected by insurance, surety bond or collateral. The fair value of <br />collateral pledged must equal 110 percent of the deposits not covered by insurance or bonds, with the exception of <br />irrevocable standby letters of credit issued by Federal Home Loan Banks as this type of collateral only requires collateral <br />pledged equal to 100 percent of the deposits not covered by insurance or bonds. <br />34 <br />97 <br />